Apprehensions, Illegal Entries Forecast for 2019 (August)

The reduction in border apprehensions in the last few months has, predictably, affected families and unaccompanied minors the most, with apprehensions of adults -- the traditional source of illegal border crossings -- returning to near longer term averages.

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On the basis of August data, we have updated our forecast for apprehensions for fiscal and calendar year 2019. For fiscal year 2019 ending September 30, we anticipate 856,000 border apprehensions, of which 316,000 will be minors.

We further project that just under 600,000 illegal border crossers and released asylum seekers will successfully enter the US in FY 2019, representing an increase of 8.2% of the undocumented Hispanic population, if apprehended asylum seekers are included in the count. Of total successful entries, 233,000 are projected to be minors.

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Border Apprehensions August: Returning to Normal

For the month of August, Customs and Border Protection reported 50,693 apprehensions at the US southwest border. This was a reduction of 21,289 (-30%) compared to the prior month, and 87% below the May high of approximately 133,000. This decline continues to be attributed to a crackdown by Mexican authorities at the behest of President Trump.

Notwithstanding, August apprehensions remain up 35% on last year and are the highest for the month since 2007.

We forecast the pace of apprehensions to continue to decline, returning to recent averages for the balance of the year.

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A portion of the illegal traffic has been visibly diverted into inadmissibles, with migrants trying alternative means to enter the US. At 13,300, inadmissibles for August are 40% above our forecast made early this year, but are still relatively small in absolute terms.

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Again, the Trump administration deserves credit for the reduction in the pace of apprehensions at the southwest border.

Japan's Lessons for US Immigration Policy

The National Interest and Yahoo recently re-published an article I wrote in 2017 on Japan's long-term demographic, economic and fiscal outlook (version with graphs, here). Those interested in the strategic context for US immigration and fiscal policy will find this article uniquely helpful.

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Japan is preceding the US in demographic trends by about 15 years. Some version of events there will happen here, influencing US policy towards both legal and illegal immigration.

Indeed, some trends are already manifest. In the US, the growth of the 65+ aged group began to surpass that of the core 15-64 aged workforce in absolute numbers in 2012. In the next decade, the core workforce is forecast to expand by three million, while the 65+ age cohort is expected to rise by 17 million.

This has a number of important implications, specifically:

  • structurally low GDP growth

  • structurally low unemployment and chronic labor shortages, particularly at the low end

  • structurally low interest rates

  • large, sustained federal budget deficits and on-going fiscal pressures

  • a need to find cost effective alternatives to manage the well-being of seniors

The immigration-related challenges:

Caring for Seniors

Some parts of the country are already critically short on home health care, as described in this article, ‘Catastrophic’ shortage of caregivers in Maine expected to be mirrored nationwide

The disconnect between Maine’s aging population and its need for young workers to care for that population is expected to be mirrored in states throughout the country over the coming decade, demographic experts say. And that’s especially true in states with populations with fewer immigrants, who are disproportionately represented in many occupations serving the elderly, statistics show.

A coalition of progressives, elderly conservatives and fiscal conservatives will be motivated to increase guest worker visas to help ease shortages of those caring for the elderly. Market-based visas would provide a template for such an eventuality, and do so in a context in which conservatives remain in material control of migrant headcount. In other words, MBVs would provide a program which should meet conservative requirements while accommodating at least some of the needs for incremental migrants to take care of our elderly.

The Southward Invasion

We are accustomed to thinking about migration flows principally as south-to-north. In the coming decade, the greater flows may be heading south. Fiscal pressures will limit the amount of government support available for retirees, who will be increasingly pressed to look for low cost living alternatives, with Mexico and Central America key potential destinations. The numbers are large, with twice the population of New Jersey turning 65 in the 2020s. Even a small portion of these could mean one or two million Americans heading to Mexico or Central America in the next decade or so -- at a pace not too different from illegal Latin Americans heading to the US. The US government's interest is to insure the greatest scope for expat retirees' security, health, infrastructure and convenience in Latin America in order to protect the domestic consensus around and the viability of Social Security and Medicare. This can be achieved as a function of a market-based visas approach to improve Latin American governance, but in any event, the US interest is in closer integration with Mexico and Latin America, not the building of walls and barriers.

