Deterring the Migrants the Right Way - The Numbers

The Biden administration is at a turning point. Even now, it is beginning to double down on the enforcement-based policies of the Trump administration. For those who seek legal status for undocumented immigrants, the window is closing. History shows that the opportunity to normalize the status of undocumented immigrants may not recur for a decade or more. If you want to try something new -- perhaps something as radical as the textbook policy solution -- now is as good as it gets.

In our last post, I argued that illegal immigration is materially a black market. The border jumping, wall climbing, caravans, fake asylum claims and the rest arise for lack of a legal channel for migrants to enter the US to work. Create a legal channel, and all the cruel and bizarre manifestations of black markets will disappear by themselves in as little as one month. To combat illegal immigration, the government should do less, not more.

The plain vanilla version of doing less is 'open borders' of the sort championed by, say, CATO or a number of the libertarian economists over at George Mason University. How would that work in practice?

Polls have shown that as many as one-third of Mexicans and Central Americans would want to work in the US, representing a potential pool in excess of 20 million unskilled migrant workers, with the vast majority of these currently earning not more than $2.50 / hour, assuming they are employed at all.

Prior to the pandemic, the effective minimum wage in the US was about $10 / hour, probably higher now. About 20 million Americans work for these wages. Therefore, the pool of potential minimum wage workers from Mexico and Central America (MCA) is about the size of the total minimum wage market in the US, 20 million in both cases. Put another way, there is a large potential pool of minimum wage migrant labor in the MCA countries, even by US standards.

What would happen if these migrants could enter the US at will with a free visa subject only to a background check?

Our pre-pandemic analysis of JOLTS labor market survey data showed 2 million open jobs which could be filled by unskilled, non-English speaking migrants. For the moment, let us assume that all these jobs were open as advertised and filled solely by MCA migrants. What would be the impact on employment and wages?

Let's start with employment, assuming no impact on wages. After the 2 millionth job was filled, the next migrant would show up offering to work for less or willing to provide better service. As a result, we might expect this influx to create unemployment. And in fact, high unemployment would be rational for incoming migrants. Our analysis suggests that those earning $2.50 / hour in the MCA countries would be willing to work for $6.50 / hour in the US, a wage sufficient to cover higher US expenses and an hourly wage premium to make it worthwhile to leave their homes. If they could earn $10 / hour, it would be rational for them to come to the US even if they expected to be unemployed 40% of the time. Further, if they were unemployed 50% of the time in the US, they would still be making as much net as working full time at home. Such unemployment does not represent indolence or some lack of moral character, but rather rational economic behavior: In some cases, it's better to earn a higher hourly wage and work fewer hours, particularly when that wage is four times your normal rate. This implies, however, that open borders with just the MCA countries could draw in 50% more migrants than the jobs available, and assuming two million jobs, that implies one million unemployed migrants hanging about the US.

And this situation could persist for some time. As unemployed migrants are absorbed, those remaining in the large pool of MCA migrants would have an incentive to come to the US with a willingness to remain unemployed for 40% of the time. Unemployed young men have a propensity to get into trouble, and the US public -- even in the vanishingly remote chance that it would ever support an open borders policy -- would be unwilling to countenance the side-effects for more than a presidential term.

Alternatively, open borders could be felt more in wages than employment. Incoming migrants could push down wages to their Relocation Wage, the hourly wage needed to make it worthwhile to come to the US, about the above-noted $6.50 / hour for Mexicans. This would make a mockery of those seeking increased minimum wage laws, with the result that either unskilled US workers would see higher unemployment, potentially much higher unemployment, or have to work off the books at wages below the much-maligned Federal minimum wage of $7.25 / hour. Such pressure could fall disproportionately on the unskilled black community -- a critical Democratic constituency. But even more so, it would affect the unskilled, undocumented immigrant community.

We tend to think of undocumented residents and illegal immigrants as being the same. But in many ways they are not. Most undocumented immigrants have been in the US for fifteen years or more. They are established here, with long-standing jobs or businesses. They quite possibly have raised their own children here, who may be both US citizens and think of themselves that way. They are closer to undocumented Americans than migrant Mexicans or Central Americans. Importantly, most of them are earning $10-12, not $6.50, per hour. In many cases, incoming migrants could easily displace the incumbent undocumented working population. As a result, open borders with the MCA countries promises to be a disaster for undocumented US residents. Thus, there is a very good chance that the 2,000,001st migrant is not displacing another recent migrant, who is also willing to work for $6.50 / hour, but rather a long-established undocumented resident costing his employer $12 / hour. Open borders, therefore, should yield one million unemployed unskilled Hispanics, but the brunt could be borne disproportionately by those who arrived before the Great Recession. By implication, long-time undocumented residents and incoming illegal immigrants are not one interest group. They are two interest groups, and at high levels of migrant entry, have diametrically opposed economic interests.

If open borders would be unacceptable, perhaps we could stem the flow of migrants with a modest visa fee. In his book 'Open Borders', GMU economics professor Bryan Caplan suggests an entry fee of $1,000, equal to about 50 cents per work hour. What would be the effect?

It certainly would not discourage any of those migrants coming across to take those two million jobs, as they would still earn far above their Relocation Wage (the US wage necessary to induce them to leave home). It would, however, influence both wage pressures and the number of unemployed migrants in the country. At the extremes, it would reduce migrants' willingness to remain unemployed to about 35% of the time or reduce the effective minimum wage from $10 to $7 / hour for those jobs which unskilled migrants could fill.

What if we raised the visa fee higher? For example, a fee of $2 / work hour would see the optimal unemployment rate fall to around 22% -- still very high -- and the maximum wage impact would be $1.50 / hour, that is, reducing wages to $8.50 / hour for jobs which unskilled migrants could fill. Even a $2 / work hour fee would not be sufficient to protect incumbent workers and sustain public support.

If, however, we let the visa rise to its market value -- which we estimate around $3.50 / work hour -- the incentive for unemployment falls to zero and the wage impact is also zero. That is, migrants would have to earn the prevailing US minimum wage of $10 / hour to cover both the visa fee and their own Relocation Wage (which includes a premium for coming to the US). This allows virtually no unemployment and no undercutting of prevailing wages. This is the expected result of the bidding process for visas.

Therefore, protecting the domestic workforce -- primarily the undocumented Hispanic workforce -- from migrant competition requires a market value for our proposed H2-M, market-based visa. This minimizes disruption to domestic labor markets and helps ensure public support for the program. If you want to protect the undocumented resident population of the US, then you want incremental visas to be issued at a market rate.

Moreover, the market price is essential to end illegal immigration. Let's go back to where we started:

The migrants depicted above are willing to clash with Guatemalan security forces because they believe they will never have access to a US H2 visa. Practically speaking, they are right, because the US government issues H2-A and H2-B visas far below their market value and therefore demand vastly outstrips supply. If the US government issues our proposed H2-M market-based visas below market value, they will immediately stock out, no different than the H2 visas today. Remember, even in a market-based visa system, no more than 5% of the migrants in the picture above will receive an H2 visa of any sort, including an H2-M visa, at any given point in time. We maintain order in the market, however, by ensuring that H2-M visas are available on demand, in unlimited quantities, 24/7. And we can do that at the market price -- but not below it.

This changes the calculus for the migrants. The question becomes not 'Can I get over the border?' Of course, a background-checked Honduran could run the gauntlet as he does today, but it would be far easier to simply buy a visa online and book a flight to Atlanta. Therefore, the question will be instead, 'Can I find an employer willing to pay me enough to cover both the visa and my Relocation Wage?' We have a term for this in the United States. It's called 'a job search'. By this means, we convert a border security problem into a garden variety labor markets issue. The pressure moves away from the border and to the employer, where it organically belongs.

