How asylum seekers will impact the public school system (July update)

With yesterday's June border statistics from Customs and Border Protection, we can update our forecasts for the impact of asylum seekers on the US public school system.

The asylum surge of the last year is fundamentally different than more typical illegal immigration of the prior forty years. Whereas illegal immigration historically arose from single men crossing the border undetected, today entire migrant families are showing up to turn themselves in to Border Patrol. As a result, the share of children coming across the border illegally has soared. The available data suggests that 70-75% of these children are being released into the US interior, and we assume that 75% of those will end up in the public school system.

Migrants are currently entering primarily in Texas and other states bordering Mexico. Nevertheless, over time, these in-coming populations will diffuse to other parts of the country as migrant parents search for work. We believe the default option will be to go to communities where undocumented migrants are already present in large numbers, in part because friends and family are most likely to reside there and because migrant support networks are best developed in these areas. Therefore, the regions most likely to receive large numbers of asylum seekers are those with the largest unauthorized Hispanic populations. This may prove not entirely true, but for modeling purposes, probably represents a reasonable default outcome.

According to Pew Research, more than 60% of unauthorized Hispanics are concentrated in just seven states, in order: California (20.6%), Texas (15%), Florida (7.2%), New York (6.8%), New Jersey (4.4%), and Georgia and Illinois (3.7% each). We forecast that a bit less than 200,000 unaccompanied minors and children in family groups will be released into the US interior between Jan. 1 and the end of August, that is, just before the start of the school year. Assuming they are placed into school during the fall, this would represent 140,000 additional students, almost entirely in public schools.

Source: Princeton Policy estimates based on Customs and Border Protection statistics

Source: Princeton Policy estimates based on Customs and Border Protection statistics

If migrant students were allocated pro rata by the undocumented population, they would be distributed per the chart to the right.

For the 2019/2020 school year, the numbers are notable, but not catastrophic, about 0.5% of the currently enrolled student body. If, however, asylum seeking continues at its recent pace (largely unknowable at this point), then the numbers for the 2020/2021 school year -- just before the next presidential election -- would be a major political issue. It should also be noted that this is a slow-moving event. That is, Texas is being hammered now, but over a 3-9 month period, the migrant dispersion will continue, such that concentrations in, say, New Jersey would likely keep rising right through next spring even if the surge ended today. Closing the border does not make this problem immediately go away in key states, most notably Florida.

Indeed, the situation in Florida has already come to the attention of the New York Times, which on July 10th published a front page article entitled Schools Scramble to Handle Thousands of New Migrant Families. Below are a few excerpts to give a feel for what is to come.

Dayvin Mungia, 7, arrived from El Salvador at South Grade Elementary in South Florida last year with, it seemed, no schooling at all. “He didn’t even recognize the first letter of his name,” said Nicol Sakellarios, his second-grade teacher, as the smiling boy gamely stumbled through his ABC’s in summer school not long ago. “Good job, my love,” she said, prodding him on as he faltered again and again.

Laura Martin, 16, who attended school for only three years in Guatemala and speaks an indigenous language, plans to enroll in high school in Florida next month. “Illiterate” and “0” were scrawled on a math worksheet that she tried and failed to complete after she made her way across the border in May.

Migrant children arriving in record numbers are creating challenges for school districts across the country. Many of the newcomers have disjointed or little schooling; their parents, often with limited reading and writing skills themselves and no familiarity with the American education system, are unable to help.

Schools in places like Lake Worth, a city near President Trump’s Mar-a-Lago resort that has become a favorite destination for Guatemalans, are scrambling to hire new staff and add summer sessions to support the newcomers.

Last year, the Palm Beach County school district enrolled 4,555 Guatemalan students in K through 12, nearly 50 percent more than two years earlier. Many of the students come from the country’s remote highlands and speak neither Spanish nor English. The number of elementary school students in K through 5 more than doubled to 2,119 in that same period.

Ana Arce-Gonzalez, the principal at South Grade Elementary School in the heart of Lake Worth’s immigrant enclave, said that in 25 years as an educator she had never experienced anything like it. The school saw its enrollment rise from 820 at the beginning of the last school year to 910 in the spring, pushing it over capacity.

“It speaks to what is happening at the border,” she said.

And this is only the tip of the spear. The worst is yet to come.

Key Rulings and Legislation

Some key rulings and legislation.

August 2015 - Dolly Gee Ruling

U.S. District Judge Dolly Gee ruled the Department of Homeland Security was keeping children at detention centers in violation of a 1997 class-action settlement that said juveniles under the age of 18 cannot be held for more than 72 hours. If a parent was caught with his or her child, authorities could justify keeping the adult in custody if the person is a “significant flight risk” or poses a safety concern, the ruling said.

My read on this is that the ruling did not provide for blanket releases of adults from detention and did not apply to men or relatives other than mothers.

May 2018 - Zero Tolerance

The Attorney General of the United States announces a “zero tolerance policy,” under which all adults entering the United States illegally would be subject to criminal prosecution, and if accompanied by a minor child, the child would be separated from the parent.

July 2018 - Dana Sabraw Ruling

U.S. District Court Judge Dana Sabraw blocks the Trump administration from separating immigrant parents and children at the U.S.-Mexico border. The Dolly Gee protections are expanded to include all parents -- men as well as women. Given that men have traditionally been the primary form of illegal immigration across the southwest border, this ruling appears to have had the effect of opening a new market segment to illegal immigration. Also, combined with the Dolly Gee ruling prohibiting holding of minors more than 72 hours, this would appear to require the release of apprehended parents upon release of their child. The ruling appears to make no provision for flight risk, thus, the child is to be released to the parents whether or not they represent a domestic flight risk.

My interpretation is that Judge Sabraw substantially increased the scope of protections provided to family units, and the immediate increase in families coming the southwest border across supports this view.

H.J.Res. 31: Consolidated Appropriations Act, 2019 (the Omnibus Bill)

Wording of the act:

224.(a) None of the funds provided by this Act or any other Act, or provided from any accounts in the Treasury of the United States derived by the collection of fees available to the components funded by this Act, may be used by the Secretary of Homeland Security to place in detention, remove, refer for a decision whether to initiate removal proceedings, or initiate removal proceedings against a sponsor, potential sponsor, or member of a household of a sponsor or potential sponsor of an unaccompanied alien child (as defined in section 462(g) of the Homeland Security Act of 2002 (6 U.S.C. 279(g))) based on information shared by the Secretary of Health and Human Services.

In addition, this bill reduces border detention beds from 49,060 to 40,520 and adds another $40 million for the Alternatives to Detention (ATD) program, which moves asylum seekers to facilities in the interior of the country, where they are usually released. (Conservative Review)

The text to me reads like amnesty for anyone with or potentially with a UAC who qualifies under 462(g), that is, Sec 224(a) appears to materially destroy border control for anyone with an qualifying, unaccompanied minor.

A crisis of hope, not fear

With the situation at the US southwest border deteriorating by the day, policy-makers are looking for causes. On the left, politicians argue that migrants are fleeing violence in their home countries. On the right, analysts contend that US legal rulings and legislation are the cause.

The debate matters, because it influences both who will be held to account and the appropriate policy responses. If the omnibus bill is to blame, then that legislation needs to be fixed, and if the Democrats fail to comply, then they should have every expectation of being held to account by voters.

If, on the other hand, the surge of asylum seekers are motivated by a sudden deterioration in security conditions at home, then US options are fundamentally constrained to building more holding facilities and hiring more Border Patrol personnel and immigration judges. Many of the asylum seekers will be released into the US interior, and their children will show up in some school systems in notable numbers.

Which answer is correct? The data is unambiguous: the February omnibus bill — the Consolidated Appropriations Act of 2019 — is to blame.

May appre by group.png

To be clear, the issue is not whether poverty and safety issues exist in the Northern Triangle countries, as well as many other parts of the world. Nor is the issue the legitimate desire of poor peoples for a better life, in this case, in the United States. All these concerns are valid, and have been for a long time. The issue, rather, is whether the massive surge in asylum seeking since last August, and in particular since February, is properly attributed to ‘pull’ factors — the hope for a better life — or ‘push’ factors — the flight from immediate physical threats to the migrants.

It is the pull of the United States.

Here’s the reasoning:

  • The surge is from multiple countries

    When we are speaking of a domestic security crisis, normally it is on the state level. Had the security situation deteriorated over a six month interval, we would expect it to occur in a single country, barring a regional war. In this case, the surge comes from three countries — El Salvador, Guatemala and Honduras — all at the same time. There is no common denominator across these countries during the last six months, no shared war or regional disruption. Rather, all three share in common the ability of their citizens to enter the US under US immigration law if they bring a child and claim asylum.

  • The surge is primarily of families and unaccompanied minors

    If countries were experiencing severe domestic crisis, we would expect that all categories of border crossers would increase, notably adults and minors traveling alone, as well as families. However, 84% of the increase has come from persons traveling in family units, and another 6% has come from unaccompanied minors. Families cannot be held and deported before a hearing, and unaccompanied minors can achieve the same effect with undocumented immigrants already in the US. In all, 90% of the increase in border apprehensions in FY 2019, on an annualized basis, compared to FY 2018, has come from the two groups treaty favorably by the omnibus bill.

    If the issue were the flight from violence, we would have expected to see the increase across all categories, not only families, but also of adults traveling alone. We don’t see that at all. Instead, the data shows exactly what the experts predicted: unprecedented, lenient treatment of family units and minors would lead to a surge of illegal crossings in this category. This expectation has been fully met.

  • Northern Triangle security has improved, not deteriorated

    As reported by the Seattle Times, the murder rate is El Salvador has fallen by half since 2015 and is now below that of Baltimore City. Allowing that the murder rate stands as a proxy for violence and crime overall, the rate of out-migration from El Salvador should have collapsed, not risen. Instead, border apprehensions of Salvadorans are up 177% over FY 2018 levels. Deteriorating domestic security is not a plausible explanation for the surge.

Homicides honduras.png

Nor is it the plausible cause in Honduras, where the homicide rate has fallen by half since 2011.

Nor is it true in Guatemala. A study by the Crisis Group reports a 5 percent average annual decrease in murder rates in the Guatemala since 2007, compared with a 1 percent average annual rise among regional peers. As in Honduras, homicides have fallen by half since 2011.

In light of these numbers, an analysis by the Center for Immigration Studies concludes that “the data show no obvious relationship between Central American homicide rates and the number of Central Americans apprehended illegally crossing our border in a year.” This is being too kind. All the available data shows a clear inverse correlation: the surge in asylum seeking has occurred in the context of a sustained drop in homicides rates across all three Northern Triangle countries of El Salvador, Honduras and Guatemala. The argument that violence is driving the surge in asylum seekers is categorically refuted by the available data.

  • And now they’re coming from all over

    A new article from CIS reports that up to 35,000 migrants from more exotic countries like Cameroon, Ghana, the Congo, Haiti, Cuba are making their way through Central America towards the US border. The reports are not yet confirmed through official channels, and the headcount and timing are ultimately uncertain, but that large numbers of asylum seekers are headed towards the US from outside Central America must be taken as highly likely. This was foreseen by Jessica Vaughan, Director of Policy Studies at CIS, who noted at the time of its signing that the omnibus bill “will further expand and institutionalize the catch-and-release policies for those arriving illegally at the border from all over the world.” Again, this speaks not to a security situation in the Central American countries, but rather to a change in US policy which has made it attractive to migrants from all over the world to enter the US illegally at the southwest border with a child and claim asylum.

  • It’s the economy, stupid

Historically, Mexican and Central American migrants list economic reasons as the primary cause of their interest in moving to the United States.

For example, in an April 2018 survey of public opinion in Honduras (table 91), nearly 83% of respondents listed economic reasons are the cause of a relative’s decision to leave Honduras, as opposed to only 11% who listed violence and security as the primary cause.

The Los Angeles Times documents the situation on the ground in the Honduran city of San Pedro Sula:

In the Rivera Hernandez neighborhood, which has seen significant U.S. investment, homicides have been cut about in half over the last several years, said Danny Pacheco, an evangelical pastor who runs an anti-gang program focused on improving the community’s relationship with police. He said some people leave because violence in Honduras, though reduced, remains too much to bear, [but] he named more mundane factors as bigger drivers of immigration: skyrocketing energy bills, rising food costs and lack of work. “The majority of the population is probably willing to leave if they can,” he said. “And most who can are.”

With respect to Guatemala, press reports list low coffee prices and unemployment, as well as a desire to remit funds to sustain relatives or gather a nest egg to build a house as causes for Guatemalans to move to the US. Our searches show very little on individuals fleeing due to specific threats to their security, although a poor security situation is one factor which encourages emigration. There is no indication in any press report that security has deteriorated to such a fashion in the last year as to warrant a mass migration to the US.