The Fertility Crisis

When I was in college, economics courses hailed Social Security as an advance which eliminated the need for people to raise children to provide for them in their old age. As it turns out, this logic suffers an internal inconsistency, in that even Social Security depends on someone having children to provide for the elderly collectively. Well, women in the advanced economies and China are having far too few children to maintain population levels, and this is emerging as a key conservative issue in the 2020s, with Russia, Poland, Hungary, and France already providing financial incentives for incremental children. This is a new kind of conservative feminism in which women can essentially name their price to provide children for society's benefit.

This has two important implications. First, taxing women and families -- and these are a critical portion of the tax base -- is going to become harder and harder, and the net burden there will have to be progressively lowered not raised. That will put incremental pressure on the federal budget. The second implication is that a failure to reproduce will create increasing demands for immigration. Thus, fertility and immigration are going to be inextricably intertwined, with outfits like CIS and FAIR likely to expand their expertise and political advocacy around fertility issues.

All this deserves a specific analysis for the US, not just Japan. For now, the key point is that the immigration debate insufficiently recognizes that the world of the 2020s will look materially different than that of the 1990s, or even 2000s. Whereas twenty years ago we could speak of excess labor, we today are facing structural shortages as far as the eye can see. Policy should not focus on withdrawing from the world, but on engaging, particularly with Mexico and Latin America, to insure that US retirees have the best prospects for a happy, safe and prosperous old age and that a sufficient supply a guest labor is available to care for our aging society.

We have an opportunity to build out controlled channels for guest workers and influence governance in Latin America with an approach which leaves conservatives in material control and demonstrates to both them and the wider US public that we can interact safely with Mexico and Central America to the benefit of their citizens and ours.

We should seize the opportunity and try a new approach, which not only addresses today's issues, but also anticipates the challenges of the 2020s.

Excess Migration Premium

The path of illegal immigration and domestic worker exploitation depends fundamentally on the Excess Migration Premium (EMP), the extra earnings a migrant can access by coming across the border illegally.

The Excess Migration Premium is the difference between the Prevailing US Unskilled Wage and the migrant’s Relocation Wage.

The Prevailing US Unskilled Wage

The prevailing unskilled wage in the US is approximately $10 / hour. About 20 million Americans work at this wage. For the US employer, the alternative to hiring a Mexican or Central American immigrant is to pay $10 / hour to a US citizen (assuming an employer can find US workers to fill certain jobs at any price). Therefore, at anything up to $10 / hour, an employer is willing to hire a migrant, illegally if necessary.

The Relocation Wage

The migrant’s Relocation Wage is the sum of

  • The migrant’s home country unskilled wage, about $2.50 / hour in Mexico and $1 / hour in Honduras,

  • A Relocation Premium sufficient to induce the migrant to leave his home country, which we calculate subjectively at 60% of the home country wage, and

  • An adjustment to cover the higher cost of living in the US. We estimate this at $2.50 / hour.

Thus, the Relocation Wage for an unskilled Mexican is about $6.50 / hour, and in the range of $5 / hour for Central Americans.

The Relocation Wage can change depending on home country circumstances. For example, an unemployed Guatemalan with dim jobs prospects at home might count his domestic wage (opportunity cost) as $0 when considering his Relocation Wage. Similarly, if one were fleeing violence, then the Relocation Premium could theoretically be a negative number, that is, a migrant may be willing to work for less than their home wage just to enjoy greater safety in the US.

Notwithstanding, a stylized Relocation Wage can help us understand the motivations of migrants.

The Excess Migration Premium

On the table below, we can see the excess migration premium for Mexico and Honduras, about $3.50 /hour for Mexicans, and almost twice as much, $6.15 / hour for Central Americans.

