SPEAKERS CONTENTS INSERTS Tables
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58–001
1999
IMMIGRATION AND AMERICA'S WORKFORCE FOR THE 21ST CENTURY
HEARING
BEFORE THE
SUBCOMMITTEE ON
IMMIGRATION AND CLAIMS
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
APRIL 21, 1998
Serial No. 93
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR SMITH, Texas
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB INGLIS, South Carolina
BOB GOODLATTE, Virginia
STEPHEN E. BUYER, Indiana
ED BRYANT, Tennessee
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
LINDSEY O. GRAHAM, South Carolina
MARY BONO, California
JOHN CONYERS, Jr., Michigan
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BARNEY FRANK, Massachusetts
CHARLES E. SCHUMER, New York
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
THOMAS E. MOONEY, Chief of Staff-General Counsel
JULIAN EPSTEIN, Minority Staff Director
Subcommittee on Immigration and Claims
LAMAR S. SMITH, Texas, Chairman
ELTON GALLEGLY, California
WILLIAM L. JENKINS, Tennessee
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
ED BRYANT, Tennessee
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JAMES E. ROGAN, California
MELVIN L. WATT, North Carolina
CHARLES E. SCHUMER, New York
HOWARD L. BERMAN, California
ZOE LOFGREN, California
ROBERT WEXLER, Florida
CORDIA A. STROM, Chief Counsel
EDWARD R. GRANT, Counsel
GEORGE FISHMAN, Counsel
MARTINA HONE, Minority Counsel
C O N T E N T S
HEARING DATE
April 21, 1998
OPENING STATEMENT
Smith, Hon. Lamar, a Representative in Congress from the State of Texas, and chairman, Subcommittee on Immigration and Claims
WITNESSES
Borjas, George J., John F. Kennedy School of Government, Harvard University
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Fraser, John R., Acting Administrator, Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor
Hatano, Daryl, Vice President for International Trade & Government Affairs, Semiconductor Industry Association
Joyner, Carlotta C., Director, Education and Employment Issues, Health, Education, and Human Services Division, U.S. General Accounting Office
Lariviere, Richard W., Associate Vice President of International Programs, University of Texas at Austin
Matloff, Norman, Department of Computer Science, University of California at Davis
Miller, Harris N., President, Information Technology Association of America
Payson, William S., President, The Senior Staff
Reynolds, Alan, Director of Economic Research, Hudson Institute
Smith, David A., Director of Policy, AFL–CIO
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Sullivan, Daniel L., Senior Vice President for Human Resources, QUALCOMM, Incorporated
Vernez, Georges, Director, Center for Research on Immigration Policy, RAND
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Borjas, George J., John F. Kennedy School of Government, Harvard University: Prepared statement
Fraser, John R., Acting Administrator, Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor: Prepared statement
Hatano, Daryl, Vice President for International Trade & Government Affairs, Semiconductor Industry Association: Prepared statement
The Institute of Electrical and Electronics Engineers, United States of America: Prepared statement
Joyner, Carlotta C., Director, Education and Employment Issues, Health, Education, and Human Services Division, U.S. General Accounting Office: Prepared statement
Klink, Hon. Ron, a Representative in Congress from the State of Pennsylvania: Prepared statement
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Lariviere, Richard W., Associate Vice President of International Programs, University of Texas at Austin: Prepared statement
Matloff, Norman, Department of Computer Science, University of California at Davis: Prepared statement
Miller, Harris N., President, Information Technology Association of America: Prepared statement
Payson, William S., President, The Senior Staff: Prepared statement
Reynolds, Alan, Director of Economic Research, Hudson Institute: Prepared statement
Rogan, Hon. James, a Representative in Congress from the State of California: Prepared statement
San Francisco Examiner
Smith, David A., Director of Policy, AFL–CIO: Prepared statement
Smith, Hon. Lamar, a Representative in Congress from the State of Texas, and chairman, Subcommittee on Immigration and Claims: Prepared statement
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Sullivan, Daniel L., Senior Vice President for Human Resources, QUALCOMM, Incorporated: Prepared statement
Vernez, Georges, Director, Center for Research on Immigration Policy, RAND: Prepared statement
APPENDIXES
Appendix 1.—Prepared statement from American Electronics Association
Appendix 2.—Prepared statement from The American Council on International Personnel, Inc.