Of course, if we fail to issue enough visas, regardless of price, we will see illegal immigration revive at the southwest border. Therefore, we set a target for southwest border apprehensions, say 150 / day, and we issue more visas if the apprehensions rate exceeds this level. This underlines the chief philosophical difference between, for example, CIS and ourselves. CIS is aiming for absolute sovereignty. The US government is allowed to dictate the number of visas, and MCA citizens should respect that decision on US soil. The US government is the absolute sovereign on US territory.

By contrast, we think 56 years of futile attempts to stop illegal immigration suggests that absolute sovereignty is not feasible under real world conditions. We believe instead in constrained sovereignty. This begins with the premise that only a fool would get between a poor man and his job. Don't fight titanic economic forces. Instead, focus on channeling such flows to maximize the ordinary conservative objectives of safety, propriety (following the laws), conformity (following customs), and compensation (members should pay their own way). A market-based visa system can deliver all of those at a high level. A very high level. But the price of this approach is that the government is shaping flows, rather than mandating them. In a market-based system, if we need more visas to end illegal immigration, we issue more visas. It is in this sense that sovereignty is constrained. Notwithstanding, our analysis suggests we can close the southwest border to illegal immigration with a 3 x 350,000 tranche of H2-M visas (about 1 million incremental visas over three years) on top of the 300,000 H2-A and H2-B visas issued in 2019. As a conservative, would I gamble 1 million visas (that's $18 bn of revenue to the Feds over three years) for a shot at ending illegal immigration and normalizing the status of undocumented Hispanic immigrants?

Absolutely.

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President Biden is already beginning to turn to those Trumpian policies many of my readers decried as despicable and inhumane, notably resumption of construction of the border wall in places and the enhanced use of Mexican, Guatemalan and Honduran troops to better seal their borders. The Biden administration is doubling down on exactly the use of force depicted in the photo above. This is dreadful policy, but the inescapable result of an enforcement-based approach to illegal immigration.

We can do better, and I think we might find the necessary Republican votes to get there.

For my readers who are pro-migrant and on the left -- and some of you have close ties to the administration -- you are at the crossroads. You can propose something new, something with hope for a better future for millions of south of the border and the prospect of normalization for seven million undocumented Hispanics in the US. Or you can wait and hope that, ten years from now, we will not still be spinning our wheels in the rut of the last half century, wasting vast taxpayer resources in a barren and cruel effort to keep poor migrants from filling jobs needing them in the US.

Deterring the Migrants - An Enforcement-based Approach (Part I)

The Biden administration is facing the dual challenge of both deterring migrants from entering the US illegally and doing so without resorting to draconian enforcement measures. Today, we consider the options using the current enforcement-based (volume-limited) policy.

Under the current system, the US government sets the number of visas, H2's in this case, and then attempts to enforce the border around that quantity. For example, the cap count for FY 2021 for H2-B visas was set at 66,000. Because these visas are issued far below their economic value, supply is artificially low and demand vastly exceeds supply. As a consequence, the overwhelming majority of those who would like to work in the US have no realistic chance of ever obtaining a visa.

And that yields the picture below.

This photo from earlier this year depicts a caravan of Honduran migrants clashing with police in Guatemala. It is easy to see the picture as simple chaos, a mob without meaning. But that's not the case. To understand the dynamics, we can imagine ourselves in the Hondurans' shoes and consider their goals, motivations, and values. Clearly, these migrants want to go work in the US. They are not tramping up Central America because they love the Dodgers or want to visit Disney World. These migrants are enduring at best great discomfort, and at worst, risking not only their own lives, but those of their spouses and children. We might reasonably characterize them as 'highly motivated'. They are on the road to change the very course of their lives.

What is their belief about their chances to enter the US legally? It must be effectively zero. Why would anyone walk a thousand miles if they thought they could simply apply for and receive an H2 visa? They wouldn't. Rather, these people do not believe they have a shot at any H2 visa at all. Ever.

As a result, their downside is limited to the journey's discomfort and the risk of injury, crime victimization and death. If they succeed in entering the US interior, they are better off; if they fail, their losses are limited to the trek itself. Because these migrants have no hope of legal entry into the US, the prospect of apprehension at the US border is not a meaningful deterrent. In an enforcement-based framework, therefore, the US is short of both carrots and sticks to influence migrant behavior. The US cannot extend the reasonable expectation of obtaining a legal visa, and therefore the prospect of apprehension at the border and losing visa eligibility is not a meaningful deterrent. Instead, the administration is reduced to pleading: "Don’t come over," President Biden said during an interview with ABC News' George Stephanopoulos. “Don’t leave your town or city or community.”

Clearly, migrants weren't listening. It is naive and insulting to think that they would. Just look at the photograph. For these migrants, the decision is existential. They will make their choices based upon conditions on the ground, not based on pronouncements, laws, exhortations or niceties. No one is going to walk weeks to the US border and then concede to Border Patrol that they are really 21 when they have the prospect of entry if they claim to be only 17 years old. Migrants will work the system as it exists. If those ahead of them report that they were able to enter the United States, the following migrants will continue to push on.

So what policy options does the US have? First, all options are subject to political constraints. As I have elsewhere noted, the political limit for southwest border apprehensions is a maximum of about 40,000 / month. Above this level, the press will be talking of a crisis, and an administration will be bleeding political capital. That limits the scope for humane policies, and by and large, any given US administration -- be that of Bush, Obama, Trump or Biden -- will be forced back into volume constraints. Those Guatemalan police on the photo above are a volume constraint, as are migrant camps in Mexico or deportation from the US. They all seek to reduce the number of migrants entering the US interior.

This enforcement-based approach has delivered political and policy failure for every administration since Nixon. It does not work, and it never has. And it never will. Why would it? Any reasonable economic or market analysis will show it doomed to failure. (So why do Niskanen and Rand continue to promote it?) As a result, today's policy framework dictates that the Biden administration will be reduced to measures the left will consider mean and inhumane -- unless the administration is willing to invest its political capital in levels of apprehensions too high for the political tolerances of prior administrations, both Republican and Democrat.

The Public's Tolerance for Border Apprehensions

How many apprehensions at the southwest border will the US public tolerate before treating it as a 'crisis'? Put another way, at what level do migrant apprehensions become a political problem for an administration?

As it turns out, this number can be reasonably estimated. As a rule of thumb, Americans will accept southwest border apprehensions less than 500,000 / year as normal, that is, about 40,000 / month. If we allow for seasonality, then 50,000 / month is acceptable in the peak season of March to May, and 30,000 - 40,000 / month for the rest of the year, as we show on the 'Tolerance Limit' line on our graph below.

Using this framework, we can easily identify the respective border crises of Obama, Trump and now Biden, as well as incipient surges in late 2018 and again in late 2020 (and a pre-Trump surge in late 2016). The model accurately shows those periods when the media and the analyst community viewed border apprehensions as being at crisis levels.

If the Biden team wants to put the border crisis behind them as a political matter, they should be targeting no more than 50,000 monthly apprehensions at the southwest border to May and 40,000 / month thereafter.

We are a long way from there.

It wasn't Jacobson's fault, either.

White House border coordinator Roberta Jacobson became the first administration victim of the border crisis, with Reuters reporting that she "will retire from her role as coordinator at the end of this month." The border situation is not Jacobson's fault, just as it was not that of Homeland Security Secretary Kirstjen Nielsen, whom President Trump fired during a similar border surge in November 2018. Readers will recall my note on the matter.