How motivated a migrant might be to come into the US illegally is a function of the multiples they can earn compared to their domestic wage. Mexicans can almost triple their net salary, and roughly double it if we include the inconvenience of having to leave their home country.

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In the US, Central Americans can earn nearly eight times their home wage net of US expenses, and about five times as much even if compensating for the inconvenience of having to leave their homes.

The Economics of Illegal Entry

With this information, we can calculate the economic incentive to try to cross the border illegally. We have elsewhere calculated the expected cost of crossing the border — including cartel and guide fees, and the risk of death, kidnapping, extortion, rape, injury, arrest and incarceration — at approximately $13,800. This could vary depending to the values and probabilities one wishes to assign to certain adverse events, but it likely comes out in the $10,000 - $15,000 range.

We estimate the value of an illegal crossing at three years of earning the Excess Migration Premium. For example, a Mexican coming across illegally would hope to earn $3.50 / hour more than the number he would require to relocate to the US legally. That $3.50 / hour has to compensate for the risks of entering the US illegally. We know that consumers typically discount benefits — like buying a car with better fuel economy — over three years, and that’s what we use here. Three years works out to 6,000 work hours at $3.50 / hour, or about $21,000. That is the expected benefit of illegal entry. From this the Mexican migrant will deduct a subjectively estimated $13,800 in expected crossing costs, leaving a net benefit of $7,200 for coming across illegally. Note that it’s still worth it, but not that great. If the Mexican had stayed home, he would have earned $5,000, so a risk-adjusted benefit of $7,200 is about 17 months of pay. It’s better, but not hugely better.

Not so for Hondurans. Under similar assumptions, the expected value of crossing the border illegally represents nearly 12 years of home country income. That’s a big incentive.

The Rationality of Oscar Martinez

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As a case study, we can use this framework to assess the reasoning of Oscar Martinez, who drowned along with his daughter in Rio Grande as they were trying to enter the US this past April.

As reported by the Daily Mail, in El Salvador, Oscar worked at a Papa John’s 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.

Did it make sense for Oscar Martinez to attempt to ford the Rio Grande? As it turns out, the payback potential — even allowing for the risks associated with crossing the border — was highly attractive. He took the risk and lost. Some of those attempting entry will die as a matter of absolute certainty. But from the individual’s perspective, it was the right call, with the expected benefit equal to five years’ wages.

Now, my conservative friends will chide me for seeming to endorse illegal immigration: “Migrants should follow US laws!” While I appreciate the sentiment, US laws are just one of several obstacles migrants must overcome to enter the US. What looks like morality for US conservatives boils down to a hard-nosed cost/benefit analysis — yes, informal and inexact — but a subjective cost/benefit analysis for migrants choosing between staying in their home countries and taking a shot at getting into the US. This is no different than the logic of the English colonists at Jamestown, the Pilgrims in Massachusetts, or the pioneers heading out west. All of them suffered from imperfect information and likely lacked formal quantitative analysis. But they made their best subjective estimate and decided. For some, the colonists at Jamestown or the pioneers at Donner Pass, the result was tragedy. But those on the Mayflower effectively became the founding families of the United States. They all took risks. Some won. Some lost. Just like Oscar Martinez.

In the end, Oscar Martinez was rational, just unlucky. It is US policy which is irrational, because it persists, on the one hand, with tactics which frankly have never worked, while ignoring migrants’ hard economic realities, on the other.

Ending Illegal Immigration: The Drive for 325

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One of the interesting conclusions of our model is that we can calculate when illegal immigration is no longer worth it. This occurs at a surprisingly low wage. At a hourly pay of only $3.25, it no longer makes sense to jump the border. At this wage, the excess migration premium is no greater than the expected cost of crossing the border illegally. This is not that much higher than unskilled wages in the northern half of Mexico. That is why we increasingly see stories of Mexicans saying that they’ll only work in the US with official documentation, or not at all. That’s not true of Central America, though, where wages are much lower than in Mexico. As a consequence, we see a surge from Central America accompanied by a restrained pace of illegal crossings of Mexicans.