Appendix 3.—Prepared statement from American Engineering Association, Inc.
Appendix 4.—Prepared statement from Federation for American Immigration Reform
Appendix 5.—Prepared statement from The National Association of Manufacturers
Appendix 6.—Prepared statement from The American Immigration Lawyers Association
Appendix 7.—Prepared statement from The National Technical Services Association
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IMMIGRATION AND AMERICA'S WORKFORCE FOR THE 21ST CENTURY
TUESDAY, APRIL 21, 1998
House of Representatives,
Subcommittee on Immigration
and Claims,
Committee on the Judiciary,
Washington, DC.
The subcommittee met, pursuant to call, at 9:36 a.m., in Room 2237, Rayburn House Office Building, Hon. Lamar S. Smith [chairman of the subcommittee] presiding.
Present: Representatives Lamar S. Smith, Edward A. Pease, James E. Rogan, Melvin L. Watt, and Zoe Lofgren.
Staff Present: George Fishman, Counsel; Judy Knott, Staff Assistant; and Martina Hone, Minority Counsel.
OPENING STATEMENT OF CHAIRMAN SMITH
Mr. SMITH OF TEXAS. The Subcommittee on Immigration and Claims will come to order.
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Before we go to opening statements and then hear from our first panel, I do have some housekeeping comments to make that go to a number of areas. We are going to proceed a little bit out of order this morning, not that there was any set order to begin with, but for a number of reasons, we are going to have our third panel first, and then the rest of the panels will be in the original order. Which is to say that after the third panel, we will hear from the administration, and then we will hear from the various groups about H–1Bs, so the third panel will be up first.
Because of the number of witnesses we have today and because of the need of a number of individuals to catch planes and so forth, I am going to have to be strict about enforcing the 5-minute rule, perhaps stricter than I have been before. We will try to finish up by noon today, if at all possible.
Also, in the way of announcements, let me say that we are expecting additional members who are now in transit, to arrive shortly, including our Ranking Member, Mel Watt. Other members besides Mr. Watt are literally taking planes from their districts to try to arrive this morning. I know Ed Pease is coming in from Indiana momentarily, and Elton Gallegly and Zoe Lofgren and others will arrive. But because of the various time commitments that our witnesses have, we are going to go on and get off to an early start.
Let me ask the members of the third panel if they will come forward and take their seats, and then we will have opening statements. The third panel, I think they are all here. Good. I will introduce them shortly. But first I would like to make an opening statement and recognize other members as well.
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Today's hearing on immigration and the American work force for the 21st century will be one of the most important this subcommittee will hold in this Congress. Immigration is having an ever-increasing impact on America's work force. Since two-thirds of America's future population growth will be caused by immigration, it will continue to transform our work force, for the better or for the worse, into the new century.
Most people are content to sit back and enjoy the ride of our current economy. But driving carries responsibilities such as keeping the tank full of gas and watching out for hazards.
According to the recent work of a growing number of respected researchers, several of whom are here today, our economy is already hitting some potholes, especially for those who lack a high school education. And our economic engine will sputter without a steady supply of ever more highly educated workers. This research is like a warning light on the dashboard. We have time to get to a service station, but we had better not wait too long.
Ninety percent of all future jobs will require a high school diploma as a minimum qualification. The Hudson Institute in its publication, ''Work Force 2020,'' reports that, ''Unless the education and skill levels of the American work force are upgraded, America's productivity and prosperity will grow less quickly.''
It will be tough going for low-skilled Americans. It will also be tough going for American businesses if sufficient high school workers cannot be found.
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A rational immigration policy would not put obstacles in the path of low-skilled Americans and American businesses. A rational immigration policy would not flood the job market with low-skilled immigrants to compete for the comparatively stagnant number of low-skilled jobs while depriving the economy of the skilled immigrants it needs.