Rather, the problem is the underlying construct of border policy. Under an enforcement-based approach as we have today -- one endorsed by the likes of Heritage, Niskanen and Rand (but not CATO) -- migrants must necessarily be treated as either criminals or victims. They are criminals because they cross the border illegally, lie about their age or motivation, work without permits, obtain fake social security cards and evade taxes. In most cases, at least three of five of these are true. These acts are justified in the eyes of the left, however, because migrants are 'victims', fleeing gangs and poverty, and migrants must be handled by sympathetic asylum courts while the administration conducts shuttle diplomacy to address the 'root causes' of illegal immigration. Thus, the current policy framework forces migrants to be treated as either sinners or saints, criminals or victims.

If illegal immigrants are to be treated as 'saints', then the result is 'humane' policy which involves losing control of the border and a political crisis for the administration. Hence Ms. Jacobson's scalp.

The implied alternative, however, is a replacement who is going to be tougher on illegal immigration. We have seen this film before. The number of Border Patrol agents increased 14% under President Obama. The Biden administration will be forced into something similar -- and rather Trumpian -- as I have said before.

One would think that, in 2021, after three decades of increasing border staffing, yet another migrant surge would encourage decision-makers to consider alternatives beyond firing the scapegoat du jour. Not yet, apparently.

Let me once again reiterate that we could obtain vastly better outcomes by migrating to a compensation-based, rather than enforcement-based, approach. And let me add that hickjacking governance in Central America to serve US interests -- that is, to 'address the roots causes of illegal immigration' -- is also a trival matter. But you're not going to see the opportunity peering through a moral lens projecting migrants as either criminals or victims.

CBP March Southwest Border Apprehensions: Worst since 2001

US Customs and Border Protection issued March apprehensions and inadmisibles numbers today.

Border Patrol apprehended 168,195 persons at the southwest border in the month of March. This was slightly less than preliminary figures reported by the Washington Post last week. Notwithstanding, this is still the highest since March 2001, the first year of the Bush administration, when Border Patrol recorded 170,580 southwest border apprehensions.

At the current pace, apprehensions for calendar year 2021 could be forecast at 1.2 million, following the precedents of 2005 and 2006. The comparison may prove apt. Then as now, the stock market was hot and real estate prices were heading well into bubble territory. We have contended that black markets, like other markets, are demand-driven. Migrants look to jump the border when they know jobs are waiting for them. A hot US economy -- particularly one with work discouraged by fear of the coronavirus and generous unemployment benefits and stimulus payments -- may prove an irresistible draw for Mexican and Central American migrants looking to fill the gap in a tight US labor market.

As a result, barring a major modification of Biden administration policy, we might expect a level of illegal immigration this year not seen since the Great Recession. The situation is fairly described as a border crisis and a rolling policy disaster.

There are better ways to handle the situation.

*****

Inadmissibles have also begun to creep up. As the pandemic begins to pass and vaccines become more widely available, inadmissibles -- those who present themselves for legal entry at official crossing points but lack appropriate documentation -- are likely to begin to return more typical levels.

March Apprehensions: Worst in Twenty-One Years

US Customs and Border Protection, as has been its annoying habit in the last several years, once again leaked headline apprehension numbers before the release of its formal publication of monthly statistics. Per news releases, US Border Patrol apprehended 171,000 persons attempting to cross illegally into the US in the month of March, just as CBP forecast a few weeks ago.

March saw the highest number of apprehensions for the month since the Clinton administration -- worse than any March during the Bush, Obama or Trump terms. It is fair to describe the situation as both a crisis and a policy disaster.

And that's not all. We would expect apprehensions to continue to rise for the next couple of months. In such an event, apprehensions will compare unfavorably with the Clinton administration itself, the last time the US had a bona fide illegal immigration crisis in the eyes of most immigration analysts.

For purposes of comparison, during the last year of the Clinton administration, calendar year 2000, 1.6 million people were apprehended at the border.

We are not there yet, but the border remains visibly out of control and the Biden administration appears clueless in its response.

I would again add pro forma that this crisis could be ended purely with rhetoric were a market-based visa system in prospect for the migrant community.

"Worst in Twenty Years"

NBC News reported that Homeland Security Secretary Alejandro Mayorkas on Tuesday said that the U.S. is expected to reach the highest number of people apprehended at the U.S.-Mexico border in two decades.

Just how many is that?

Twenty years ago, in 2001, border apprehensions reached 170,580 in the month of March.

Here's how that looks on our monthly graph:

A level of 170,000 would be almost twice that of March 2019, during the surge of the Trump administration, which itself was the highest level since 2007. It is not an exaggeration to describe the situation as disastrous.

There has been some attempt to blame events on the Trump administration. In fact, the 2018 Sabraw ruling and the 2019 Omnibus bill largely gutted Border Patrol's ability to control the border with respect to minors and families. The Trump administration responded by jerry-rigging administrative procedures to compensate, including migrant camps in Mexico and strong-arming Guatemalan and Mexican authorities to clamp down on migrant caravans. The Biden administration in essence removed the pressure on the tourniquet, with the result that migrants are now gushing over the border.

The Biden administration has days to weeks to get the situation under control. As I have said before, expect the administration to turn back to the Trump playbook, with some fairly nasty policies to come.

And again, let me reiterate that all this could be solved in short order without draconian measures and to broad public satisfaction using a market-based visa program.

An Entirely Predictable Border Surge

The press has been replete with reports of a major uptick in illegal border crossings in the past month. Customs and Border Protection published numbers today, giving us insight into the month of February.

Border Patrol apprehended 96,974 migrants attempting to enter the US illegally across the US southwest border in the month of February. This was almost three times the level of one year earlier and the highest since 2006, that is, during the Bush administration. It was far worse than any February under either the Obama or Trump administrations. Nor should these developments have surprised the Biden administration. The surge was not only foreseeable, we actually forecast it.

In our November 23rd note, I wrote

...the numbers suggest the border problem will continue to worsen as long as the current 'catch-and-boot' regime lasts, possibly through Q1 2021. If so, the apprehension numbers in the December to March period could once again be eye-popping and a policy priority -- or at least a policy headache -- for the incoming Biden administration.

Not only was this qualitative guidance, we forecast the numbers, which can be seen updated with today's CBP data on the graph below:

Reported apprehensions were even worse than our forecast, which itself might reasonably have been characterized as 'alarmist'. That the Biden administration has been caught unawares is frankly surprising. The Obama administration had problems with its own surge, and consequently these issues should not have been novel or unexpected for President Biden. Expect some entirely Trumpian, and fairly nasty, measures to be implemented in the next month or so to control the surge.

I need hardly reiterate that all this could be resolved in short order without draconian measures if the Biden administration would consider a market-based visa program.

*****

Meanwhile, inadmissibles remain at abnormally low levels, depressed by the ongoing covid pandemic.

Seven reasons amnesty might succeed

The DACA program, covering children brought to the US illegally by their parents, is well known. Less remembered is the failed DAPA initiative of the Obama administration. Announced in November 2014, the program would have granted work permits to the undocumented parents of children born in the US. The current Biden amnesty would, by its very nature, cover this group.

If DAPA failed, why would a broader amnesty succeed now?

Here are seven reasons why it might, and one reason it might not.

The Passage of Time

The simple passage of time makes a claim of 'common law' residency ever more supportable. In 2014, the DAPA eligible might have been in the US only five years. Now, those very same people will have been in the US more than ten years, and many, more than fifteen. Their children will have grown up here. Even five years ago, most Americans agreed that undocumented immigrants should qualify for resident status in some form. That rationale today is even stronger. The passage of time by itself has changed the terms of the debate.