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The debate over illegal immigration expends far too much effort on ideology, sentiment and mood affiliation. Policy analysis also has a place. We can achieve many, if not all, of our goals across a range of stakeholders if we employ quantitative analysis and honor established theory and practice.

Five Approaches to Illegal Immigration

It's an exciting time for migrant policy, with several related proposals circulating in DC right now. To help Hill staffers and other stakeholders make sense of the choices, we thought to categorize the various approaches.

Deport and Enforce

The favorite of conservatives, Deport and Enforce calls for the government to enforce the laws on the books: identify, gather and deport illegal immigrants, and seal the unsecured border to unauthorized crossing. Variants include building a Wall, hiring more border patrol agents and immigration judges, expediting immigration hearings, and taking various steps to dissuade migrants, among others.

Enforcement against economic migrants falls into the category of supply suppression for black markets. Supply suppression rarely works. Indeed, for the traditional vices of alcohol, marijuana, hard drugs, prostitution and gambling, it has never worked. Having said that, crossing the border illegally undetected appears to have become more difficult in the last decade, with apprehension rates rising from an estimated 40% to the 55-70% range under the Trump administration.

The problem, of course, is that migrants adapt, transitioning from single Mexican men traveling alone to Central Americans traveling in caravans and families claiming asylum. Supply suppression inevitably devolves into a game of whack-a-mole, with each new enforcement initiative countered by some change in black market tactics. As long as there is work to be had and US wages are multiples of those in Central America, enforcement will always be a challenge and victory will be fleeting. Indeed, the migrants are winning handily in 2019. We estimate the illegal Hispanic population will have increased by more than 8% in FY 2019 if asylum seekers are included.

Be Nice

The Democrats' rhetoric, if not strategy, comes down to 'Be Nice'. The left calls for easy, if not unlimited, access by migrants to the US interior, with full access to the social safety net, including welfare, healthcare and schooling for minors. The intent is to eliminate all accountability and ignore the nearly 80% of American who believe the country needs secure borders. This is manifest for example in Democratic presidential candidate Julián Castro's call for making illegal crossing of the border a civil, not criminal, offense. With a 60% apprehension rate -- which is very good -- nearly 80% of crossers would successfully enter into the US interior within three tries. If the only downside is getting the equivalent of a jaywalking ticket, crossers have every incentive to keep trying the border until they get through. With only a fraction of the public supporting open borders, such liberalism will gain no more traction than will the conservatives calling for mass deportations and building a wall.

Volume-based Approaches

Historically, work visa volumes are determined by legislation. For example, last year's Goodlatte bill anticipated increasing H-2 visa counts by 450,000. Fixed volume legislation has the benefit of limiting the risk for conservatives as the number represents an upper limit. It is also easier to negotiate, because negotiations can focus heavily on this one number. On the downside, because H-2 visas are structurally under-priced, they are a subsidy to employers and migrants, with taxpayers picking up the associated costs. For this reason, the number of visas agreed is inevitably fewer than the underlying market demand. Consequently, although such initiatives may reduce illegal immigration for a while, they do not fix the problem in any meaningful sense; indeed, they are not directly intended to close the southwest border to illegal immigration. Further, they do nothing for the undocumented immigrant market. In terms of simplicity and ease of passage in Congress, volume-based initiatives have historically tended to dominate the discussion, but they are inevitably stop-gaps rather than durable, structural reform. They have failed to materially alter the dynamics of illegal immigration in the last half century.

Price-based Approaches

The proposals of CATO, Ideal Immigration, the Rational Middle, and arguably Americans for Progress fall into this category. These organizations take the view that businesses need workers to fill certain jobs that Americans are reluctant to do. In their view, migrant workers and businesses coming together are legitimate and more of a benefit than cost to society. Thus, like market-based visas, price-based approaches represent an implicit legalize-and-tax view of immigration. However, because the price is fixed, it is inevitably set too low, such that these programs would see a dramatic increase in migrant numbers without a cap. A true market price cannot be imposed by Congress, because it fails the political optics test (leaving aside the consideration that we do not know the right price in practice). This in turn would prompt conservatives to demand a cap on visa numbers, thereby converting the matter back into a volume-based approach, with all the problems attendant.