Instead, the Guardian relays a fairly typical story:

Agustín Marcos, 44, used to be an agricultural laborer, but when corn production plummeted, he moved his family to the regional capital, also called Heuhuetenango. Now, he works as a parking attendant, but he still cannot cover rent, food and school fees.

So he is considering migration. “We know people who left just last month and are already in the United States and working,” he said.

Yes, security is poor. But in account after account, Central Americans themselves report the intention to migrate to the US is driven primarily by the desire to work.

The truth is in the market price

Market prices for smugglers are a key metric for enforcement practices at the border. As analysis by others and ourselves suggests, it has become much harder for adults traveling alone to cross the border. “During the Trump administration, the price [for human smuggling] has increased incredibly for those who go alone or who try to cross the desert,” notes Francisco Simon, a researcher on immigration at the University of San Carlos who was quoted in the Guardian. He adds that prices for single adults traveling from Huehuetenango to the US have roughly doubled in the past two years, and are now up to $10,400. But for migrants who surrender themselves at US ports of entry – as most family groups do – there is less risk, and the price drops. Simon’s research has found that in the three departments where most Guatemalan migrants are from – Quiché, Huehuetenango and San Marcos – smugglers’ family rates have halved in recent months.

Such price differentials have nothing to do with local conditions and everything to do with enforcement trends at the US border. The Trump administration’s efforts in shutting down border jumping appear to have born some fruit, but this has been more than offset by the collapse of enforcement against families claiming asylum. When the above-mentioned Agustín Marcos travelled north in 1999 he went alone. This time, he plans to take his 17-year-old daughter. “On my own, they’ll charge me $11,700, but if I go with her, it’s $5,200 for both of us and it’ll be easier to get in,” he said to the Guardian.

Diverging prices for human smuggling make it amply clear that US policy has changed. It has become much harder for individuals to cross, and much easier for families — and only in the past few months, just after the omnibus bill was passed.

The omnibus bill is responsible

Those who contend that the surge in illegal immigration is due to some sudden deterioration in security conditions across three countries will find scant support in the data or anecdote. Rather, every indicator strongly suggests that the surge in illegal immigration is driven by a change in US border enforcement policy, with that change stemming from the passage of the Consolidated Appropriations Act of 2019 in February. Until enforcement is changed, whether in law or in practice, expect the rate of apprehensions and releases into the US to remain at crisis levels.

Why they died in the river

The nation was riveted this week by a wrenching photo of a Salvadoran father and daughter who drowned in the Rio Grande trying to enter the United States. Accusations were hurled in the aftermath. Democratic presidential candidate Julián Castro blamed Trump’s metering policies for the fatalities. Acting director of US Citizenship and Immigration Services Ken Cuccinelli in turn blamed the father for both his own and his daughter’s death.

Both are wrong.

February’s omnibus bill killed them.

Victims of the Omnibus Bill: Taking the risk was rational. Policy was not  Source:   CNN

Victims of the Omnibus Bill: Taking the risk was rational. Policy was not

Source: CNN

The omnibus bill killed them

In the narrow sense, the omnibus bill of this past February is proximately responsible for the deaths of Oscar Martinez and his two year old daughter Valeria. This law, combined with the Sabraw ruling of last July, prevents Border Patrol from separating migrants from their children and holding them if they seek asylum on ‘credible fear’ claims.

This policy has induced families from the Northern Triangle countries to take a shot at the US border. Nearly ten times as many families were apprehended in May 2019 as the previous May, almost all from the Northern Triangle countries.

The Martinez family was among those who sought to capitalize on the opportunity. Had the omnibus not passed, there is a 90% chance Oscar Martinez would never have set out for the US. But it did, and that ultimately put him in the muddy waters of the Rio Grande.

Moreover, the law requires a child be part of the package, compelling Oscar to bring along his toddler, Valeria. She was his ticket in. When he drowned, she died with him. She died because US policy demanded that her father bring her on this dangerous journey.

Therefore, as the proximate cause, the omnibus bill is clearly to blame. Without it, Oscar Martinez almost certainly would have stayed home. And even if he had tried the border, he would not have risked the life of his daughter in the attempt.

It was not the father’s fault

Conservatives commonly blame migrants for their plight. In important ways, this is untrue, at least in the sense of blaming the victim of a traffic accident for having chosen to travel by car.

US law states that entering the US without authorization in illegal. In practice, those caught crossing the border illegally will be apprehended and subsequently deported, possibly with some jail time in between. However, if a migrant succeeds in making to the US interior, there are plenty of good jobs waiting and, as it turns out, undocumented immigrants are something of a protected class, at least as a group. There is about a 3% chance of being caught and deported in any given year—not nothing, but a pretty low probability at any given time. If the migrant can run the gauntlet and remain undetected by ICE in the US, then he can increase his net wages by 4-7 times.

The migrants’ logic is ultimately correct. Jumping the border, or bringing the children and faking an asylum claim, is a rational strategy. The risk is well worth the reward, with almost all upside and very little downside. That’s how US migrant policy works in practice.

It has made sense for 300,000 Northern Triangle migrants so far this year. And it almost worked for Oscar Martinez.

As reported by the Daily Mail, in El Salvador, Oscar worked at a Papa Johns pizza restaurant, where he earned $350 a month. He and his wife Tania lived off this $10 / day, because Tania had already quit her job as a cashier in a Chinese restaurant to care for Valeria, their only child. According to Tania’s mother, they were not fleeing violence, but were in desperate search of a life where they could earn more. Their plan was to spend a few years in America to save up enough money to eventually return to El Salvador and buy or build their own house.

Determined to go to the US, they left El Salvador for Mexico on April 3rd. After two months stuck in southern Mexico with no prospect of entering the US legally, the family decided to make their way north. They took a bus to the US-Mexico border zone and upon arrival went straight to the International Bridge to try to plead their case. They were told that they would likely have to wait weeks if not months for their appointment because so many other families were ahead of them in line.  Desperate, they decided to try to cross the Rio Grande themselves and made their way to the river bank.  The father took Valeria across first, left her on the US bank and returned to assist his wife. The toddler tragically decided to follow her father back into the water and he returned to rescue her, but in vain. Both were swept away. Their bodies were found 500 yards down the shore.

*****

Oscar and Tania Martinez had a plan, and they executed it step by step. They tried to comply with the law, but failing that, decided to attempt an extra-legal maneuver which would have succeeded but for a fluke, the decision of the toddler to follow her father back into the water in a small but fateful misstep. They were not fearing persecution, nor were they unemployed. But they saw a chance — granted by the omnibus bill — to quadruple their wages and move to a country which, at least for a time, would provide them opportunity and lift them from chronic penury. But for a minor, tragic turn of fate, they would have successfully crossed into the US, in all likelihood to be released like hundreds of thousands of fellow Central Americans.

Oscar Martinez was not crazy, stupid or a bad person. He was just unlucky. But his decision-making was sound, and his actions were responsible. He was looking for a better life for his family, and but for a small mishap, he would almost certainly have made it. In terms of risk/reward, it was the right decision, just like you may hop into your car to drive to work. Yes, there is risk, but most of the time, it is small and manageable. This time, it was small, but fatal.

*****

Black markets force participants to play the odds, to stay at the roulette table turn after turn and hope they never lose, or lose big. Can we make it into Mexico? WIll they let us stay? Will the Americans give us a hearing? Can we go to the border? Will the cartels get us? Can we find a coyote? Do we have enough to pay them? Can we safely cross the river? Will Border Patrol catch us? If they do, will they release us into the US? Will we find jobs and a way to take care of our children? What if ICE catches us? The lack of a legal channel forces people to take risk, really a series of risks. Actuarially speaking, most of the time migrants win, but some of the time they fail. The incidence of death, rape, kidnapping and incarceration can all be calculated in advance. Black markets are not black boxes. It’s a matter of counting and cataloging the coin tosses.

Economics will drive the decision-making. The level of kidnapping, extortion and assault, the incidence of theft and the price of cartel and coyote fees are all a function of the wages migrants can earn in the US. So most of the time, trying the border will be worth it. The migrant’s decision to run the gauntlet to make it to the US is rational and responsible. But it is risky, sometimes life-and-death.

From the policy perspective, the issue is not whether migrants fail or succeed, but rather that US immigration policy forces them to take the risk. It’s not that Oscar and Valeria Martinez drowned. It’s that they were there at all.

Readers will no doubt expect me to harp on the benefits of a market-based approach, and I will not disappoint you. Enforcement-based regimes — prohibitions — create black markets that convert plans into games of chance: you bet your life. Prohibitions are farcically cruel, capricious and create little but crime and tragedy. Had Oscar Martinez had a legal option, he would have chosen it. Indeed, he did choose it. But because it led nowhere, he turned to illegal options. If he could have gotten a background check and purchased a visa, he could have calculated whether it made sense to go to the US. Without a doubt, he would have left his family, safe with their mother, back in El Salvador. And he would have worked huge hours to earn in a few months what he could make at home in a year. But he would have known, up front, whether the math made sense. No one would have died. No bitter recriminations would have followed. No stain would be left on our honor and decency. It would have come down to a simple economic decision, nothing more.

Stakeholder Analysis for Congressional Staff

We have claimed that market-based visa (MBV) legislation can be passed in Congress and approved by the White House. I was asked by Congressional staff to support this assertion with a stakeholder analysis, the substance of which can be found below.

*****

Illegal immigration is a very peculiar policy area. Literally no one endorses current migrant law and enforcement practice. Conservatives hate it, because they feel they are being invaded and the border is out of control. Fiscal conservatives like FAIR hate it because it brings in dependents who represent a material fiscal burden on taxpayers. Hispanics hate it because migrants have to live in hiding and in fear. Democrats hate it because it's cruel and mean-spirited.

So we have a law now nearly 55 years in force that has literally no constituents. It's not like, say, sugar subsidies, which are a zero sum game between consumers and US sugar producers, where giving to one means taking away from the other. No one likes migrant policy. No one is defending it.

This implies quite a bit of negotiating space among the various political factions, as long as one can propose a policy superior to the loathed incumbent model. So let's take a look, stakeholder by stakeholder, at who wants what:

The Social Conservatives

In an ideal world, social conservatives (hereafter, 'conservatives') would like to deport all illegals and seal the border hermetically.

Not Going to Happen

That's not going to happen, for several reasons.

  1. Public opinion is against mass deportation and the Wall by a 60/40 margin (Gallup), and the votes are not there in Congress, not even with the most anti-immigration president in living memory and both houses of Congress to 2018.

  2. Meaningful enforcement against employers -- which would work -- would split conservatives and is therefore suppressed. Note Social Security's 'no match' letters, followed promptly by President Trump declaring E-Verify too hard for farmers. Conservatives themselves do not support mass deportation when the costs are laid plain.

  3. Supply suppression, in this case border enforcement and deportation, has never been successful in eliminating black markets, illegal immigration in this case.

  4. President Trump is down 30 pp with independents, with a net approval rating of -11 pp. No president has ever won re-election with such ratings and Biden is up on the president by 13 pp nationally. For planning purposes, conservatives need to assume that Trump is not re-elected, in which case conservatives most likely will not have another window on illegal immigration policy until 2029, when demographics will have further reduced the conservative white share of the population.

  5. Half of undocumented immigrants have been in the US 15 years, according to PEW. Ten years from now, it will be 25 years. At some point, the American public will want to resolve the situation. Senator Graham, a Republican, is looking at some options now. If conservatives fail to make a move under Trump, most likely some substantial portion of the ten million, long-term undocumented immigrants in the US will obtain permanent status in the next decade.

Bottom line: Enforcement doesn't work historically; the votes are lacking in Congress; public opinion is firmly against mass deportation and a Wall; and time is working against Republicans regarding amnesties. Conservatives need a deal before Trump leaves office.

The Offer to Conservatives

We cannot offer deportations and a sealed border to conservatives, because we cannot deliver them. We can, however, offer compensation, numeric limits, control, safety and legality.

1. Compensation

If we cannot materially remove or deter migrants, we can at least see that conservatives receive market compensation for allowing them in. Within this, two factors matter: the amount, and how the amount is determined. How the price is determined matters for purposes of legitimacy. Americans are accustomed to paying the market price, and the market rate is accepted as legitimate. A person's home is worth what someone in the open market will pay for it. By extension, a visa is worth its market value. Just the fact that the market has set its value will comfort conservatives. Second, the value of the visa should be material. When conservatives see their minimum wage lawn guy is paying twice their rate of effective taxation, that alone will be a cause for respect. (This is an important distinction between us and CATO, by the way. In CATO's world, the US Congress sets the price of the visa; in our world, the migrants set the price of the visa, ie, the value is what it is worth to them, not us. This is also the difference between closing the border and leaving it open.) Conservatives will derive comfort from the knowledge that they are being compensated at a fair rate based on an impartial arbiter -- the market -- and that the amount of compensation is material in terms of migrants' ability to pay.