The Failure of Deportation

The legitimate alternative to legalization is deportation. President Trump was by far the most aggressive proponent of deportation in living memory. And yet, even under the Trump administration, the rate of deportation of undocumented residents without criminal records was only 8 in 10,000 per year. As a practical matter, the undocumented worker who avoid run-ins with the law already enjoys amnesty.

Further, the 2019 raids on Mississippi poultry plants demonstrated that the American public has no appetite for rounding up undocumented mothers and fathers, working in grinding, menial jobs, as their children watch them being arrested and deported. Entering the country and working illegally is an administrative crime, but not a moral one. Everyone has a right to try for a better life, and the American public has limited appetite to deport those who broke the rules in hopes of a better future for themselves and their children.

Therefore, the singular failure of the Trump administration has discredited mass deportation as a policy option, effectively leaving normalization as the only practical alternative if the undocumented are not to live in a legal twilight forever.

Relief, Guilt and Exhaustion

Many voters, even on the right, are breathing a long sigh of relief at the departure of Donald Trump. These were appalled by the treatment of migrants under Trump and may feel the time is ripe to balance the scales. Further, the Biden administration is enjoying some good will from the public. This will fade in the next few months, but for now, many feel the time has arrived for a more accommodating stance towards illegal immigrants.

Biden is not Obama

If Biden is not Trump, he is not Obama, either. Obama was demonized on the right as a true leftist and, it has been argued, on racial grounds. Joe Biden cannot be so characterized. To all appearances, Biden is a centrist to the core, a white Catholic guy who owns a Pontiac TransAm, one of the iconic sports cars of the working class. It is harder to paint Biden -- and by extension his amnesty bill -- as the product of a radical leftist.

Relatively Low Illegal Immigration Numbers

Border apprehension levels have fallen dramatically since 2000, and in particular, in the decade following the Great Recession. While 2019 saw a major surge and the prospects of large caravans remain a risk, the overall level of border apprehensions -- and by extension, illegal immigration -- has fallen dramatically in recent years. As a result, the public is perhaps not as aroused by the topic as it once was, and therefore amnesty may not be as resisted as it has been historically.

The End of the Depression

The business cycle is also favorable. Foreigners are shunned during depressions, and we have argued that the Great Recession was indeed a depression. During a prolonged downturn, immigrants are seen as competitors for scarce jobs and simply more mouths to feed. By contrast, during an economic expansion, migrants are seen as helping hands to do needed work. While we believe a financial crash is coming in the wake of the pandemic -- the economy is over-stimulated with easy money -- the economy may remain largely on track and the incremental labor of migrants will be welcomed by the public. Amnesties are easier when the public is in a good mood, and it probably will be as the pandemic ebbs.

The Coming Labor Shortage

We have stated the US will face an acute labor shortage as we head towards 2025. But it could be even worse than that. A number of Americans near retirement age will have elected to permanently leave the labor force during the enforced vacation of the pandemic era. As the pandemic eases and demand returns, these workers will be missing. Therefore, the high unemployment of the last year could in short order be replaced by a historically tight labor market as early as, say, the fourth quarter of this year, and certainly by 2022. This again will tend to create a pro-immigration sentiment conducive to leniency for undocumented immigrants.

The Risks of Over-reach

The Biden administration has proposed legislation covering the gamut of Democratic objectives. And that was just in its first two days. Of particular concern is the call for a $15 / hour minimum wage. Our immigration policy recommendations are fundamentally about ending the evil of black markets. A binding minimum wage is exactly how one creates black markets. It is bad policy intrinsically. But it is even worse for illegal immigration. Raising the effective minimum wage from $10 to $15 / hour would create a huge incentive for illegal immigration. Illegal border crossing is driven by wage differentials, about $1.50 / hour in Guatemala and $2.50 / hour in Mexico versus $10 / hour in the US. A $5 / hour increase would represent roughly $30,000 in net present value to an illegal border crosser, most of which would ultimately end up in the pockets of intermediaries helping migrants enter the US illegally. Do the math, and a binding $15 / hour wage would result in a net annual gain of $5 - $10 billion to the Mexican drug and human trafficking cartels. It could potentially disrupt border control far more than a general amnesty. (I would note that a higher minimum wage should have no material effect on a market-based visa program.)

One is left wondering about President Biden's motivations in sending a laundry list of Democratic priorities to Congress. Does the administration intend to fight both an immigration and minimum wage battle in a 50/50 Senate? Or is the President merely pushing the pile across the table in order to demonstrate his fealty to his progressive supporters? If that's the case, which policies really enjoy his support and which are merely for show? It makes all his proposals look less serious.

*****

Assuming amnesty actually is the priority, the Biden team has effectively set the left edge of the illegal immigration debate. Both the passage of time and emerging trends are on their side. The electorate is exhausted by four years of political stress and simply wants to end the whole illegal immigration topic, even as the Trump administration has effectively gutted the viability and legitimacy of an enforcement-based strategy. The conflux of conditions are in the left's favor.

How will conservatives respond? If illegal immigration proves a true administration priority, the right will face a dilemma.

If 'no amnesty' sums up policy on the right, conservatives are condemned to a static defense which will either prevail or fall. But for the many Americans who want a solution -- any solution -- for illegal immigration, condemning long-term undocumented residents to a perpetual twilight is not an answer. Resisting amnesty may represent righteous vengeance and bile-soaked principle, but it is not constructive, not conservative, and little more than institutional cruelty after so many years. At some point, the public may have had enough.

In such an event, conservatives would do better to engage with the topic and set a defensible edge on the right.

Is that even possible? I think it is, and curiously, I believe it may come down to the views of a single person.

Amnesty for 11 Million

So much for unity.

On January 15th, the Los Angeles Times reported that the incoming Biden administration

plans to send a groundbreaking legislative package to Congress to address the long-elusive goal of immigration reform, including what’s certain to be a controversial centerpiece: a pathway to citizenship for an estimated 11 million immigrants who are in the country without legal status, according to immigrant rights activists in communication with the Biden-Harris transition team.

This is as expected. I have written on any number of occasions that an incoming Democratic administration might be expected to propose and successfully pass not only legislation resolving the DACA issue, but also a larger amnesty. The Republicans' bungling of the Georgia Senate elections makes it that much easier.

The matter of DACA is straight-forward. Those in the program are Americans in all but name. The issue should have been addressed during the Trump administration. It will be resolved now.

More interesting is the case of long-term undocumented residents. Beyond those in the DACA program, perhaps five million illegal immigrants have resided in the US for at least fifteen years. The case for normalizing the status of these 'common law' residents is sound, even from the conservative perspective. If we are not going to deport them -- and we are not in any great numbers -- then they should be given status to better maintain order in society, even absent humanitarian considerations.

But 11 million is a big number, likely requiring cross-aisle cooperation. What sort of incentive is being dangled to conservatives for their support?

As it turns out, nothing.

Marielena Hincapié, executive director of the National Immigration Law Center and its Immigrant Justice Fund, told the LA Times that the Biden administration would offer no additional enforcement measures to Republicans. “This notion concerning immigration enforcement and giving Republicans everything they kept asking for … was flawed from the beginning,” she said. Lorella Praeli, an immigrant and longtime activist in contact with the Biden team, added in the same article that the proposed legislation “will not seek to trade immigration relief for enforcement, and that’s huge.”