I would add that price-based approaches tend to want good workers to be afforded permanent residency over time. That is, they tend to combine worker visas with permanent visas, which makes the politics even more challenging.

Market-based Approaches

Market-based visas (MBVs) essentially fuse conservative and liberal objectives. Like price-based approaches, MBVs acknowledge the legitimacy of migrant workers and businesses coming together. On the other hand, the approach uses a price mechanism to adjust visa volumes to maintain migrant numbers at levels not much different than those achieved under current conditions. This allows the system to operate under either a soft or fixed cap in visa numbers, a key consideration for those hoping for conservative support.

We also acknowledge conservative objectives, specifically and in order: 1. safety, 2. permission, 3. identity, 4. standards, 5. self-sufficiency, 6. culture, and 7. demographics. Of these, MBVs deliver the first five, but not the last two. Indeed, MBVs represent the most liberal entry form of any of approach listed here. Background-checked migrants from select countries can enter, exit and work in the US at will for a duration of their choosing, whether or not they have contracted with an employer at the time--for an estimated $20 / day.

This is the best option conservatives will see, by far. While MBVs do not end migrant labor as such, the approach achieves ten critical goals for conservatives that they would not attain otherwise. Notably, MBVs

  1. close the unsecured southwest border (the upside of allowing on-demand entry)

  2. end the black market in undocumented immigrant labor

  3. keep migrant numbers near levels they would otherwise be (and MBVs would have prevented the asylum surge entirely)

  4. retain control over visa issuance numbers -- even below any cap

  5. meet five basic conservative objectives, from safety to proper documentation, better conformance with laws and social standards, and self-sufficiency

  6. provide market-level compensation for allowing labor market access

  7. encourage migrants to leave their families in their home countries and return there when not working in the US

  8. provide no path to permanent residency (as a structural matter)

  9. insure wide-spread compliance by both employers and migrants

  10. permit the program to be unwound in a year at a profit if the approach proves unworkable

For conservatives, no other option comes close in practical terms.

Just as for conservatives, MBVs provide Hispanics and Democrats the best offer they will see in the next ten years -- by far. MBVs will provide status for up to 7 million undocumented Hispanics, allow free movement of background-checked migrants across the border, eliminate the vast scale of pathology -- including death, rape, kidnapping, extortion and incarceration, among others -- associated with crossing the border and working illegally, and will represent the biggest gain in Hispanic pride and prestige in a century.

For business, it means protection from arbitrary ICE raids and access to unlimited quantities of migrant labor on demand at the market price for any duration they choose, with confidence that these workers are properly documented, have health care coverage, and have committed no serious crimes.

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The traditional left-right divide highlights the limitations of current policy. Because the government has no carrot -- no legal way for economic migrants to enter the country in a timely and predictable fashion of their own choosing -- deterrence is left to employing sticks. But keep in mind that these sticks are deployed against migrants whose principal crime is wanting a better life in America and a willingness to take a 'dirty' job that Americans do not want. These are not bank robbers or murders, but largely unemployed or poor peasants trying to feed their families. Deterrence therefore degenerates into a farcical and self-defeating cruelty, for example imprisoning, at the cost of $40,000 / year, otherwise harmless illegal border crossers who could be providing needed services and creating $50,000 of GDP on average in the US.

But what is the alternative? The Sabraw ruling of July 2018 and Section 224(a) of the February omnibus effectively gutted border enforcement for families traveling together from Central America. The result was the surge we have seen for the last year. A permissive system will bring migrants by the hundreds of thousands in short order, because the economics are compelling.

Thus, in an enforcement-based system, the choice is impotence or cruelty. It is not that one of these choices is better, but rather that the entire framework of analysis is wrong. The whole approach is bankrupt.