Many, and perhaps most, Americans appreciate that migrants are here to stay and that we will struggle to close the border. Given this reality, many will be willing to accept money as compensation. Put another way, we can use money to solve certain problems, and this may be one of them.

2. Control

Many Americans are offended by the loss of control over the border, not by people entering per se. Market-price visas, properly managed, will close the border. Historically, transitioning to a legalize-and-tax approach reduces associated pathology by 95% immediately and automatically, which would reduce border apprehensions from 4,500 / day last month, to perhaps 150 / day under a legalized system. This would of course have a huge impact in the border zone (as well as elevating Houston as the de facto capital of Central America), but to the average American it would signal that the US had regained its sovereignty along the Mexican border. For the conservative, this is very important psychologically--but it does not have to mean keeping people out. It means that the channel for migrants is controlled and ordered.

This analogy extends to the undocumented population. Again, conservatives are troubled by foreigners in their community who have no standing, no documentation or known identification, no background checks and are leading an unwelcome sort of lifestyle, poor and hiding, self-aware of being second class residents of the community. In a market-based system, all this ends--even though the Hispanic migrants remain essentially in place--and we do it without amnesty.

3. Numeric Limits

A market-based system provides the opportunity to maintain migrant numbers not much higher than the counter-factual, that is, current policy pre-asylum crisis. We will need to increase visas one-time to accommodate the demand effects of legalization, that is, the 350,000 number calculated here. But that is still far, far better than the asylum fiasco we have today, which we estimate will net 740,000 additional migrant entrants — 300,000 of them minors — in CY 2019. Put another way, with a market-based system, the current asylum crisis would never have happened and illegal immigration would be lower than it is today.

4. Safety

Black markets create adverse selection. Those who participate are the ones most likely to break the law. In a market-based system, it is exactly the opposite. If visas are available at any time on the market, there is always another Mexican or Central American ready and willing to take the place of the incumbent. It is a next-man-up system. Trip up, and there are a million Mexicans ready to take your spot. As a result, not only will such migrants be law abiding, they will be substantially more law abiding than the suburban communities they often serve. If they are not, they won't last.

5. Protect Domestic Wages

A market-based visa will have the effect of bidding migrant wages up to the US market level. Thus, the US employer has the option of hiring US unskilled labor at about $10 / hour or hiring a migrant. Because Mexicans are prepared to accept $6.50 / hour, employers can pay less or provide suboptimal working conditions. This can undermine US unskilled wages or working conditions. In a market-based system, the visa fee will be bid up by the migrants until the employer is indifferent between hiring a migrant and hiring a US worker. By this means, the employer is prevented from undercutting the market wage, even as the migrant earns only his Relocation Wage (which equals the Mexican unskilled wage, a mark-up to cover higher US costs, and an increment to compensate for leaving the home country). Thus, a market-price visa supports US unskilled wages and insures that conservatives are fully compensated for providing market access, that is, the visa system subsidizes neither the employer, the migrant nor any intermediary.

6. Vastly Improved Compliance

A widely-flouted system cannot be enforced. By providing status for those here and a legal way in for those wishing to work in the US, employers have a legal means to access incremental employees on demand, subject only to a budget (visa price), rather than administrative, constraint. In such a world, it is possible to enforce the law and reach near universal compliance, at least with respect to larger businesses.

Fiscal Conservatives

Fiscal conservatives are principally concerned with the fiscal impact of illegal immigration. Most of this is captured in FAIR's 'Fiscal Burden' report. For fiscal conservatives, market-based visas are a no-brainer.

1. Compensation

In a market-based system, the US government receives the maximum compensation from migrants which the market allows, swinging the Federal budget by about $30 bn / year. If this activity were capitalized as an equity on the S&P 500, it would be the fourth biggest company in the US, nestled between Google and Facebook with a market capitalization around $600 bn.

2. Reduction in Costs

Part of the benefit to the Federal government is a reduction in costs, particularly enforcement costs. In our approach, we cut Border Patrol by about two-thirds, because there is very little to enforce on the border. If border crossings drop by 95% -- and that's a reasonable target -- 15,000 Border Patrol agents will deliver 150 apprehensions per day. That's overkill by an order of magnitude at least.

Similarly, depending on the methodology, 50,000 to 190,000 migrants languish in US jails and prisons on immigration and related charges. These cost us about $40,000 / capita / year. Again, 95% of that goes away in a market-based system.

3. Health Insurance

A market-based visa would require migrants to carry health insurance (net that out of the visa fee). This would help ease, but probably not fully eliminate, associated health care costs.

4. Dependents

Because the visa price is determined by the marketplace, low cost providers will be at an advantage. Those who leave the spouse and children at home will have the lowest costs, so a market-based system will discourage bringing dependents, thereby lowering associated education costs paid primarily through local real estate taxes. Similarly, the visa can be designed to discourage birth tourism, in part by discouraging the bringing of spouses and in part as a condition of the visa itself. I would again underscore the importance of on-demand entry and exit in a market-based system. In an MBV system, migrants come and go as they please -- but they have to pay when they're in the US. In the current system, access to the US market is not easy, but it is potentially cheap. In an MBV system, access is easy, but not cheap. Migrants have both the flexibility and incentive to leave the family in the home country, and that will reduce the fiscal burden on taxpayers.

5. New Business Opportunities For US Companies

The traffic which currently goes through the unsecured border on foot would, in the case of the Northern Triangle countries, transfer to air travel. This represents an incremental $1.5 bn in air travel revenues, about 60% of which would fall to US carriers and two-thirds of which would transit through Houston. So there would be plenty of new opportunity for the US business community, both domestically and in the participating Central American countries.

Democrats and Hispanics

For purposes of this analysis, we will treat Democrats and Hispanics as a single group, referring to them as 'Democrats' or 'the left' here, bearing in mind that this is not a homogenous group. The left would like open borders. unqualified amnesty and other concessions for resident and incoming migrants, including access to various social welfare programs.

Not Going to Happen

That's not going to happen, for several reasons.

  1. A liberal President Obama with two Democratic houses could not pass meaningful immigration reform, including amnesties. The best he could achieve was DACA, a presidential order not likely to survive court challenges forever. With a mixed House and Senate, a full scale amnesty is unlikely, although one or two smaller amnesties covering, say, 1-3 million people in the 2020s is possible, and probably likely

  2. Concerns about national sovereignty and border security are not exclusive to Republicans. Questions of immigration cut to the core of identity and group dynamics. All people have such considerations, regardless of political party. Every Republican could be ejected from the Congress and White House and the border would still remain closed to unchecked immigration. (This is why Democrats have such a hard time articulating an immigration strategy.)

  3. There is little appetite on a national level to extend social programs to undocumented immigrants.

Therefore, the most likely post-2020 scenario is a Democratic president and split houses of Congress. A limited amnesty of some sort is probable, but the overriding problems of illegal immigration are likely to remain. For migrants, this includes existential uncertainty, deportation, incarceration, wage theft and worker exploitation, etc. We estimate approximately one million cases of migrant victimization and predation per year. All this remains even after the election. The most plausible outcome for Democrats and Hispanics is a continuation of the miserable status quo, plus one or two limited amnesties in the next ten years.

The Offer to the Left

While we cannot offer amnesties and concessions, we can offer a trade -- market access for a market-based fee. Just as for conservatives, this is a second-best outcome for the left. Although we have converted the prospect of a gift into a service to be purchased, we still allow access to the market, and this has many, many advantages for migrants and the Democrats.

1. The ability to enter and exit the US on demand, work at will

This step has enormous implications. It will end 95% of the observed pathology, and provide social standing and dignity for Hispanic migrants.

2. Status for undocumented Hispanic residents

Although market-based visas will close the border, they still contain a residual risk. Migrants who paid $7,000 / year for a visa will end up working next to undocumented residents who pay nothing. There will be a temptation to improve personal economics by failing to renew the visa, pocket the $7,000, and become part of the undocumented workforce. Therefore, it would make sense to extend the visa program to resident migrants to mop up the black market -- a conservative goal in any event. This would involve issuing market-based visas to resident Hispanics from 'first round' participating countries (presumed to be Mexico, Guatemala, Honduras and El Salvador, and possibly other CA countries, but excluding all others). This would imply issuing visas to approximately 7.3 million undocumented Hispanic residents (out of 10.3 million total, per PEW), of which 5.4 million would be workers. All these people are already in the country -- half of them more than fifteen years.

3. Vast Reduction in Predation and Victimization

A market-based program would materially end death while crossing the desert; end kidnapping, extortion, theft, robbery and assault during migration; end the rape or coerced sex of at least 30,000 women and girls per year; vastly reduce the risk and incidence of arrest and incarceration in the US or Mexico; end the cause of human trafficking for forced labor and prostitution to pay off cartel and coyote fees; end coerced drug smuggling; and materially reduce wage theft and worker exploitation. In humanitarian terms and with respect to the protection of an important Democratic constituency, this would be an incredible step forward.

4. Dignity and Social Standing

Perhaps as important as any other achievement in a market-based system is dignity and social standing gained not only for migrants, but for the Hispanic community as a whole. Sneaking across the border, hiding in trucks, trying to be invisible in the US -- all these would end, and migrants and Hispanics could stand as the equal to any person in the United States.

5. Ease of Working and Living in the US

A market-based system would vastly improve day-to-day working conditions for migrants by allowing access to drivers' licenses, bank accounts, housing rental, etc. and by allowing free travel to and from the US to see family, on the one hand, and contract work while abroad, on the other.

6. Closing the border opens the door to resident status

A principal objection of conservatives to amnesty is that -- as with IRCA in 1986 -- amnesty will encourage yet another round of illegal immigration. If the border can be closed and numeric limits achieved, then conservatives' objections to amnesty will be greatly reduced. Thus, a successful MBV program, while it does not provide amnesty, can provide the preconditions for securing one.

*****

Democrats would never propose a market-based program because it represents a fair deal, not a concession, a gift or an entitlement. Nevertheless, they would be hard pressed to oppose it, because it provides status for 7 million Hispanics, unlimited on-demand access for background-checked Mexicans and Central Americans to the US labor market at the market price; and because it ultimately protects Hispanic women from exploitation, particularly sexual assault, as well as seeing migrant men spared extended time in US jails and prisons. It is a very big deal for Democrats and a huge step up for the Hispanic community as a whole.

Conservatives, of course, would prefer to close the border and deport the undocumented.

Neither Democrats nor Republicans will achieve their preferred outcomes. The failure of the Obama administration to drive through amnesty with two Democratic houses of Congress, and the failure of the Trump administration to fund the Wall with two Republican houses of Congress, shows that neither side can achieve their best case scenario. Therefore, some version of the status quo is almost certain to persist, with the exception that amnesties for 1-3 million unauthorized residents seems likely during the 2020s.

While MBVs are not the first choice for either conservatives or progressives, they can easily be the second choice for both and represent an outcome far, far better than either the status quo or any other plausible alternative in the coming decade.

*****

There is a lot here, but at its core, the proposition is simple: end the Prohibition in migrant labor and transition to a legalize-and-tax system with a volumetric cap using a pricing mechanism. The rest is just technique.

This kind of liberalization has a proven track record of success. We know how events will play out and that we can deliver the results promised. This is a problem we can solve, together, to the satisfaction of most Americans.

How Market-based Visas would change Houston and Texas

Texas is currently taking the brunt of the asylum seekers' onslaught, and Texans are looking for alternatives which could help. Market-based visas are the best way to turn around the situation in the Lone Star state.

Market-based visas (MBVs) envision allowing background-checked Mexicans and Central Americans to enter and work in the US on demand in return for a fee which we calculate at about $3.50 / hour, an effective 35% tax rate. This would keep migrant numbers about the same as they would have been before the asylum crisis. In this system, if we wanted to reduce the number of migrants, we would raise the visa price; to increase the number of migrants, we would lower the price, but a migrant could buy a visa on demand at any time at the prevailing price, just as you can, for example, buy gasoline at any time at the market price. There are, of course, many caveats and conditions, but that’s the program in a nutshell.