If the proposed immigration legislation is intended to promote unity and heal the country, one can hardly wonder what a divisive initiative would look like. The Biden proposal is in-your-face and all about payback. After the crude and dehumanizing treatment of illegal immigrants by the Trump administration, this is hardly surprising. But it is not constructive. President Biden will brand himself with the US electorate in the next ten days, establishing in the public's mind whether he really intends unity or whether he was just selling a bait-and-switch line. Unity may be an anachronistic notion a week from today.

This would be a pity, because the immigration initiative -- as well as many others -- can be couched in conservative, as well as progressive, terms.

Illegal immigration to the US from Mexico is an unintended (but easily foreseen) by-product of the Hart-Celler Nationality and Immigration Act of 1965. The act catalyzed a black market in migrant labor with a corresponding incentive for illegal immigrants to settle permanently in the US. This legislative framework needs to be replaced with modern legislation which acknowledges market forces at the border and provides a sound and sustainable means for allowing labor to flow back and forth in ways which meet conservative criteria. Specifically, such a program must acknowledge and collect from migrants the market value of the right to work in the US. This is the only way to effectively close the unsecured southwest border to illegal immigration: by monetizing the value of illegal entry and allowing background-checked migrants to pay that amount to the US government in return for on-demand entry to work.

But this is not enough. As a corollary to this approach, the domestic black market for migrant labor must be drained. That is, if legal migrants pay an entry fee but can work off the books easily in the US, then they will have an incentive to 'go dark' and join the existing US black market in migrant labor. Therefore, currently undocumented workers must be either legalized or deported. As I have written, undocumented immigrants who do not otherwise commit crimes already have amnesty in all but name. We are not going to deport them. Therefore, closing the southwest border to illegal immigration requires normalizing the status of undocumented workers already here. This is not a gift, a concession or woolly niceness, but rather a necessary requirement for unwinding 55 years of bad public policy. Providing legal status to 11 million undocumented residents is an integral part of creating functional migrant worker policy — even for conservatives.

By contrast, couching the matter in terms of being humane and kind, as Biden's activists have, is divisive and counter-productive. By framing the issue as us-versus-them -- nice Democrats versus mean Republicans -- the Biden administration is setting up immigration legislation as a win-or-lose test of strength based on party loyalties, rather than as a necessary modernization of law to meet requirements across the ideological spectrum.

This in turn guarantees that 11 million people will not receive legal status. At least some Republican Senators are likely to sign up for DACA legislation, and perhaps a few will vote for allowing long-time undocumented residents to receive legal status of some sort. Notwithstanding, a blanket amnesty appears highly implausible. Not even the Democrats are likely to offer such largess.

More likely, any amnesty will cover between two and six million people. That is what activists like Hincapié and Praeli are advocating as a practical matter: an important but ultimately incomplete win. By implication, however, 5-8 million undocumented residents will remain just that. And not for a year or two, but given the difficulty with which the US Congress births immigration legislation, for a generation or more. By framing the issue in partisan terms, the Biden administration's acolytes are guaranteeing that the suffering of millions of undocumented residents will persist for decades to come. Worse than that, the horrors of illegal crossing into the US will remain, as will exploitation of migrants by US employers. And many Americans will resent, indeed hate, those granted -- and granting -- amnesty and continue to look down upon Mexicans and Central Americans as, to use Trump's words, "bringing drugs, crime and rapists" to the US. If the black market is allowed to persist, these notions will thrive, and they will have some basis in reality, for black markets around the world inevitably bring crime in other forms.

Nor does it solve matters which will be on President Biden's desk early Thursday morning. ABC News reports that a migrant caravan 7500 strong is heading through Guatemala towards the Mexican, and ultimately US, border. Sooner or later, they will force the president's hand. Is the border now open to all comers? Or will President Biden resort to some part of the Trump playbook to keep the migrants out? Well-meaning activists will do nothing but make these crowds larger and more frequent.

Next week's presidential agenda item

On the other hand, the prospect of a market-based solution would disband this group in short order. These migrants are pushing forward because they need work and there is no legal means for them to enter the US for jobs open and waiting for them. Provide a legal means of entry -- at a market price -- and the need for caravans disappears because Central Americans can work in the US whenever they like. Rather than using volume constraints, which the soldiers in the picture literally embody, the US would be using the price constraints which create order, peace and stability in markets across the globe.

President Biden has called for unity and national healing. I take him at his word and believe this reflects his intentions. Nevertheless, the default setting in Congress -- and perhaps throughout the electorate -- is narrow-minded partisanship. If we are to successfully navigate contentious issues like illegal immigration, the Biden administration will require wider vision, one which considers not only the liberal, but also the conservative, perspective. In illegal immigration, as with a number of other policy topics, both liberals and conservatives need a law which serves the range of ideological interests better than the incumbent solution. This in turn requires greater sophistication in economic and stakeholder analysis, strategy, structuring and communication. Activists have their role, but passing comprehensive immigration reform will require more than that.

US Southwest Border Oct. 2020: The Surge Continues

For the month of October, US Customs and Border Protection reported 66,337 apprehensions at the US unsecured southwest border. This is 12,000 higher than the previous month and the highest for October since 2005. For context, October's apprehensions averaged twice the level for the month during the Obama years.

The dynamics here once again demonstrate the difficulty of trying to address black markets -- including the black market in migrant labor -- with an enforcement-based approach. I have written earlier of the 'whack-a-mole' nature of black markets. This is but another example, in this case driven by a change in enforcement policy. In March, the Trump administration issued a directive allowing Border Patrol to "swiftly expel migrants they consider health risks to their home country or their last transit country (in this case Mexico)," as Pew Research put it. Border Patrol might reasonably deem pretty much all illegal crossers as public health risks and briskly deposit them on the far side of the Mexico border. After a nice lunch and a rest break, these same migrants could take another crack at the border. Hence the swift rise in apprehensions of Mexican men. Whack-a-mole, indeed.

As we wrote last time, this situation looks to deteriorate until, at a minimum, a vaccine is made available to Border Patrol personnel, and possibly until a vaccine is made available to border crossers more generally (ironically). In any event, the numbers suggest the border problem will continue to worsen as long as the current 'catch-and-boot' regime lasts, possibly through Q1 2021. If so, the apprehension numbers in the December to March period could once again be eye-popping and a policy priority -- or at least a policy headache -- for the incoming Biden administration.

*****

The US border enforcement system is often described as dysfunctional, but it is in fact functioning just as specified. Rather, the specification is dysfunctional. But then why not change it?

Both left and right are stuck in an emotional mindset. On the left (note, on the left), CATO and GMU tend to see migrants as poor people requiring our help, and therefore, the goal of US policy is to be 'nice' to undocumented immigrants. The US should provide such migrants all sorts of support and certainly better-than-market terms.

On the right, undocumented immigrants are sometimes treated as barely human and entirely criminal, and thus police-style enforcement is called for.

In a market-based approach, such migrants are treated as regular people, intrinsically neither better nor worse than the rest of us. And like the rest of us, they need to make difficult trade-offs in life decisions, but are assumed -- even though they may be less educated-- as capable of making their own way. Such migrants are considered to be simply following economic opportunity and the hope for a better life. We make no assumptions about their moral character other than to note that they will play by the rules as enforced on the field, not as recorded in law or regulation.

The high conservative perspective therefore seeks to create order, not niceness, but at the same time rejects bullying and hatred. Order means safety, permission, propriety, conformity and compensation. Order, by extension, makes bullying and hatred not only unacceptable, but unnecessary, because it eliminates the principal causes of such hatred, notably illegal behavior. All this, however, must occur within the framework of constrained sovereignty. A blanket closure of the unsecured southwest border has proved and will always be impossible. However, a model which channels migrant flows using a market framework will work and produce outcomes acceptable to most conservatives, including closing the unsecured southwest border to illegal immigration.