The alternatives include issuing more visas, which will never be sufficient because the visas will be under-priced, providing insufficient motivation for conservatives to grant an adequate number.

A broader liberalization with a fixed price would work, but would allow in migrants in such numbers that the initiative will fail to get traction.

This leaves a hybrid MBV approach using a floating price to maintain migrant numbers in a range broadly acceptable to conservatives while providing a safe, transparent and on-demand means for migrants to access the US labor market. That should work, bearing in mind that MBVs are not a concession, a subsidy, an entitlement or a gift. They are a trade.

Everyone wants better terms: cheaper labor, free entry, entitlements and amnesty. But for every winner in such a world, there are as many losers, and no deal will come together. On the other hand, if the parties can agree to trade at market value, then we can solve illegal immigration in short order.

Baltimore, Border problems share common cause

During a hearing on July 18th, House Oversight Chairman Elijah Cummings took Acting DHS Secretary Kevin McAleenan to task over the conditions of detention facilities for migrants at the U.S.-Mexico border.

The President shot back this past Saturday, tweeting that “Rep. Elijah Cummings has been a brutal bully, shouting and screaming at the great men & women of Border Patrol about conditions at the Southern Border, when actually his Baltimore district is FAR WORSE and more dangerous. His district is considered the Worst in the USA......”

Forget the border. Baltimore's murder rate is actually higher than those of Guatemala, Honduras or El Salvador.

Source: Princeton Policy analysis based on multiple sources

Source: Princeton Policy analysis based on multiple sources

Baltimore is on track for 340 murders in 2019, on a population of about 610,000, representing a murder rate of 56 per 100,000. Guatemala's murder rate in 2018 was 22. El Salvador's was 50, and declining. Honduras was tracking a pace of 38 through the first four months of the year. That Baltimore's murder rate is higher than the most dangerous countries' in Central America is frankly appalling on many levels, and as someone who grew up in Baltimore, I believe increased accountability is long overdue.

Having said that, half of the violent crime rate in Baltimore and other major US cities, as well as 95% of the entire suite of pathology at the southwest border -- and 22,000 of Mexico's record pace of 34,000 murders this year -- are the direct result of US prohibitions in drugs and migrant labor. Black markets resulting from prohibitions are well understood and easily documented through historical precedent, for example, Prohibition in the 1920s and Mexico's war of drugs since 2006. The coefficients of pathology -- rates of murder and rape, for example -- can be modeled in advance.

Baltimore's "disgusting, rat and rodent infested mess" has been projected through the lens of race. In terms of problem-solving, however, we believe the situation is better appreciated as safety-related. People don't want to work, study or live in dangerous neighborhoods. That means businesses and employers will be few, incomes will be low, and crime and blight will spread. A more constructive approach to illegal drugs would see violent crime rates fall by half in Baltimore and the city's prospects improve commensurately.

Moreover, there is nothing immutable about murder rates. Many readers will no doubt be surprised to read that Baltimore has a higher murder rate than the Central American countries whose violence the left has claimed led to the asylum crisis. Central America used to be much worse. As late as 2015, El Salvador's murder rate was about 100 -- almost twice that of Baltimore. But security is much improved across the Northern Triangle countries (one reason we concluded that the asylum surge was caused by a change in US policy, rather than push factors in Central America). With better governance, crime rates can be reduced substantially.

The results at the border could be much more impressive. A market-based approach for migrant labor would reduce related crime and victimization -- including death, rape, kidnapping, robbery, human smuggling and trafficking, incarceration, illegal immigration, and migrant wage theft and exploitation -- by 95%, and would do so in as little as two years even as enforcement is substantially curtailed. From the policy perspective, repealing Prohibitions is not hard and the dynamics are well understood.

With all the charges of racism over the last few days, it is worth keeping in mind that prohibitions relying primarily on supply suppression (enforcing principally against economic migrants, for example) represent the key form of institutional racism in the country, by far. Prohibitions are central both in determining the culture and economic prospects of inner cities and in setting public perceptions of the Hispanic community.

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.