Closing the Southwest Border

With this, the US could close the unsecured southwest border without the need for enforcement. People come through the desert because there is no timely, legal way in otherwise. Under an MBV system, a migrant can come anytime they want — at a price. Indeed, anyone caught coming through illegally would lose the right to buy a work visa, and that’s a very, very valuable right that one would not want to risk. If the visa volumes are properly set, this will close the southwest border. Why come through the desert when you can hop a flight to Houston as easily?

Houston will become the capital of Central America

Air Traffic

Much as Miami is the unofficial capital of South America, a market-based approach would make Houston the unofficial capital of Central America. Even today, most of the flights from the Northern Triangle countries of Guatemala, Honduras and El Salvador enter the US at Houston. Those who now come across by foot would fly in, mostly through Bush International Airport. A legalized system would see the air traffic from the Northern Triangle countries increase by 30-40%, with about two-thirds of this channeled through Houston. Therefore, “going to the US” would mean principally “going to Houston” for shopping, doctors visits, and banking (not to mention the seafood gumbo at Pappadeaux).

Business and Investment

The price Central American governments would have to pay for participation in this program is a range of pro-business policies, mostly notably related to finance, telecommunications and air travel — as these are desirable to insure the MBV program’s smooth functioning. Real estate would be another area of interest, with the intent to open these countries to US retirees where they can live in comfort and convenience — and then go to Houston for their doctors and shopping. There is more here, but in essence, Central American leadership would be highly incentivized to promote sustainable economic growth — the best defense against illegal immigration. Much of the related business would ultimately be conducted out of Houston.

Improve the Condition of Hispanic Communities, Increase Confidence and Pride

A large portion of Houston’s Hispanic population lacks legal status, and this is reflected at times in the condition of the undocumented community.

Could use an upgrade

Could use an upgrade

In a market-based system, the vast majority of migrant Hispanics will be legal, and they will pay twice your rate of taxation to do so. But in the process, they will know they are in the US legally, legitimately and in control of their own destiny—and frankly, that they are tougher than you are. (For the record, Mexicans are the hardest working people in the OECD. They work 10 weeks per year more than the average American.) A legalized system will create Hispanic confidence, pride and dignity—perhaps as important an achievement as any other in the program.

It will also allow investment in physical assets — stores and malls, for example — serving the Hispanic community. For me, an enduring memory of Houston is the run-down strip malls on the western side of town, with washaterias, Western Unions and pawn shops, a string of worn storefronts affixed with fading Spanish-language signage. Now, Houston has its share of ugly strip malls all over the city, but these gave an unsettled feeling of people living on the edge, hanging on for dear life. In a market-based system, a lot of this goes away, and migrants will look, act and feel much more like ordinary residents of the city. They will have as much a right to be there as anyone else, and to be treated as a customer demographic just like any other.

Thus, a market-based system will uplift Houston’s currently undocumented Hispanic community, better integrate them into the city, and encourage increased investment in the physical and intangible assets which underpin migrants' social progress. In the process, it will make Houston a better city to live in.

Federal Funding

We estimate that a market-based visa program would swing the Federal budget by about $30 bn / year. A portion of this gain would be shared with the states, in the case of Texas, probably something north of $1 bn / year. This is not going to revolutionize the situation, but it’s a handy bit of change for addressing schooling and health-related issues. In addition, migrants would have to obtain barebones healthcare coverage, which would also reduce some of the pressure on local budgets.

An MBV system strongly discourages bringing dependents, because the visa price will be set by those with the lowest costs, ie, those migrants who left the kids at home. (Again, bear in mind that migrants can come and go as they please in an MBV system. With lots of discounts flights out of Houston in particular, they can go home and return anytime they please—this is how we close the unsecured border.)

Nevertheless, some may wish to bring children. The conditions for doing so belong more in the realm of politics than policy, but here is an illustrative proposal. In this system, we never say ‘no’, but everything has a price. For example, the US could charge $5,000 / year per dependent child. This amount, matched by the US government, could be used as a tuition voucher at any public, parochial or private school. Thus, a migrant could pay $5,000, which would generate $10,000 from the federal government to pay, for example, tuition in the Houston public school system. This would take pressure off the local community and in some sense nationalize the education costs of migrant children. It would also provide school systems a tangible incentive to insure their student body is properly documented. Finally, it would allow the injection of private money to cover migrant costs. For example, if the Gates Foundation wants to cover migrant dependent visa costs, then the Federal government would match that amount. Whatever the Gates Foundation does, you can be assured they will seek the highest quality education for migrant children—and that’s good for everyone.

The Next Step for Houston as an International Gateway

For both Houston and Texas more broadly, market-based visas would prove transformative. MBV’s would establish Houston as the de facto capital of Central America even as it closes the unsecured border and takes the pressure off of the long-suffering US population in south Texas. It would bring safety, conformity, propriety, transparency, and dignity, as well as ensuring proper compensation for providing access to US labor markets. It would take Houston to the next level, no longer just an oil town or a major US city, but an international gateway in its own right.

Purpose, Practicality and Passage (the CATO Review)

The CATO Institute has responded to our assessment of its illegal immigration strategy.  

First, let me express my thanks to Alex Nowrasteh of CATO for providing us visibility and fostering a wider debate on illegal immigration policy, including market-based visas.  I think the mood is turning and the wider US community is now open to considering a commercial approach to solving illegal immigration.  This morning a Fox affiliate radio station in Houston called me, and they were the ones to bring up market-based visas to address the increasingly desperate situation in Texas.

As regards CATO's response, any proposal must meet three tests: Purpose, Practicality and Passage

  1. Does it address the problem, which today is ending the asylum crisis, closing the southwest border and eliminating the domestic black market in migrant labor?

  2. Is it administratively practicable?  Can it be successfully implemented in practice in a reasonable amount of time?

  3. Will it pass in Congress and be signed by the president?

If you don't have those three elements, you may have a worthy editorial or interesting concept piece, but it is not a policy proposal.

Purpose

It's not clear that the CATO proposal ends the black market and closes the border.

Practicality

CATO expresses a willingness to consider the 6.5 million visas which might arise if only 0.1% of the population from the eligible countries participated in its proposed approach.  Today, the US Bureau of Consular Affairs processes about 10 million visas per year.  Thus, a 0.1% participation rate in CATO's Gold Card program would increase the workload by 2/3 on consular services.  That alone would blow up the system.  Notwithstanding, the recent experience with asylum seekers suggests that participation rates could easily be in the low single percents, that is, closer to 50 million visas.  That is simply not a viable number in any plausible administrative framework.

Passage

Meanwhile, over on the right, visas for even 600,000 incremental migrants would constitute a massive political lift.  So it's all well and good to call for a liberalized system, but it's at least an order of magnitude too big to qualify as a legitimate topic of discussion on the right, much less an initiative which could pass in Congress.  

Therefore, the CATO proposal is much like the Kushner Plan.  It is an interesting concept, but it fails to qualify as a policy proposal. 

And that's fairly typical.  The conservative think tanks are no better, and they matter more under the current political constellation.

Here's the electoral math.  A recent Quinnipiac University poll shows the President locking down Republicans while enjoying virtually no support among Democrats.  Critically, however, he trails Joe Biden by an astounding 30 percentage points among independents.  If the president can't move the needle with independents -- and market-based visas will appeal to independents -- then the election will be a blow-out.  In such an event, conservatives will be picking the Democrats' dust from between their teeth for a decade. 

Thus, while deeply held sentiments about national sovereignty have their place, the conservative DC think tanks have to focus on what can be passed now, and that means considering more than just conservative priorities.  Purpose, Practicality and Passage.  We need all three from the DC policy shops.

Illegal Immigration Strategies: CATO and Ideal Immigration

With the ideology framework we introduced recently, we can consider the positioning of the various think tanks with respect to illegal immigration. 

Think tanks.png

In this post, we consider the classical liberals (top left on our chart), the CATO Institute and Ideal Immigration.  One would anticipate including the Niskanen Center in this group, as they best described as fiscal conservatives in terms of philosophy.  Notwithstanding, Niskanen's policy prescriptions are essentially indistinguishable from those of CIS or FAIR, and so Niskanen will be considered with that group in a later post.

Like Princeton Policy, CATO and Ideal argue for visa fees, 'immigration tariffs' in CATO parlance. However, the details are radically different.  

Ideal's proposal is relatively simple: a $2,500 annual fee for a work visa with an option on permanent residency after 10 years.  

Under the CATO concept, immigrants would buy a 'gold card' which allows them to live and work in the US and gain permanent residency.  The price of the gold card would be based on the age and education of the purchaser to guarantee a "fiscal windfall" to the US government.  Per CATO's mock tariff schedule, anyone younger than 25 could buy permanent residency for no more than $15,000.  If the number of visas is capped then, then visas could be auctioned to the highest bidder.

Weaknesses

The fee is too low and the market is too big

Both the CATO and Ideal fees are too low, particularly as they offer permanent residency in some form.  From the conservative perspective, the idea is to limit or reduce the number of immigrants and reduce tenure of migrants in the US.  A low fee will not only encourage immigration, it will crush the system.

Consider CATO's $15,000 fee for young adults without high school educations.  How big is the potential market?  If we apply the offer to 133 low income countries globally -- to Latin America, East and South Asia and Africa -- then we are speaking of a gross population of 6.5 bn.  If just 0.1% decided to take up the offer...well, it would be game over in a matter of days.

If the number of visas is capped, let's say at 1 million to choose a number well beyond the political tolerance of Republicans, then the 150 million citizens of Mexico and Central America who represent illegal immigration across the southwest border would gain about 1% of all offered visas, with the rest going to countries like China, India, Pakistan, Indonesia and Nigeria, among many others.  At the current pace, that would deter illegal immigrants from the southwest border for all of three days.  Put another way, CATO's proposed fee would either have little impact on illegal immigration or blow up the legal immigration system on contact.

Congress is incapable of managing visa market conditions 

CATO sees Congress setting visa volumes and tariffs.  There is zero chance that the US Congress would post tariffs for minimum wage migrant workers at a 35% effective tax rate.  Politically, that is not feasible.  If Congress is to post a tariff schedule, the rates will be much lower.  But, of course, this would flood the market with new entrants, prompting Republicans to put a cap on numbers at low levels -- the historical pattern -- which in turn would prevent the southwest border from closing.  An auction would not change this outcome per se.  If the number of visas auctioned is materially below the demand for labor, then the auctioned visas will be sold at some price, but employers will continue to take any labor deficit from the black market, just as they have since at least 1965.  CATO's price/volume mechanism is not viable, because Congress would have no more competence in managing visa market conditions than it would in setting, say, gasoline prices.  

A price-based system is incompatible with permanent residency

For H2 class migrants -- unskilled workers typically lacking English language skills -- a price-based system is incompatible with permanent residency.  On an hourly basis, permanent residency -- even if promised fifteen years into the future -- is worth about $4 / work hour.  If we assume that migrants earn $10 / hour on average and the right to work in the US by itself is worth $3.50 / work hour, then a work visa with a residency option is worth $7.50 / hour, leaving $2.50 / hour in wages.  Of course, Mexicans cannot afford this, but a residency option will force them to make wrenching trade-offs between current consumption and future residency.  It will lead to penury for migrants, and by extension, to claims -- readily visible to the public -- that visa fees are exploitative and are impoverishing migrants.  In such an event, the system will fail, just as the Bracero system failed in 1965, and for similar reasons.  For this reason, residency cannot be included in a price-based program.  Work visas should not be conflated with formal immigration mechanisms.

Stockholm Syndrome

One of the occupational hazards of dealing with migrants is the policy analyst's human impulse to try to improve their condition.  This is laudable, and no one has done more to document migrant predation than Princeton Policy.  Notwithstanding, US policy cannot be based on the interests of migrants.  Migrants are not a voting constituency.  Legislation must serve US voters, who are the ultimate client for any policy shop, no matter how compelling the plight of migrants.  Good policy should, of course, help migrants, but that should be a by-product of high quality design, rather than the principal objective of any legislative initiative.  If a bill is seen to promote migrants at the expense of US citizens, it is likely to fail.

*****

Overall, it is heartening to see a more business-like approach to work visas, and both CATO and Ideal Immigration represent a step in the right direction, from our perspective.  Nevertheless, if the intent is to run migrant labor as a business, then let's run it as a business, not a hybrid business / social program.  A mixed-mission program will implode from its internal contradictions.  Moreover, too little attention has been given to market sizing and segmentation, opening the door to volumes which will lack political viability and prove unworkable administratively.   Overall, therefore, the direction is laudable, but the particulars require some modification.

Finally, let's keep in mind that there are three priorities for the Trump administration:

  1. End the asylum surge

  2. Close the southwest border

  3. End the black market in undocumented labor within the US

Until this administration ends, any other immigration initiative is a poor use of time.