​The challenges are not principally technical. We understand the dynamics of and fixes for black markets, and we have all the technology and technocratic skill to create an orderly border market. The challenges, instead, are in the heads of the think tank analysts​ who are captive to preconceptions about the nature of Latin American migrants, that they must either be coddled as wards of the state or prosecuted as criminals to be tossed in jail or deported. We see a third way. In a market-based system, we treat migrants as everyday people looking for a better life and willing to play by the rules if the incentives and processes are properly structured.

Demographics, Think Tanks and Immigration Policy

The prospect of a Biden administration has begun to lubricate the policy wheels at the various think tanks. This past week, David Bier of the CATO Institute laid out 52 reforms for the US immigration system. David is possibly the most sensible analyst in the immigration sphere and his proposed policies establish the benchmark by which other alternatives may be judged. Most of CATO's views are long-held, but they are worth reviewing for those readers not familiar with them.

I have been personally surprised by the strength of the right in the recent election. Moreover, I think Republicans have solid prospects to hold the two Senate seats in Georgia and therefore a majority in the Senate. By implication, CIS and FAIR -- not CATO -- look to be the winners of this election. CATO will need a tailwind if it hopes to see a meaningful share of its program implemented.

Demographics might provide the needed push.

The US Census Bureau updated its US population estimates this past week; econ blog Calculated Risk provides an analysis of the numbers well worth reading. In essence, in 2017 the Census Bureau over-estimated the 2019 US population by over 2 million; by over 3 million in 2020 if Calculated Risks' estimates prove correct. A miss of 2-3 million people over a three year stretch is huge.

An extrapolation of these trends shows the challenges ahead. A 'naive' regression analysis suggests that the US will face the now well-known European and Japanese problems of depopulation by the end of the decade. From 2030, the entirety of US net population growth will depend on immigration if family policy does not change otherwise.

​This will put both CATO and CIS on the horns of a dilemma. If individuals are choosing not to have children and that leads to depopulation, well, that's ok from the libertarian perspective. If depopulation is acceptable, however, then the patently visible, emerging case for higher immigration is potentially weaker.

By contrast, ​CIS and FAIR were founded upon the premise that over-population is a problem. Nevertheless, the data says that in the US, as in other advanced countries, the problem -- at least from the conservative perspective -- will soon be depopulation. And as ever in these matters, Hungary's Prime Minister Victor Orban foreshadows the associated politics with his 'procreation, not immigration' policy. This may be on the agenda in the US as soon as 2024, and probably not later that 2028. Where will CIS and FAIR stand then?

Last week's election demonstrated that nearly half of US voters are prepared to challenge traditional assumptions about left and right and beliefs about the legitimacy of democratic traditions and institutions. Demographic trends suggest that accepted notions of left and right will continue to be churned. In all this, paradoxically, social conservatives promise to be the radical force, even as fiscal conservatives and progressives fight to preserve the status quo.

Conservatives, Cannabis and Illegal Immigration

Marijuana legalization and market-based visas share common roots. Both seek to end a black market and replace it with a legalize-and-tax structure -- but not because its proponents are necessarily fans of either recreational drugs or immigration. Rather, the conviction stems from both theory and practice: black markets create worse side effects than the problem they are ostensibly designed to address. Prohibition created Al Capone. The war on drugs is responsible for half of the violent crime rate in US inner cities and perhaps two-thirds of homicides in Mexico. It is not a minor issue or inconvenience: black markets and related enforcement literally determine the culture and economic prospects of communities. Ending a black market with a legalize-and-tax policy will create materially better policy outcomes than persisting with ever greater enforcement efforts inevitably doomed to failure.

Marijuana legalization may be showing a path forward, as it is gradually gaining traction with conservatives. Bloomberg notes that "initiatives on the ballot in a handful of conservative states show Republicans are increasingly on board with legalization as well -- perhaps paving the way for an end to federal prohibition, no matter who controls Washington."

Piecemeal legislation has demonstrated, however imperfectly, that legalizing pot is not the end of the world. “People are just much less afraid of marijuana than they used to be,” said John Fanburg, co-chair of the cannabis practice at a New Jersey-based law firm, as he was quoted by Bloomberg.

Perhaps we will eventually arrive at similar place for a market-based approach to illegal immigration, one which accepts that fighting against titanic economic forces seeking to arbitrage wage differentials across the Rio Grande is pointless. Rather, migrants should pay the market value for the right to work in the US. In doing so, we can close the unsecured southwest border to illegal immigration while limiting the migrant headcount, create order in our own communities, and push migrant gross wages up to prevailing rates to protect domestic workers. The average American gets this. Perhaps at some point in the future, the dialogue on illegal immigration in professional circles will also turn to the traditional, proven remedies for ending black markets, including the black market in migrant labor. Conservatives' gradual acceptance of marijuana legalization shows that minds can be changed over time.

CBP Southwest Border Oct. 2020: Another surge on the way?

The covid pandemic has changed much in our societies.  Illegal immigration has largely been put on ice since March, both by myself and many other commentators.  Nevertheless, the world of illegal immigration has not stood still over the last six months, and it's time to start catching up.  

Consider border apprehensions: With the outbreak of the pandemic, southwest border apprehensions collapsed to only 16,000 in April, which would have been a four decade low but for April 2017, when the then new president, Donald Trump, intimidated Central Americans into postponing their journeys north.  However, then as now, April would mark the low point of the cycle and numbers would rise thereafter, this year, in linear fashion to last month.

September apprehensions were surprisingly high, 54,771, the highest for the month since 2006, during the Bush administration.  This is attributed variously to 1) continued pandemic-related lockdowns in Central America, forcing migrants north looking for work; 2) a greater propensity for catch-and-release by Border Patrol, encouraging more tries by migrants; and 3) attempts by migrants to seek medical treatment in the US.  

Be that as it may, apprehensions continue to march up, much like 2018.  The Great Migrant Surge of 2019 (GMS) began in July 2018 and accelerated into mid-2019.  Last month's apprehensions were well above the 2018 levels which would prove the harbinger of a subsequent explosion in illegal immigration.  One has to wonder whether we could see a repeat here.  Should President Trump lose the election, as many now believe, he will have little incentive to fix the border in the balance of his administration.  An incoming Joe Biden will be swamped with action items, not least a stimulus bill, should that fail to pass in the next two weeks.  As a result, the incoming administration may not be in a position to deal with illegal immigration until the spring.  In the interim, the border could devolve into yet another free-for-all.  For now, this is speculation, but anyone with a ruler can project a surge during the winter months.

One should note that the demographics of illegal immigration have returned to their traditional form.  Historically, the majority of border jumpers were single adults, mostly men.  During the GMS, families displaced individuals, as both court rulings and the Omnibus Bill of 2019 provided preferential treatment for adults traveling with children.  With the pandemic, however, families and unaccompanied minors have all but disappeared from the rolls of apprehended.  

The opportunity today is for those willing to risk illness and apprehension, and try over and over if detained by Border Patrol.  Once again, adult men traveling alone have an advantage.  And they are coming in record numbers.  Expect the trend to continue.

In contrast to apprehensions, inadmissibles -- those seeking to enter the US at official crossing points but lack proper documentation -- have fallen sharply, down two-thirds.  Traveling to the US during the covid pandemic is risky, and of course, the US-Mexico border remains closed to non-essential travel. 

Thus, illegal immigration today is largely limited to adults traveling alone, willing to risk not only apprehension but covid infection to reach the US.