Eighty-seven percent of immigrants admitted in 1996 were admitted without regard to skills or education. A disturbing 42 percent of family-sponsored immigrants have less than a high school education.
What is the result of our skewed admission policy? The National Research Council in its report, ''The New Americans,'' finds 44 percent of the decline in the relative wage of high school dropouts between 1980 and 1994 can be attributed to the large influx of low-skilled immigrants during that period. As the Commission on Immigration Reform noted, ''Unskilled foreign workers present the greatest potential for adverse impact because they are competing with some of the most vulnerable of American workers.''
It is not surprising that the Hudson Institute states in ''Work Force 2020,'' that, ''U.S. immigration policy serves primarily to increase the number of U.S. residents who lack even a high school degree. America must stop recruiting workers for jobs that do not exist or exist only at the lowest wages.''
It is not surprising that the RAND Corporation in its recent report, ''Immigration in a Changing Economy: California's Experience,'' states the widening gap between the number of jobs available for noncollege-educated workers and the increasing number of new noncollege-educated immigrants signals growing competition for jobs and, hence, further decline in relative earnings at the low end of the labor market. RAND concludes that, ''There appears to be a growing divergence between current trends in the State's economy and immigration policies that are producing a steady inflow of poorly-educated immigrants. Specifically, we recommend that current policies be modified to place greater emphasis on the educational levels of new immigrants.''
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One prime example of the need for a more educated work force is in the information technology industry. The Department of Labor reports that this will be the fastest-growing industry over the next 10 years and that the three fastest-growing occupations will be information technology occupations.
At the same time, the Information Technology Association of America reports that there are already 346,000 vacancies in information technology positions.
Silicon Valley warns us that unless the 65,000 cap on H–1B visas for highly skilled workers is dramatically increased, the American economy will suffer.
A number of witnesses will present us with evidence this morning that there is a growing level of unmet demand for information technology jobs. The question this subcommittee needs to address is to what extent the demand should be met through an increase in the quota for H–1B workers.
Most likely we will need some increase in the cap for at least a few years while we let the law of supply and demand take effect. Presumably, plentiful jobs and increasing salaries will encourage more American college students to study technology. I believe this is already happening. Also, we may need some increase in the quota for at least a few years while America's primary and secondary schools emphasize the teaching of math and science. But the immediate demand can also be alleviated by the retraining of American workers, both information technology workers who need skill upgrades and workers new to the field. And we need to make sure that the information technology industry does not use foreign workers to displace American workers.
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By taking advantage of the expertise of today's witnesses, we will be able to decide as a subcommittee how much of the present demand for information technology workers needs to be met through the increased importation of workers on H–1B visas.
That concludes my opening statement. We will go to the gentleman from California, Mr. Rogan, for an opening statement.
[The prepared statement of Mr. Smith follows:]
PREPARED STATEMENT OF HON. LAMAR SMITH, CHAIRMAN
Today's hearing on Immigration and the American Workforce for the 21st Century will be one of the most important this Subcommittee will hold in the 105th Congress. Immigration is having an ever-increasing impact on America's workforce. Since two-thirds of America's future population growth will be caused by immigration, it will continue to transform our workforce—for the better or the worse—into a new century.
Most people are content to sit back and enjoy the ride of our current economy. But driving carries responsibilities such as keeping the tank full of gas and watching out for hazards.
According to the recent work of a growing number of respected researchers, several of whom are here today, our economy is already hitting some potholes, especially for those who lack a high school education. And our economic engine will sputter without a steady supply of every-more-highly educated workers.
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This research is like a warning light on the dashboard. We have time to get to a service station. But we had better not wait too long.