Illegal Immigration Forecast for Calendar Year 2019 - June Update

For calendar year 2019, we forecast 1,072,000 apprehensions at the southwest border. Of these, we anticipate 430,000 will be minors, and 642,000 will be adults.

We expect 309,000 minors and 226,000 adults will be released into the US interior, joined by 202,000 adults entering the US illegally and undetected. For the calendar year as a whole, we project 737,000 asylum seekers and illegal border crossers will successfully enter the US interior. Pew Research estimates the unauthorized Hispanic population in the US in 2016, the latest year for which data is available, at 7.3 million. Thus, an increase of 737,000 migrant entrants would represent a 10% increase in the “illegal” population of Hispanics in the country during calendar year 2019.

This is quite a large gain in percentage terms. Half of it — more than 350,000 successful migrant entries into the US interior — can be attributed to the omnibus bill alone.

Apprehensions

Determining the number of migrants entering the US starts with apprehensions. We have forecast southwest border apprehensions month by month for 2019, using actual data through May. We have assumed some seasonal decline in June, but note that the trend line is firmly up, so our forecast could prove low. The balance of the year is based on a projection of April to June 2019 actuals, seasonally adjusted. This yields an estimate of apprehensions at the US southwest border for calendar year 2019 at 1,072,000, up from 931,000 in our May update.

May appreh.png

Customs and Border Protection segments apprehensions data by families and individuals, and this allows us to better understand current dynamics and the outlook for successful border crossings. As the graph below shows, the number of minors and adults apprehended who were traveling alone has risen, but the surge in growth has come principally from family units.

May appre by group.png

Applying this segmentation to our forecast above allows us to estimate apprehensions by migrant type. This yields calendar year 2019 apprehensions of approximately 430,000 minors and 640,000 adults, with about half of adults from family groups.

The Causes of Increasing Apprehensions

Apprehensions began to rise materially in August 2018, and then exploded in early 2019. The two turning points were associated with the Sabraw ruling and the omnibus spending bill.

The Sabraw Ruling

In an attempt to stem the pace of border crossings, Attorney General Jeff Sessions announced a ‘zero tolerance’ policy in April 2018, which included the separation of migrant parents from their children. This practice was promptly challenged in the ninth district court (southern California), Judge Dana Sabraw presiding. Sabraw took a dim view of zero tolerance, decrying “government conduct that arbitrarily tears at the sacred bond between parent and child.” “Such conduct,” he wrote, “is brutal, offensive, and fails to comport with traditional notions of fair play and decency.” In July, he ruled that migrant parents could not be separated from their children nor deported prior to their hearing.

With this, family units began to flood in. From August, the numbers began climbing quickly, and based on the last four months of the year, would have led to 598,000 apprehensions at the southwest border for the calendar year 2018 as a whole, 200,000 more than apprehensions at the January to July pace. As it was, apprehensions in the August - December period were about 70,000 higher than expected for that five month stretch, and this can be considered the impact of the Sabraw ruling through year-end 2018.

* Annualized based on Jan.- July 2018 data, using Jan-July 2014-2016 precedent, seasonally adjusted  ** Annualized based on Sept. - Dec. 2018 data, using Sep-Dec 2014-2016 precedent, seasonally adjusted  Princeton Policy estimates and forecasts based on Customs and Border Protection data

* Annualized based on Jan.- July 2018 data, using Jan-July 2014-2016 precedent, seasonally adjusted

** Annualized based on Sept. - Dec. 2018 data, using Sep-Dec 2014-2016 precedent, seasonally adjusted

Princeton Policy estimates and forecasts based on Customs and Border Protection data

The Omnibus Bill

The bigger numbers, however, came with the signing of the omnibus spending bill (the Consolidated Appropriations Act of 2019) in mid-February, which essentially prohibited the deportation of any adult from the Northern Triangle countries traveling with a minor and claiming asylum. March and April each saw nearly 100,000 apprehensions, almost twice the pace of the last quarter of 2018 after the Sabraw ruling.

Attribution

Attributing rising family unit apprehensions to rulings and legislation over-simplifies causality to an extent. However, it is clear that the Sabraw ruling and the omnibus bill represented turning points in apprehension trends. For practical purposes, we attribute the post-July 2018 surge to the Sabraw ruling, and the post-February surge in apprehensions to the appropriations bill itself, even if the gains cannot be definitively allocated between the two, or indeed, to other factors.

Our current apprehensions forecast of 1,072,000 for 2019 includes a rise of 205,000 which can be attributed to the Sabraw ruling, and an additional 473,000 which can be credited to the omnibus spending bill.

In terms of minors, 430,000 are expected to be apprehended in calendar year 2019, of which 102,000 can be attributed to the Sabraw ruling, and an additional 229,000 to the omnibus bill.

By our estimates, the omnibus bill by itself will account for nearly 475,000 adults and minors apprehended at the US southwest border in calendar year 2019.

Successful Entries across the Southwest Border

We can convert the apprehension numbers into estimates of successful crossings into the United States.

Traditional Border Crossers

While much of recent attention has turned towards asylum seekers, the traditional border jumping business continues unabated. Adults traveling alone — who can be detained and deported — will continue to attempt to enter the US undetected. Apprehension rates have recently been thought to be in the 55-70% range. We use 60%, under the assumption that adults traveling alone are more savvy than families and minors, on the one hand, and that Border Patrol is too distracted with the tsunami of asylum seekers to properly focus on traditional border jumpers. We anticipate more than 300,000 apprehensions of adults traveling alone, which is reasonably high but not unprecedented by recent standards. Based on a 60% apprehension rate and a three-try model, this translates into about 200,000 successful crossings into the US by adults traveling alone and seeking to avoid apprehension. This is the highest since 2016, but not exceptional by historical standards.

Asylum Seekers

The classification of those claiming asylum is problematic. Conservative analysts have presumed that most migrants seeking asylum correctly appreciate that it will not be granted and therefore do not intend to show up at related hearings. Nathalie Asher, the acting chief of U.S. Immigration and Customs Enforcement’s deportation branch, recently made just this point to Congress, noting that 87% of released families in a pilot program were skipping their court hearings. Therefore, from the conservative perspective, the recent surge of asylum seekers may be considered just the latest manifestation of illegal immigration.

On the other hand, until their cases are heard — perhaps as much as three to five years into the future — asylum seekers typically have the right to remain in the US. During this time they do not count as either illegal or undocumented. Ultimately, however, historical precedent suggests that only 12% of those seeking asylum are likely to have it granted. So how should the others be treated? From the conservative perspective, they would probably be considered illegals, or perhaps illegals-to-be. For purposes of this analysis, we treat 88% of the apprehended asylum seekers as illegal and 12% to be considered legal by being granted permanent status in the US.

In some respects, the distinction is irrelevant. From the conservative perspective, the 12% granted asylum represent roughly the same impact as those who are ultimately slated for deportation—although asylum seekers are allowed to work pending the disposition of their cases. For presentation purposes, they are treated as a single group of migrants entering the country. The average US citizen will be unable to differentiate between legitimate and illegitimate asylum claims, and will instead focus on the very real number of new Central American students showing up in their public school system. The aggregate headcount is likely to matter more than the ultimate status of those seeking asylum.

* Annualized based on Jan.- July 2018 data, using Jan-July 2014-2016 precedent, seasonally adjusted assuming 60% apprehension rate for adults alone and 75% and 40% entry rate for minors and adults in families, respectively. Assumes one month lag from apprehension to release for asylum seekers.  ** Annualized based on Sept. - Dec. 2018 data, using Sep-Dec 2014-2016 precedent, seasonally adjusted assuming 60% apprehension rate for adults alone and a 75% entry rate for minors and and 70% rate for adults traveling in family units. Assumes a one month lag from apprehension to release for asylum seekers.  Princeton Policy estimates and forecasts based on Customs and Border Protection data

* Annualized based on Jan.- July 2018 data, using Jan-July 2014-2016 precedent, seasonally adjusted assuming 60% apprehension rate for adults alone and 75% and 40% entry rate for minors and adults in families, respectively. Assumes one month lag from apprehension to release for asylum seekers.

** Annualized based on Sept. - Dec. 2018 data, using Sep-Dec 2014-2016 precedent, seasonally adjusted assuming 60% apprehension rate for adults alone and a 75% entry rate for minors and and 70% rate for adults traveling in family units. Assumes a one month lag from apprehension to release for asylum seekers.

Princeton Policy estimates and forecasts based on Customs and Border Protection data

At present, Border Patrol appears to release approximately 70-75% of minors and asylum seeking adults traveling with minors, which, allowing for lags from apprehension to release, translates into roughly 310,000 minors and 225,000 adults anticipated to be released into the US interior during calendar year 2019.

For the calendar year as a whole, we project 737,000 asylum seekers and undocumented border crossers will successfully enter the US interior. Pew Research estimates the unauthorized Hispanic population in the US in 2016, the latest year for which data is available, at 7.3 million. Thus, an increase of 737,000 migrant entrants would represent a 10% increase in the “illegal” population of Hispanics in the country during calendar year 2019.

This is quite a large gain in percentage terms. Half of it — more than 350,000 successful migrant entries into the US interior — can be attributed to the omnibus bill alone.

May Border Apprehensions: Worst Case Scenario

Customs and Border Patrol reported 132,887 apprehensions at the US southwest border during the month of May. This was 33,583 (+34%) higher than the previous month and 3.3x the level of last year, as well as 9.2x the level of 2017.

This was the highest for the month of May since 2000 and the highest for any calendar month since March 2006.

We had expected a major surge heading into the summer months, but this was above our worst case scenario.

May appreh.png

Forecasting remains a challenge, but our current estimates, allowing for seasonal fluctuations, projects 1,072,000 apprehensions at the southwest border for calendar year 2019. This would be the highest full year since 2005.

No doubt President Trump had a sense of these numbers a few days ago, hence the Mexico tariff initiative. Notwithstanding, we expect a similarly bad June.

Kushner Plan: DOA. No surprise

Yesterday afternoon, President Trump took to champion the latest White House immigration plan, prepared and announced by Jared Kushner last week. The plan has been poorly received and poorly reviewed. No surprise.

I had been asked a couple of months back by different groups if I wanted to contribute analysis to the Kushner plan. I demurred, because there are only two reasons to propose legislation:

  1. Because it will pass

  2. Because it helps your electoral prospects

The Kushner plan wasn’t going to do either.

It wasn’t going to pass

Any proposal which cuts green cards for family reunification while providing no relief to Democrats on DACA was going to be a non-starter. Here’s Chuck Schumer:

“Exclusion of DACA?” Mr. Schumer said. The idea that for every immigrant they help, they “hurt one, all of that is no good.” NYT

On the other hand, trading a reallocation of green cards for DACA amnesty at this point in the political cycle would be suicidal for the president and the Republican members of Congress. So that deal wasn’t going to happen, either.

Even leaving the DACA issue aside, the proposal failed to gain traction in key Republican circles:

On Wednesday, Sen. Lindsey Graham, who chairs the Senate Judiciary Committee, introduced legislation that would, in part, change the asylum process, saying that "the White House's plan is not designed to become law."

"The White House plan is trying to unite the Republican Party around border security and merit-based immigration. I am trying to get some relief to our Border Patrol agents," the South Carolina Republican told reporters. "I'm trying to put a dent in the smuggling business and keep kids from going on a journey that's got to be hell." CNN

It was clear well in advance that the Kushner plan risked being viewed as irrelevant by key Republicans — another reason why I felt the initiative was headed in the wrong direction.

The key issues on the table are the asylum surge and illegal immigration more broadly. By failing to address those, the Kushner plan made itself moot.

It hurts the President’s electoral prospects

Had the proposal come from, say, a President Jeb Bush, it might have received a better reception. It is primarily a technical initiative reallocating visas in ways that fail to move most conservatives. There is not going to be any “Fight for 33” — 33% being the the proposed share of green cards intended for family reunification, versus 66% currently. Just to visualize: Imagine two Texas oil roughnecks, and one says, “Yeah, that Trump didn’t reduce immigration a bit, but boy, that green card allocation just makes my day. 33%! Can you believe it!”

No, they’re not going to say that.

But it’s worse than that. It’s a swamp proposal. Republican voters elected Trump to “burn the house down.” This Kushner plan is almost the diametric opposite. It’s a green eye shades proposal that only an accountant could love. The proposal is not bad per se, but it is largely what you might expect from the inside-the-beltway crowd. That this is the best the White House could conger so late in the game is devastating to the president’s image. If the pinnacle of the administration’s imagination is a Jeb-worthy proposal, conservatives would have done better with Jeb, who would have carried so much less baggage.