Hawaii Covid Strategy Analyses

Fear of Flying and Hawaii Tourism (Sept. 3)

The Covid Exile Market (Sept. 4)

Is Quarantine Worth It? (Oct. 6)

Hawaii Needs a New Strategy - Part 1

“Just one more month.” That’s what everyone says, and it has been Hawaii’s de facto strategy for dealing with the coronavirus. If Hawaii clamps down for just one more month, the virus may be brought under control and restrictions eased. This was the hope in June, and July, and now August. Perhaps just one more month, and Hawaii can open in October.

Given that five months of quarantine have ended in an uncontrolled virus outbreak on Oahu, the time has arrived to ask whether a strategy based on short term hope has run its course. The coronavirus may very possibly remain a problem not only through September, but a year or two more. We are moving out of the short term and into the medium term. Rather than trying to beat the virus outright, Hawaii should consider approaches to reviving the economy under the assumption that the virus will remain an endemic problem indefinitely.

This may sound dire, but in fact, Hawaii is far better prepared to pull through than many may appreciate. To an extent, Hawaii will have to reinvent itself – as so many of us will in this dislocated era – but the adjustment is within the state’s capabilities.

As a Mainlander now two weeks post quarantine, I would like to offer my experience as a model for a new strategy from the visitor’s perspective.

The incoming tourist faces not only quarantine, but more dauntingly, the flight over. Back on the East Coast, we have established daily routines to protect us from the coronavirus, including face masks, social distancing and limiting interpersonal interactions outside the household. Most of us have confidence that we are relatively safe on a daily basis. We cannot, however, control the ten-hour flight to Hawaii, in an enclosed space filled with strangers – exactly the conditions the experts tell us to avoid. If Hawaii wants more visitors, reducing the actual and perceived risk of flying is a critical part of the equation.

When I flew from New York last month, until I landed at Kona, no one checked my temperature, required any kind of test, or asked me anything about my health beyond a few superficial questions. Incredibly, one can still fly around the US without anyone taking in any serious interest in whether one is contagious or not. I would have paid double for my ticket if I had confidence that everyone on my flights had passed a coronavirus test. Even if Hawaii does not lift the quarantine, requiring test results not more than a week old would go a long way to creating the confidence to fly. This would not necessarily address all the problems in multiple-stop flights, but it would at least cover the leg of the trip from the west coast to Hawaii.

In addition, the importance of new, less sophisticated virus tests cannot be overstated. These tests are cheap and quick, but they measure infectiousness rather than the illness. That is, they measure whether the test taker has a virus in an infectious state, not necessarily whether they have covid or not. For purposes of a flight, this would be a huge step forward. From the traveler’s perspective, the question is not whether someone potentially sick is on board, but rather whether they will transmit the disease to you during the flight. Rapid tests which filter out those in an infectious phase of the virus would enormously boost the confidence needed to fly to Hawaii.

Second, Hawaii should manage perceptions by preparing a regular dashboard of quarantine results. Because Hawaii – and only Hawaii – has had a blanket quarantine in place now for almost five months, it has data unique in the entire United States. Indeed, when you arrive at the airport in Hawaii, you are compelled to provide your cell number, which they call right on the spot to confirm that it is yours. In my case, quarantine control followed up twice, at the end of the first and second week. The State of Hawaii knows that I was symptom-free at the end of quarantine. This data can be used to determine the risk of flying. When I flew to Hawaii, I did not know whether my odds of contracting covid were 1 in 5, or 1 in 5000. I still don’t. If state government would share quarantine results on a regular basis, that would help potential visitors decide whether the flight is worth the risk. The state cannot promise to reduce the risk to incoming passengers to zero. But those same visitors cannot reduce their risk to zero at home, either. In the end, it comes down to taking reasonable, timely and cost-effective steps to reduce risk and helping potential visitors make informed choices at a time when all risk cannot be eliminated.

Rather than trying placing all bets on eliminating the virus completely, Hawaii should consider approaches to reviving the economy based on the assumption that covid will remain endemic indefinitely. Success will come from learning how to manage virus transmission risk while allowing the economy to function. For Hawaii, it is not a matter of victory, but of adaptation.

Hawaii Needs a New Strategy - Part 2

On the Mainland, we tend to think of Hawaii as an expensive destination suitable for a short vacation of a week or two. The state’s fourteen-day quarantine rule seeks to discourage just such tourism. And it has. Very few would come to Hawaii for two weeks of quarantine followed by a week or two of vacation. As a result, the island is all but free of its traditional tourists.

Notwithstanding, there is another market ready for the taking: covid exiles. For example, 420,000 New Yorkers have left the city for safer climes, most notably the Hamptons, Cape Cod and Maine. As an owner of a Cape Cod home, I can attest that the coronavirus has brought us an exceptionally good year, with the house rented continuously from July 4th through Labor Day. Indeed, various members of our family have occupied the house since March and will again after Labor Day. Ordinarily, Cape Cod has a short season of about ten weeks. This year, our house is likely to be occupied for ten months. And of course, this is good for the local economy, even if some restaurants remain closed and various businesses are operating at less than full capacity.

There is, of course, an even better place to go than the eastern seaboard: beautiful Hawaii. If one has to be in exile, do it in paradise. Covid exiles, however, are not Hawaii’s normal fare. To win the business, Hawaii needs to position the islands in a slightly different fashion.

The exiles will be the laptop crowd, professional couples and families in which one or both parents will spend a significant part of the day working by phone or on the computer. They will do the usual tourist things, but not in concentrated quantities. On the other hand, they will be around, potentially for the entire fall season. A key driver will be affordable housing. At least half of Hawaii’s rental offerings on Vrbo and Airbnb are empty. It is possible to negotiate landlords to rock bottom if one offers to stay for a more than one month, with a terrible day rate offset by continuous income. From personal experience, I can attest that many landlords still target high rates and short term rentals. They need to be encouraged to offer their properties long-term and publish compatible rates. Hawaii today does not have to be the high cost option, and landlords should do their share to make potential visitors aware of that fact. And exiles, particularly during quarantine, will need a higher level of service, first and foremost, help in buying groceries and other necessities. Landlords should offer ‘concierge services’ — and they can charge for it.

Ancillary fees should be reduced. Vrbo and Airbnb service fees and occupancy taxes add another 25% to rental costs. The state should work with the agencies to cap their fees at two weeks’ rental. If a weekly rental is, say, $1000, then the service fee is nearly $100. Cap the fee at $250 for a transaction, and that will encourage not only more visitors, but also longer-term visitors. Furthermore, the state’s 14.6% occupancy fee is steep. For now, it should be capped or reduced.

Finally, the state should charge for covid testing. One should be tested at least twice: one upon entry into Hawaii and once before release from quarantine. Both the state and its visitors have an interest in the results of a formal test. Do not view testing as an imposition. View it as peace of mind. Visitors ultimately have the same goal as the local community: to stay healthy. The state can charge for that.

Of course, the state could also lift quarantine. Although incoming risk is better managed with a covid test than quarantine – which can be avoided by the resourceful – the problems of covid transmission, not only in Hawaii but throughout the US, are principally behavioral. Young adults partying with alcohol can spread the virus fast and wide. The lifting of quarantine will tend to bias the market back towards short-term rentals and possibly towards behaviors more likely to create transmission risks.

If quarantine is to remain, the state should target those covid exiles who never thought to spend a month or a season in Hawaii. There are hundreds of thousands of them. Give them a bit of encouragement, and many will come to Hawaii. Let the message spread: Hawaii is looking for long-term renters and making it affordable to do so. Hidin’ out in Hawaii. Paradise is on sale for those willing to make a longer-term commitment.