And finally, the very worst part of the proposal is its timing. It represents absolutely terrible clock management. Trump has about seven months left in the legislative cycle. That’s it. Meanwhile, the first five months of the year will have been consumed with exhaustive preparations for a predictable non-starter. Reloading becomes increasingly difficult, particularly if the Kushner plan remains in play until, say, Labor Day.

If that happens, is this the immigration initiative the president intends to take into next year’s election? A poorly conceived proposal from the swamp that had no hope of passing? One that makes the White House look bereft of fresh ideas, ready to capitulate to Washington insiders? The plan is not going to rally the troops, and it has already flopped with the left. This was a bad play for the president, and time is running very short.

And that’s what I told people three months ago.

Dump the right

So why was the plan proposed at all?

I have heard now in several circles an intent to move the president to the center and jettison his more rabid supporters. To be clear, this is not coming from the president, to the best of my knowledge, but from members of the Washington crowd. They hope that by dumping his far right supporters, Trump can broaden his appeal.

And there’s more to it.

The Washington crowd has a deeper antipathy towards the gun-totin’, Bible-thumping rural conservatives who comprise Trump’s base. The beltway insiders — both Democrat and Republican — don’t want to make peace with these conservatives, they want to make them go away, to marginalize them completely. And that’s the plan for Trump: dump the rural conservatives and make-up with suburban used-to-be Republicans and independents.

As I argued months ago, this is a terrible idea. The numbers tell us why. The graphs below show the president’s net approval ratings versus his six predecessors. Now, Trump’s net approval ratings are below all of the others, and no president has ever been re-elected with Trump’s ratings. That explains the strategy to move to the center or even center-left.

Source:  538

Source: 538

But the numbers tell us even more. Trump’s net approval ratings have held remarkably steady. Take any other president, and his popularity rating has moved up and down. But not Trump. Trump’s approval and disapproval ratings have remained rock solid within a narrow range, with neither victories nor defeats much changing public sentiment.

For Trump’s supporters, he is a cult figure. He is their guy, and objective reality does not matter as much as team loyalty. But the flip side is also true. Most of those who hate Trump, really hate him. And therefore even positive achievements — arguably the tax cut, the First Step Act, and certainly the economy — go unrecognized. Trump’s not like George Bush Sr. Bush’s enemies did not hate him so much, nor his friends have such rabid loyalty. He was a bit like oatmeal, generally tolerable but unlikely to generate either enthusiasm or antipathy. For that very reason, though, he could see his approval numbers move up and down. Events could influence the electorate’s views of Bush.

For Trump, it is primarily personal and less about policy. Were Trump to dump his devoted followers, he would very likely find himself on an island with narrowed support, not moving up into a widening band of acceptability. There is no moderate electorate waiting with open arms to embrace the president.

Therefore, for Trump to reject his devoted support is electoral suicide. He must hold them or lose.

At the same time, if that’s all he holds, he will lose. The numbers make that plain.

Therefore, any policy initiative must not only enhance Trump’s appeal with lapsed Republicans and independents, it has to appeal to his conservative base. Trump has to expand his church, not move to the next county. And that was never going to happen with the Kushner plan.

If Trump is to be re-elected, he has to be something more than conservative, and certainly not swampy. He needs an idea that’s big, bold and beautiful—one that appeals to conservatives and draws raves from the main stream media. There are actually any number of initiatives that come to mind, market-based visas among them. If Trump is to survive, though, he needs to be more than just conservative or moderate. He has to be Trumpian.

Illegal Immigration Forecast for Calendar Year 2019 - May Update

Although we know the numbers of migrants detained by Border Patrol with some precision, we have less insight into the numbers successfully crossing into into the US interior.

Estimating successful entries has become much more complicated recently. A year ago, we were able to focus on single adults who were attempting to cross into the US undetected, prompting us to key principally on apprehension rates. While this activity continues, the primary form of illegal entry today is family units crossing the border without authorization, presenting themselves for apprehension to Border Patrol, and claiming asylum. Given that these family units are released in short order, claiming asylum today is the primary conduit to the US interior.

The classification of those claiming asylum is problematic. Conservative analysts have presumed that most migrants seeking asylum correctly appreciate that it will not be granted and therefore do not intend to show up at related hearings. Nathalie Asher, the acting chief of U.S. Immigration and Customs Enforcement’s deportation branch, recently made just this point to Congress, noting that 87% of released families in a pilot program are skipping their court hearings. Therefore, from the conservative perspective, the recent surge of asylum seekers may be considered just the latest manifestation of illegal immigration.

On the other hand, until their cases are heard — perhaps as much as three to five years into the future — asylum seekers typically have the right to remain in the US. During this time they do not count as either illegal or undocumented. Ultimately, however, historical precedent suggests that only 12% of those seeking asylum are likely to have it granted. So how should the others be treated? From the conservative perspective, they would probably be considered illegals, or perhaps illegals-to-be. For purposes of this analysis, we treat 88% of the apprehended asylum seekers as illegal and 12% to be considered legal by being granted permanent status in the US.

In some respects, the distinction is irrelevant. From the conservative perspective, the 12% granted asylum represent roughly the same impact as those who are ultimately slated for deportation—although asylum seekers are allowed to work pending the disposition of their cases. For presentation purposes, they are treated as a single group of migrants entering the country. The average US citizen will be unable to differentiate between legitimate and illegitimate asylum claims, and will instead focus on the very real number of new Central American students showing up in their public school system. The aggregate headcount is likely to matter more than the ultimate status of those seeking asylum.

Determining the number of migrants entering the US starts with apprehensions. We have forecast southwest border apprehensions month by month for 2019, assuming April represents the peak of the year, with May close behind and then a gradual decline to the end of the year, but at substantially elevated levels compared to last year. This yields total annual apprehensions for calendar year 2019 at 931,000, the highest since 2006 and double 2018’s level. Forecasting apprehensions in such a rapidly changing environment is inherently tricky, but we believe the ultimate tally for calendar year 2019 may reasonably be expected in the 750,000 - 1,000,000 range. This assumes no major change in US asylum policy; that the April inflection point reflects the underlying trend rather than just an aberrant data point; and that the volume of asylum seekers tapers, but does not collapse in the second half of the year.

Because Border Patrol provides monthly apprehensions data by family status, we can forecast the share of total apprehensions which will represent unaccompanied minors (UACs); persons in family groups; and adults traveling without family members. As the graph below shows, border apprehensions of family units have rocketed up since last July when Judge Dana Sabraw deemed the administration’s Zero Tolerance policy unacceptable. Judge Sabraw decried “government conduct that arbitrarily tears at the sacred bond between parent and child.” “Such conduct,” he wrote, “is brutal, offensive, and fails to comport with traditional notions of fair play and decency.”

Appre Trend.png

Had the apprehensions continued at the seasonally adjusted pace of January to June, we estimate Border Patrol would have apprehended 393,000 migrants in 2018.

However, with Judge Sabraw’s ruling preventing the deportation and separation of families claiming asylum, family units began to flood in. From August, the numbers began climbing quickly, and based on the last four months of the year, would have led to 598,000 apprehensions at the southwest border for the calendar year 2018 as a whole, 200,000 more than apprehensions at the January to July pace. As it was, apprehensions in the August - December period were about 70,000 higher than expected for that five month stretch, and this can be considered the impact of the Sabraw ruling through year-end 2018.

The bigger numbers, however, came with the signing of the omnibus spending bill (the Consolidated Appropriations Act of 2019) in mid-February, which essentially prohibited the deportation of any adult from the Northern Triangle countries traveling with an unaccompanied minor and claiming asylum. March and April each saw nearly 100,000 apprehensions, almost twice the pace of the last quarter of 2018 after the Sabraw ruling.

Attributing rising family unit apprehensions to rulings and legislation over-simplifies causality to an extent. However, it is clear that the Sabraw ruling and the omnibus bill represented turning points in apprehension trends. For practical purposes, we attribute the post-July surge to the Sabraw ruling, and the post-February surge in apprehensions to the appropriation bill itself, even if the gains cannot be definitively allocated between the two, or indeed, to other factors.

Our current apprehensions forecast of 931,000 for 2019 includes a rise of 333,000 over the level which would have been anticipated from the Sabraw ruling by itself. That is, the omnibus bill can be credited with an increase in border apprehensions of more than 330,000 for calendar year 2019.

* Annualized based on Jan.- July 2018 data, using Jan-July 2014-2016 precedent, seasonally adjusted  ** Annualized based on Sept. - Dec. 2018 data, using Sep-Dec 2014-2016 precedent, seasonally adjusted  Princeton Policy estimates and forecasts based on Customs and Border Patrol data

* Annualized based on Jan.- July 2018 data, using Jan-July 2014-2016 precedent, seasonally adjusted

** Annualized based on Sept. - Dec. 2018 data, using Sep-Dec 2014-2016 precedent, seasonally adjusted

Princeton Policy estimates and forecasts based on Customs and Border Patrol data

Based on our apprehensions forecast, we can estimate successful illegal entries into the US interior for calendar year 2019.

Because minors and families cannot be held more than twenty days or deported, the vast majority of those entering the country are likely to gain admittance to the US interior. We estimate approximately 75% of those arriving as minors and 70% of adults arriving in family units will be released into the US. While their entry was illegal, their release into the US interior is not. However, as noted above, we treat 88% of them as illegal immigrants, assuming that they will remain in the US in most cases even if they fail in their asylum claims.

Of course, not all crossers are giving themselves up. We assume that adults traveling alone — who can be detained and deported — will continue to attempt to enter the US undetected. Generally, apprehension rates have recently been thought to be in the 55-70% range. We use 60%, under the assumption that adults traveling alone are more savvy than families and minors, on the one hand, and that Border Patrol is too distracted with the tsunami of asylum seekers to properly focus on traditional border jumpers.

We forecast the apprehension of 302,000 adults traveling without children in 2019. This is the highest since 2016, but does not represent a particularly exceptional pace. A 60% apprehension rate, and assuming three tries per migrant, yields just under 200,000 adults without dependents who will succeed in entering the US this year.

* Annualized based on Jan.- July 2018 data, using Jan-July 2014-2016 precedent, seasonally adjusted assuming 60% apprehension rate for adults alone and 75% and 40% entry rate for minors and adults in families, respectively. assumes one month lag from apprehension to release  ** Annualized based on Sept. - Dec. 2018 data, using Sep-Dec 2014-2016 precedent, seasonally adjusted assuming 60% apprehension rate for adults alone and a 75% entry rate for minors and and 70% rate for adults traveling in family units, assumes a one month lag from apprehension to release  Princeton Policy estimates and forecasts based on Customs and Border Patrol data

* Annualized based on Jan.- July 2018 data, using Jan-July 2014-2016 precedent, seasonally adjusted assuming 60% apprehension rate for adults alone and 75% and 40% entry rate for minors and adults in families, respectively. assumes one month lag from apprehension to release

** Annualized based on Sept. - Dec. 2018 data, using Sep-Dec 2014-2016 precedent, seasonally adjusted assuming 60% apprehension rate for adults alone and a 75% entry rate for minors and and 70% rate for adults traveling in family units, assumes a one month lag from apprehension to release

Princeton Policy estimates and forecasts based on Customs and Border Patrol data

To this we can add 260,000 minors and about 185,000 adults in family units who will gain admittance to the US this year, of which 53,000 are projected to secure protected status over time.

For calendar year 2019, we anticipate 643,000 successful migrant entries into the US, including all of unaccompanied minors, minors and adults in family units, and adults traveling without dependents. US authorities are projected to release 1,220 persons / day into the US interior, versus a reported release rate of 1,230 / day in mid-May. Of the 643,000 anticipated to enter into the US, a bit less than 600,000 can be deemed ‘illegal’.

Pew Research estimates the unauthorized Hispanic population in the US in 2016, the latest year for which data is available, at 7.3 million. Thus, an increase of 600,000 would represent a 8% increase in the unauthorized population of Hispanics in the country — quite a large gain in percentage terms. More than 260,000 of the anticipated increase in border migration in calendar year 2019 can be attributed to the omnibus bill, and another 130,000 to the Sabraw ruling.

Migrants raise American Wages

The detrimental impact of migrants on US wages is a recurring theme, with a visibly frustrated Ann Coulter last week offering to support Bernie Sanders if he returned to his prior position to limit immigration to raise US wages.  Similarly, our friends at CIS argue that there is no ‘labor shortage’.

Immigrants, and in particular, illegal immigrants can indeed depress wages.  However, their impact depends heavily on the phase of the business cycle.  If there is ample unemployed labor, then an incremental migrant may be doing nothing more than taking the job of a US citizen.  Forget depressing wages, illegal immigrants can deprive US workers of their livelihood entirely during a recession.

Nevertheless, with initial unemployment claims at fifty year lows, and black and Hispanic unemployment at historical lows, it's hard to make the case that low-end jobs are hard to get.  To go by help-wanted signs in New Jersey, one can find an entry level job at just about any retail establishment in the state.

Tester.JPG

In this world, migrants help increase output and leverage the productivity of natives.  (For the record, 'natives' here means white and black Americans, not just the native, native Americans.)  When migrants are hired, they are often part of a larger organization. Typically, the sales value of the final product to which a migrant contributes is 2.5-3.3 times the migrant's wages.  Take, for example, the poultry processing industry.  In this industry video, natives are doing all sorts of work, some on the line, but also logistics, management, quality control and testing.  Within the same supply chain, native farmers are raising chickens for processing in the plant.

This video, however, reveals that most everyone on the line is Hispanic.  They are doing the work not shown on the industry video: stripping the fat and cutting up the birds.  (It is well worth a watch to consider whether these are 'good American jobs'.)

All hispanics on the line.JPG

In reality, were it not for migrant labor, industries like poultry processing would simply be exported.  We have not assembled TVs or manufactured shoes in large volume in the US for decades.  And those are better jobs than butchering chickens.  The presence of migrants enables the poultry industry -- and the meat processing, dairy, fresh fruit and vegetable sectors -- to sustain themselves domestically.  Those migrant workers are enabling the rest of the business.  

The math looks like this.  A migrant paid $20,000 / year enables output of about $50,000 / year.  About 60% of economic activity in the US ends up as wages.  Thus, $50,000 of economic activity implies about $30,000 of wages, of which $20,000 will go to the migrant and $10,000 to other employees in the firm (or supply chain), including farmers, supervisors, testers, logistics managers and the rest--most of which actually are good American jobs.  Of the migrant's wages, about $5,000 will be remitted back to Mexico and is lost to the US economy.  But the migrant will spend $15,000 locally in the US, principally on housing, food, and utilities, of which about $10,000 will ultimately find its way to native labor.  Thus, the $20,000 of migrant wages creates another $20,000 paid to native labor both inside and outside the company employing the migrant.  Far from lowering wages, in an economy near full employment, hiring a migrant will increase US wages by about as much as the sum paid to the migrant himself.

Migrant impact on wages.png

Now, not all those wages gains will go to unskilled US labor.  But at least some should.  Therefore, although we cannot claim that migrant labor will have no impact on US natives (now including illegal immigrants who arrived years ago), the overall effect is positive, and substantially so, both on US labor and owners of land and physical and financial capital.  

In the interest of completeness, let me close by conceding a few points.  First, labor force participation by lower educated groups, notably of whites, has fallen in recent decades and this is a issue of concern requiring a closer look.  But that's not the fault of hardworking Hispanics.  Second, although migrants add to GDP, they tend to be a fiscal drag, due to the progressive nature of taxation in our system.  Third, under the current black market and H2 visa system, the US government -- and by extension, conservatives -- are grossly under-compensated for providing labor market access, and the current system does tend to reduce native wages across the business cycle by failing to charge a market-rate entry fee to the US.  Finally, the current asylum crisis is not about migrant workers.  By our count, we have perhaps 2 million open migrant-segment jobs.  We could probably let in 100,000 workers per month for well over a year and not even notice the effect on the labor market.  On the other hand, the asylum crisis is a crisis of children, whose education, feeding and healthcare will be significantly provided by US taxpayers.  And they will add nothing to US output for a long time to come.

Migrants, in a down market, can reduce US wages, in significant part by taking jobs.  In a tight labor market as today, however, migrants both increase output and increase US wages.  For every $1 paid to an incremental migrant, an additional $1 will be paid to native labor.  When times are bad, migrants represent just more mouths to feed.  When times are good, though, we need their hands to help with the work.  

And times are good now.

Demand Impact of Legalization on the Migrant Population

Princeton Policy treats illegal immigration as a black market problem resulting from the government attempting to prevent Latin American migrants from selling their labor to US employers. Instead of an enforcement-based policy, we advocate a legalize-and-tax approach to manage illegal immigration. This proven, textbook solution typically reduces black market pathologies by 95% and closes the issue from the political perspective.

In the case of illegal immigration, legalize-and-tax is achieved through a market-based visa (MBV) system, which allows a background-check migrant to enter and work in the US on-demand in return for a market-based fee.

Such a system must meet the needs of three distinct stakeholders:

• Hispanics and Democrats

This stakeholder group is principally interested in gaining status for seven million undocumented Hispanics and assuring better treatment of economic migrants from Latin America. An MBV solution must facilitate status for at least some undocumented immigrants and provide a legal pathway for migrant labor, with an emphasis on reducing predation and victimization associated with the dangerous journey to the United States across Mexico and worker exploitation in the US.

• Fiscal Conservatives

Fiscal conservatives, including organizations like FAIR, care about the fiscal impact of illegal immigration. An MBV solution must improve the fiscal position of the federal government, and lessen the impact on local governments, particularly with respect to fiscal burdens related to education of minors.

• Social Conservatives

Social conservatives are interested in maintaining social cohesion and cultural norms. They place high value on public safety, propriety and accountability and maintaining a political culture which emphasizes tradition and sovereignty. Conservatives typically seek to limit the number of foreigners who reside and work in the country and reduce the abuse of jus soli to obtain legal rights by undocumented immigrants. An MBV solution must demonstrate that it can close the border, end the black market in migrant labor, and limit the migrant headcount while reducing birth tourism and insuring a safe, transparent, and accountable system to handle migrant workers.

An MBV system can meet all of these objectives far better than today’s migrant policy.

From time to time, we explore specific aspects of an MBV system. In this analysis, we focus on one aspect of the migrant issue: the increase in demand for migrant labor resulting from a transition to a legalize-and-tax system.

An Introduction to Black Markets

We treat illegal immigration principally as a black market – and not immigration – problem.

All black markets are artificial and created by governments. They arise as a result of prohibitions or price or wage controls imposed by the government to prevent buyers and sellers of goods or labor from coming together and voluntarily agreeing a price and consummating a transaction.

The most well-known black markets today are in Venezuela, where the government has decreed that a wide range of goods must be sold below cost. This has had the effect of stripping store shelves of stock and creating a black market in goods as mundane as toilet paper. These goods will trade well above their normal market value among individuals in shady transactions – often literally in back street alleys.

A similar effect can be found when minimum wages are set well above their market value. If the difference is large enough – and the $15 minimum wage in New York City probably is, for example – a black market will arise in discounted labor, with workers accepting longer, unreported working hours nominally at the minimum wage, or going off the books entirely and working undocumented for cash.

Black market.png

In the case of the traditional vices – alcohol, gambling, prostitution, marijuana, hard drugs and migrant labor – the prohibition is set with volumes, not prices. In the case of wage and price controls, the manufacture, warehousing, distribution and consumption of a good or service is not illegal. Only transacting at market prices is prohibited. A New York restaurateur can hire an employee and the employee can provide all the services required, just not at a price below the minimum wage floor. Nor is it a crime to possess or manufacture, say, toilet paper in Venezuela. Only its sale at a market value is illegal.

By contrast, volume constraints usually arise because the government believes a given good or service is inherently detrimental. Thus, US government policy seeks to prevent the consumption of heroin or cocaine because policy-makers believe it results from involuntary addiction and is unhealthy for the consumer. Therefore, all of the production, transport, storage, sale and consumption of prohibited items are illegal. Migrant labor falls into this category: an unauthorized immigrant in the US is illegal by definition, as it is to employ or provide certain services to such migrants.

Markets subject to prohibitions or below-market prices will be supply-constrained. Labor or goods will always be in shortage in a supply-constrained market. This means customers who are willing pay above-market rates for goods or services are easy to find. The key to entering the market is a willingness to take risk, break laws and protect one’s turf with force to get supply to market. It is all about supply, whether smuggling drugs over the border or crossing the border illegally in the hopes of find a job.

Supply-constrained markets always involve government force to keep buyers and sellers from willingly coming together to transact for the given good or service. In the case of drugs, this implies drug seizures and arrests of drug dealers and fines and jail times for purchase, possession or usage for drug users.

In the case of migrant labor, the government attempts to prevent sellers of labor from entering the country via border control, including an army of border patrol agents, hundreds of miles of wall, and the agency ICE, tasked with finding migrants and deporting them. Employers are to be formally sanctioned for failing to use E-Verify and employing undocumented labor.

Ending Black Markets

Black markets can be addressed with three different approaches.

• Suppress Supply

As we note above, governments without fail try to suppress black markets by focusing on supply, arresting drug dealers or detaining hotel maids and berry pickers attempting to sneak across the US border. Supply suppression is politically attractive because it externalizes the problem. The problem is the fault of Colombian or Mexican drug dealers or tricky Hondurans enlisting children in fake asylum claims to gain entrance to the US labor market.

Supply suppression has never worked, because enforcement provides the incentive for its own undoing. When supply is suppressed, prices go up, sales opportunities are plentiful and competition is reduced. The effect is much like pressing on a spring. The harder one presses, the greater effort required, the greater the resistance and the more violent the rebound when pressure is released.

Enhanced enforcement increases black market suppliers’ incentive to bring contraband to market. This results in the most extraordinary creativity, certainly in drug smuggling, which has employed ‘mules’ with marijuana-filled backpacks, disposable aircraft, high speed boats, catapults, tunnels, swallowed packets, or drugs canned or hidden in fruits vegetables or manufactured goods – the list is endless.

In the case of migrant labor, options can include walking across the unsecured border; fake papers; tunnels under or ladders over the border; disabling border barriers; fake asylum claims; visa overstays; conveyance hidden in trucks, boats, aircraft; transit over the Canadian border and other means. The very worst, and perhaps the most common, means to circumvent enforcement is bribery, or as the case may be, intimidation and violence. It is the corruption of law enforcement, the bribery of politicians and judiciary, and the intimidation of the press which wreak the greatest damage on society.

Because supply suppression creates the economic incentive for its own undoing, it has virtually no track record of success. True, supply suppression has historically reduced the flow of illicit goods by 10-15%, but this is merely a dent in the business and very far from a meaningful prohibition. Much blood and treasure is spilt for a near meaningless reduction in supply.

• Suppress Demand

Demand suppression is as effective as it is unpopular.

Cold turkey detention of drug addicts vastly reduced addiction rates for hard drugs in Japan and Singapore.

Arizona’s hard line on migrants has also shown notable success. The state brought in tough anti-illegal labor laws in 2007 and reduced their undocumented population by half. Not only that, they have kept the numbers down by closing businesses that use undocumented labor.

Of course, this internalizes the problem. Rather than blaming migrants, enforcement focuses on their US employers. The question is whether such an approach is politically viable.

Nor is it clear that Arizona’s approach achieved its intended goals. On the one hand, Arizona did manage to materially reduce education and health expenditures associated with its undocumented population.

On the other hand, Arizona is the poster boy for unintended consequences with respect to its labor market. When Arizona implemented its tough anti-migrant policies in 2007, Arizona had the 16th best unemployment rate among the states. Today, it is in 45th place. In fact, Arizona has the second worse relative record (change in rank) of all the states since 2007. Moreover, six of the seven states which enacted restrictive laws regarding use of undocumented labor have seen their relative rank, in terms of unemployment rate, deteriorate compared to the other states.

Coercive interventions in markets have a habit of backfiring, and this includes actively preventing businesses from operating by depriving them of employees. Still, demand suppression is a viable option for the conservative purist to the extent the politics are palatable.

• Legalize and Tax

The classic remedy for a black market is to legalize and tax it. The US chose this route with alcohol, gambling and more recently, marijuana. Rather than trying to prohibit a good or service entirely, demand is regulated by a tax regime, with the goods legalized otherwise.

Historically, this approach will eliminate 95% of the criminal pathology associated with prohibition, For migrants, this includes illegal border crossing, murder, rape, kidnapping, human trafficking, theft, corruption, intimidation, smuggling and tax evasion. Domestically, it will materially reduce wage theft, workplace sexual harassment and worker exploitation.

Importantly, legalization does not end all the problems associated with prohibited goods. Alcohol consumption remains the third leading cause of preventable death in the US and is associated with a loss of $250 bn in GDP annually. Nevertheless, the public has accepted these as ‘costs of doing business’. Similarly, the legalization of gambling created much anxiety at the time, but since then, the capital of gambling, Las Vegas, has been transformed into an adult amusement park. Gambling addiction remains a problem for some people, but “what happens in Vegas stays in Vegas” has risen to a selling point, rather than a cry to shutter the city.