Even under the best circumstances, the next many months will be difficult for Hawaii. However, by refocusing the tourist sector towards long-term visitors, Hawaii’s economy may find a way to endure, and perhaps even prosper.

Why E-Verify is Useless

An important aspect of any policy is compliance and enforcement.  Compliance means getting participants to act in the way we would like, ensuring they comply with a given program.  This notion is often confused with enforcement, which generally means punishing people for failing to comply. Border Patrol and ICE are all about enforcement, not compliance.

E-Verify is an example of bad policy, both with respect to compliance and enforcement.  

E-Verify comes into play when a migrant -- the seller of labor -- is about the enter into an agreement with an employer -- a buyer of labor.  By the time the issue of E-Verify rolls around, the migrant and employer in all likelihood have agreed to do business together.  However, the employer is legally obligated to use E-Verify before concluding the transaction.  Alas, the sole purpose of E-Verify is to prevent a transaction from occurring.  It provides no value to either party.  In the dating world, it would be the equivalent of 'E-Chaperone', whose purpose is preventing boys and girls from kissing the wrong partner.  One can imagine how popular that might be.  Not only do the parties have no incentive to comply, they have a powerful incentive not to comply.

As a result, compliance must be compelled with the threat of enforcement: punishing migrants and employers who try to work together illicitly.  How effective is this threat?

We have already established that the likelihood of an illegal alien being deported from the US interior, barring a criminal offense, is roughly 8 in 10,000 per year.  The risk to the migrant is minimal.  

As for the employers, according to the Transactional Records Access Clearinghouse of Syracuse University

Not only are few employers [of illegal immigrants] prosecuted, fewer who are convicted receive sentences that amount to more than token punishment. Prison sentences are rare. For example, of the 11 individuals the Justice Department reported as convicted during the most recent 12-month period [of April 2018 - March 2019], only 3 were sentenced to serve prison time.

This can be projected onto the 570,000 employers who received 'no match' letters from Social Security and who may be presumed to employ the undocumented.  Another several hundred thousand companies probably employ the undocumented with no paperwork at all.  Therefore, the odds of enforcement against an employer in any given year is probably on the order of one per hundred thousand.  

As a practical matter, both the employer and the migrant face vanishingly small odds of enforcement for flouting employee verification in any given year.  

Thus, E-Verify is the very embodiment of bad design: a compliance procedure issued in direct opposition to the interests of the involved parties, accompanied by virtually no meaningful enforcement.

One cannot help but wonder how this state of affairs came to be.  Either its authors were stunningly naive, or baldly cynical.  It is, of course, the latter.  Black markets inevitably generate hypocrisy, because they pit our self interest against our social interest.  All of us want a properly documented society and controlled border crossings.  At the same time, the employer needs an employee, the migrant needs a job, and all of us need cheap food and housing which those very migrants will build and subsequently clean and tend.  The system is therefore the result of just this tension: the appearance of interior enforcement without the substance.  

This may infuriate conservatives.  The key, however, is to accept that employers and employees will come together as a matter of course, and that they produce goods and services of value to the rest of us.  These are inherently legitimate activities.  At the same time, society has a right to control its borders.  Therefore, it is a matter of finding a workable balance rather than taking extreme positions on either end of the spectrum.

The most important feature of a migrant labor system is ensuring that the buyer and seller have an interest in complying with regulations.  We would describe this as a 'pull' system (and E-Verify as a 'push' system).  No one has forced you to buy a smartphone, but if you are reading this, you almost certainly have one.  You did this because the money you pay for the phone and associated service are worth more than its cost to you. 

If buyers and sellers have an incentive to work within the system, then compliance will be high without enforcement.  This is and should be a principal objective of migrant policy.  And it is exactly what market-based visas do.

The cost of rejecting amnesty in a pandemic

​Conservatives resist amnesty for the undocumented for fear it may stimulate further illegal immigration and because it rewards illegal entry into the US.

A market-based visa (MBV) system would address the former concern by closing the unsecured southwest border to illegal immigration, albeit at somewhat higher migrant numbers overall.  At the same time, keeping migrant numbers within conservative tolerances implies that MBVs would carry a substantial price, $2.50 - $3.50 / work hour, or up to $7,200 / year / visa for an unskilled Mexican laborer.  

Given the high visa price, incoming migrants could have an incentive to allow their legal status to lapse and join the undocumented, alongside whom they would be working daily as is.  This in turn could be prevented by materially draining the domestic market of undocumented labor -- by providing legal status to undocumented residents of the country.  

Conservatives lump any legal status into the category of 'amnesty', but an MBV program would provide nothing more than an H2 (in our case, H2-MR) visa which could be voided by the government annually at renewal, should policy-makers so decide.  The H2-MR does not provide permanent residency, access to social welfare programs, or the right to vote.  It is just the right to reside in the US legally and work without fear of arrest or deportation.  And the US government could charge for it, by our estimates $1,200 / adult immigrant / year, about $6 bn in free money for the Federal government annually.  

Right now, such a program would be incredibly helpful.  

The White House and Congress are near to agreeing terms on the coronavirus stimulus (bridging) package.  Samuel Hammond of the Niskanen Center reports that the package should cover undocumented immigrants with US-born children or those with US Social Security numbers.  This is helpful (although rewarding migrants for using fake Social Security numbers is troubling from the conservative perspective).  Still, even with these provisions, several million undocumented immigrants may remain uncovered.   

And that could matter.  Given that most of undocumented live hand-to-mouth, they cannot afford to remain unemployed for any stretch of time.  As a result, they are likely to continue to work when they feel ill, and are likely to return to work while they are still contagious.  And they are heavily involved in ensuring our food supply, from picking fruits and vegetables, to processing poultry, pork and beef, and serving dairy farms.  Just one or two adverse media headlines about sick migrants preparing raw food could make for real public panic over food safety.

And this highlights the weakness of the anti-amnesty case.  Undocumented immigrants already enjoy amnesty as a practical matter.  The odds of ICE deporting an illegal immigrant who did not otherwise commit a crime was 8 in 10,000 last year.  That is amnesty in all but name.  

But failing to give it a name means that the government has minimal control over the undocumenteds.  How does one distribute official government support to people who are not officially in the US?  How does a migrant prove their legal status if they have none?  On what basis does the government hand out money beyond 'scout's honor'?  Without a massive invitation to fraud, it's hard to do.

And that means, for the moment, we are running the risk of a material humanitarian crisis among the undocumented coupled with a potential risk to critical parts of our supply chain.  This is a bad place to be, and most decidedly not conservative.  It is a danger to the group and its members.

If we had a market-based system, the currently undocumented population and incoming migrants would be enrolled in the most advanced system in the world, allowing us to monitor, communicate and transact with them in real time.  The proposed MBV system is predicated on smartphones and authorized bank accounts (which the government could debit for visa fees).  This system would enable real time monitoring of the respective population's health, employment status, and financial resources.  It would also allow direct deposit into authorized accounts already known and visible to the US government -- a quick, efficient and documented way to get money into the hands of those who need it.  We would have better information about and control over H2-M and H2-MR visa holders than literally any other segment of society, and this would greatly reduce associated risk and broaden policy options.

For the moment, we need to make sure we are addressing the undocumented population -- both for their safety and ours.  In the context of pandemic, invisibility equals risk.  In the medium term, however, we need to consider that a blanket rejection of any sort of legal status for the undocumented is frankly inconsistent with conservative values -- if we are unwilling to deport the undocumented as a practical matter.  A hard line against 'amnesty' is a de facto endorsement of lawlessness and puts all of us at risk.

Impact of MBVs on Airline Revenues

Impact of MBVs on Airline Revenues