Marijuana legalization has – and continues – to cause consternation among politicians, with New Jersey’s attempt to legalize now stalled. And yet, society has not collapsed in those states where marijuana is now legal. Colorado government has prepared a report on its experience at the five year mark for recreational marijuana legalization. (The summary is well worth a read.) There are issues, but far from being a disaster, marijuana legalization has actually improved some statistics (and underscores again that legal alcohol is an order of magnitude more dangerous substance than cannabis).

Migrant workers – primarily interested in mowing lawns or making up the hotel beds in decadent Las Vegas – represent a far lower risk to society than any prohibited drug or traditional vice. Legalization will not make all associated problems go away. Migrants, as the rest of society, will still occasionally commit crimes of various sorts. Notwithstanding, the history of legalization shows that this sort of anti-social behavior will fall to a fraction of its current level.

Moreover, legalization closes the topic as a political issue. Despite the adverse effects of alcohol and gambling, no one is calling for a new prohibition. So it will be with migrant labor. If a well-ordered, fair, transparent and accountable channel for migrant labor is established, and if the government is appropriately compensated for providing labor market access, history shows that illegal immigration will disappear as a political issue of major importance.

Comparing Supply Suppression and Legalize-and-Tax Approaches

As luck would have it, the US is currently running a natural experiment on the unsecured southwest border with Mexico. Three types of contraband are coming over the border: economic migrants, hard drugs and marijuana.

Despite the most aggressive efforts of the Trump administration, both hard drug seizures and border apprehensions have more than doubled compared to the last years of the Obama administration. Not only is a crackdown not slowing traffic, it is actually associated with a doubling of flows!

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By contrast, even though recreational marijuana has been legalized in only ten states, marijuana seizures over the unsecured border will have dropped in 2019 by 80% – 80%! – Since President Trump took office. Smuggling is down 95% since its peak in 2009. This is the singular success of the Trump administration at the southwest border, and yet it was not achieved with hardcore enforcement, but through legalization and taxation.

This same effect could be achieved with illegal immigration, with the difference that the border could be closed much more quickly and completely.

The Hispanic Migrant Worker Market Today

If we allow that the migrant market is primarily economic in nature, and as a consequence best treated as a black market, then the transition to a market-based system merits close attention.

We use basic economics and a few concepts to help understand how to think about the liberalization process of migrant labor.

On the graph below, we show the supply and demand for incremental Hispanic, specifically Mexican, migrant labor, based upon our own estimates for supply and demand curves at a medium term horizon of approximately two years.

To this we add two important concepts:

The Relocation Wage

Our analysis suggests that the Mexicans require about $6.50 / hour to induce them to work in the US. This includes

  • $2.50 / hour to match for unskilled labor rate in Mexico, plus

  • $2.50 / hour ($500 / month) to offset a higher cost of living in the US, plus

  • $1.50 / hour as a relocation bonus to compensate them for having to leave their home countries. This would represent their “profit” for coming to the US, a premium of 60% over their home wage.

The total Relocation Wage, as we refer to it, amounts to about $6.50 / hour.

If Mexicans were allowed unlimited entry to the US labor market, then the migrant population would expand until wages in the migrant sector fall to $6.50 / hour, either due to lower wage levels or lower utilization rates (higher unemployment).

The Prevailing US Unskilled Labor Wage

Although Federal minimum wage is $7.25 / hour, not many people are employed at this level. On the other hand, about 20 million Americans work for roughly $10 / hour, and this represents the unskilled wage in the US as we interpret it.

The alternative to a migrant laborer is an unskilled US worker. Given the large number of workers in the unskilled pool, we assume that employers, in a market-based system, are prepared to pay around $10 / hour to migrants.

The Visa Value

Given a Relocation Wage of $6.50 / hour and a prevailing wage of $10 / hour, a Mexican migrant should be willing to pay $3.50 / hour for on-demand access the US unskilled labor market.

Relocatoin Wage.png

Effect of Legalization on Demand

One of the concerns of transitioning to a market-based system is that demand will expand, increasing the inward flow of migrants. Employers, who otherwise would not have considered hiring illegal migrants, would now seek to employ legalized Latin Americans.

Such concerns have always been present when black markets are to be legalized. Because the US has lifted at least three prohibitions historically, the increase in demand can be estimated by reference to experience, in this case, with alcohol and marijuana. US per capita alcohol consumption, for example, declined by 9% from 1915, five years before Prohibition, to 1929, three years before Repeal. Marijuana legalization is associated with an increase of consumption in the range of 5-15%. In Colorado, adult marijuana use increased by 12.5% from 2014, the year after legalization, to 2017. These two precedents suggest legalization would increase demand by 10-15%.

Pew Research’s latest population estimates for 2016 imply approximately 5.4 million undocumented Hispanics in the workforce. Assuming legalization increases demand by the historically observed 10-15%, the migrant worker population could grow 0.5-0.8 million persons over the two years following the implementation of a market-based program.

However, both alcohol and marijuana were legalized with a fixed tax approach. In our proposed MBV system, prices would be actively managed to reduce the incoming headcount and meet conservative goals.

Using a Conservative Objective Function

Conservatives worry about the number of migrants working in the US, as their number is deemed material for issues of safety, social cohesion, and political culture. The attractiveness of an MBV system in part must rest on its promise to restrict migrant and (formerly undocumented) resident Hispanic numbers to materially no more than would have occurred under the next best, viable policy alternative. In this case, the alternative is the current system with 5.4 million undocumented Hispanics (7.2 million including dependents) and an additional 250,000 – 450,000 migrant workers per year.

To achieve conservative goals, we use a price-managed system in which the price of the visa is set by the lowest volume which closes the southwest border and eliminates the black market in resident migrant labor. Rather than setting the volumes directly and administratively – as is the practice today – volumes are set by the price which limits migrant Hispanic numbers to no higher than would have been achieved under the best alternative policy. We deem this a ‘conservative objective function’, as the objective is to restrict migrants numbers to a level consistent with conservative goals while acknowledging that supply suppression does not work for ending black markets, including those in migrant labor.

15 Percent.png

The graph above illustrates the dynamics. With legalization, demand is 15% higher at any given wage level. In a fixed fee system with a $3.50 / hour visa cost, demand would increase from 5.4 million to 6.2 million workers. With a price-managed system, the value of the visa is allowed to edge up modestly and additional visas are issued with the intent to prevent the re-emergence of a black market in labor. Assuming an unlimited supply of Central American labor at $6.50 / hour, the Hispanic migrant workforce would increase from 5.4 million to 5.75 million and the price of the visa would increase by about $0.30 / hour (+8%). Therefore, in a price-managed system – and assuming our supply and demand curves are approximately valid – the number of visas would increase by 350,000 ceteris paribus. Even with these additions, the Hispanic migrant workforce would only return to the levels of 2011 and remain 500,000 below its 2007 peak.

Both of these numbers should be workable from the perspective of migrants and conservatives alike.

A ‘High Case’ Alternative Scenario for Increased Demand

As a sensitivity test, we can also consider a ‘high case’ scenario in which demand increases by 50% with legalization. With a fixed fee approach, the migrant population would grow by 2.6 million to 8 million Hispanic workers, assuming that an unbounded number of migrants are willing to come to the US at the Relocation Wage of $6.50 / hour.

50%.png

This outcome would appear to be unlikely, however. We currently count 2 million jobs openings in the migrant category based on our analysis of JOLTS labor market data. Available jobs provide an upper limit on purchases of guest worker visas. Still, assuming a 50% increase in underlying demand due to legalization, the impact could be substantial. But this is easily prevented.

In a price-managed system, the visa price would rise by $1 / hour to $4.50 /hour. Assuming our supply and demand curves are approximately correct, the number of Hispanic migrant workers would increase by 1 million, to 6.4 million, even with the higher price of visas.

A $4.50 / hour visa fee translates into an $11 / hour unskilled wage. That is, 6.4 million migrant Hispanics would be earning more than perhaps 15 million US citizens earning $10 / hour and who are fluent in English and are mostly high school graduates. This outcome would appear to be unlikely. Wages in the much larger indigenous US unskilled labor market probably constitute a cap on wage appreciation for migrant labor. Put another way, US employers are not going to pay more for migrants than they do for US citizens, and this puts a cap on demand for migrant labor in a price-managed system.

As a consequence, we believe 10-15% demand growth is probably closer to reality. Overall, therefore, we might expect liberalization to result in perhaps 350,000 additional visas and an increase in the visa price around $0.30 / hour. Both of these numbers should fall into the respective tolerances of the undocumented Hispanic and conservative communities.

Enforcement

Paradoxically, a seemingly open, price-based system could restrict incremental visa issuance and migrant population increases more than anticipated above.

Illegal immigration today is a strangely asymmetric proposition. Consider the case of the family depicted in the documentary Border Hustle (a must-see video for those interested in understanding the current border crisis). In this story, a Honduran man leaves for the United States with his daughter, whom he is using as a ploy to circumvent US border control.

In the US, the Honduran will likely earn seven times his net wage at home. In the three to five years which will pass before his asylum claim is adjudicated, he will have earned the equivalent of twenty years’ work in Honduras. If he is deported subsequently, he essentially returns to the status quo ex-ante, having earned a substantial nest egg in the meanwhile.

On the other hand, if he chooses to stay as an unauthorized immigrant, he can continue to work with a 3% annual chance of deportation if he lacks a criminal conviction otherwise. He can also expect a solid public school education for his daughter and a well-founded hope that she will become a US citizen in a DACA-style amnesty in the late 2020s.

If he is caught in the future, he will be deported and return to his previous life in Honduras, albeit with some readjustment challenges. He may spend some time in US detention, but probably not too much.

The logic for the economic migrant is all to the upside. The only downsides are in the risks of the journey to the US itself. But otherwise, both migrants’ financial and security situation are likely to improve in the United States, and even if they are ultimately deported, the visit should have proved well worth it.

As a result, the US lacks either a carrot or a stick to deter border crossers. There is not much downside to being caught by Border Patrol and a huge upside in making it into the US interior.

An MBV system changes this calculus. In this world, passing an H-2 visa class background check is sufficient to establish eligibility to work in the US. After that, the key issue is finding a US job that pays well enough to meet personal financial objectives and pay the visa fee. Otherwise, the MBV system is envisioned to allow unrestricted access to the US labor market and rights to all the necessary prerequisites like bank accounts, driver’s licenses and utility and rental agreements.

But this right is not without conditions. Apprehension coming across the desert – now close to a 90% probability – would terminate eligibility for the guest worker program. The loss of access to a market-based visa would therefore become a powerful deterrent. If the migrant labor market in the US is near equilibrium, that is, if there is no great pool of black market work opportunities in the US, then being caught coming across illegally becomes a very expensive proposition indeed. Paradoxically, an open labor market offers much greater potential for border control and restrictions on visa numbers than the current enforcement-based approach.

Demographic Trends

Demographic trends also suggest that legalization of migrant labor should not bring uncontrolled Hispanic migrant population growth.

Unauthorized Population.png

The undocumented population from the Mexico, Guatemala, Honduras and El Salvador – the four countries anticipated to be first round participants in a market-based program – peaked at 8.25 million in 2007, and has since declined by more than one million, to 7.2 million in 2016.

The Mexican population has taken the brunt of the adjustment, down 1.5 million during that period. The populations of the Northern Triangle countries have grown, but only by perhaps 50,000 per year, according to Pew Research estimates.

On the face of it, therefore, with a visa price filling the gap between the Relocation Wage and the US unskilled wage, the trend data since 2007 suggests no unmanageable surge on the horizon.

This, of course, is not true when the visa price is effectively set to zero, as it is in the case of Northern Triangle residents claiming asylum currently. In such an event, the upper limit on new entrants could approximate the lesser of 4 million – including 2 million adults to fill current job openings and as many dependent children – or the population of the Northern Triangle countries willing to migrate north over the next few years.

Summary

Historically, because supply suppression has been largely ineffectual, whether in drugs, gambling or migrant labor, consumption has fallen by only 10-15% during prohibitions compared to a liberalized system. Therefore, the end of a prohibition does not typically bring a vast surge in consumption, although a medium term increase of 10-15% is well within expectations.

This would imply an increase in the resident migrant population, in a price-managed system, of approximately 350,000 or so with a relatively modest increase in the visa price. With these additions, the Hispanic migrant workforce would return to the levels of 2011 and remain 500,000 below its 2007 peak.