By 2006, the Labor Department projects that there will be over 150 million jobs in America, almost 19 million more than there were in 1996. America will indeed be a land of opportunity. But the opportunity won't be for everyone. Ninety-two percent of these jobs will require a high school diploma as a minimum qualification. The Hudson Institute, in its publication Workforce 2020, reports that ''[j]obs that are disappearing require much lower levels of skill than jobs that are being created. Unless the education and skill levels of the American workforce are upgraded, America's productivity and prosperity will grow less quickly. . . . '' It will be tough going for low-skilled Americans. It will also be tough going for American business if sufficient high-skilled workers cannot be found.
A rationale immigration policy would not put obstacles in the path of low-skilled Americans and American businesses. A rationale immigration policy would not flood the job market with low-skilled immigrants to compete for the comparatively stagnant number of low-skilled jobs, while depriving the economy of the skilled immigrants it needs.
Eighty-seven percent immigrants in 1996 were admitted without regard to skill or education. A disturbing 42% of family-sponsored immigrants have less than a high-school education.
What is the result of our skewed admission policy? The National Research Council in its report The New Americans finds that 44% of the decline in the relative wage of high school dropouts between 1980 and 1994 can be attributed to the large influx of low-skilled immigrants during that period.
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As the Commission on Immigration Reform noted, ''unskilled foreign workers present the greatest potential for adverse impact because they are competing with some of the most vulnerable of American workers.''
It is not surprising that the Hudson Institute states in Workforce 2020 that ''U.S. firms should press for enlightened immigration policies that give preference to skilled workers. . . . Instead of providing key industries with large numbers of highly educated immigrants, however, U.S. immigration policy serves primarily to increase the number of U.S. residents who lack even a high-school degree. America must stop recruiting workers for jobs that do not exist or exist only at the lowest wages.''
It is not surprising that the RAND Corporation, in its recent report Immigration in a Changing Economy: California's Experience, states that ''th[e] widening gap between the number of jobs available for non-college-educated workers and the increasing number of new non-college-educated immigrants signals growing competition for jobs and, hence, further decline in relative earnings at the low end of the labor market.'' RAND concludes that ''there appears to be a growing divergence between current trends in the state's economy and the immigration policies that are producing a steady inflow of poorly educated immigrants. . . . Specifically, we recommend that current policies be modified . . . to place greater emphasis on the educational levels of new immigrants.''
One prime example of the need for a more educated workforce is in the information technology industry. The Department of Labor reports that this will be the fastest growing industry over the next ten years and that the three fastest growing occupations will be information technology occupations.
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At the same time, the Information Technology Association of America reports that there are already 346,000 vacancies in information technology positions. Silicon Valley warns us that unless the 65,000 cap on ''H–1B'' visas for high-skilled workers is dramatically increased, the American economy will suffer.
A number of witnesses will present us with evidence this morning that there is a growing level of unmet demand for information technology jobs. The question this Subcommittee needs to address is to what extent the demand should be met through an increase in the quota for H–1B workers.
Most likely we will need some increase in the quota for at least a few years while we let the law of supply and demand take effect. Presumably, plentiful jobs and increasing salaries will encourage more American college students to study information technology. I believe this is already happening.
Also, we may need some increase in the quota for at least a few years while America's primary and secondary schools emphasize the teaching of math and science.
But the immediate demand may be alleviated by the retraining of American workers—both information technology workers who need skill upgrades and workers new to the field. And we need to make sure that the information technology industry does not use foreign workers to displace American workers.
By taking advantage of the expertise of today's witnesses, we will be able to decide as a Subcommittee how much of the present demand for information technology workers needs to be met through the increased importation of workers on H–1B visas.
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Mr. ROGAN. Mr. Chairman, thank you, and thank you for calling this hearing. Because of the number of witnesses we have before us today, rather than present my opening statement at this time, I ask unanimous consent that both my opening statement and a newspaper article written by our colleague from California, Mr. Dreier, be included as part of the record.
Mr. SMITH OF TEXAS. Without objection, both your opening statement and the article will be made a part of the record.
[The information referred to follows:]
PREPARED STATEMENT OF HON. JAMES ROGAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Thank you Mr. Chairman. To begin I would like to thank you for your leadership in authoring this important legislation and calling today's hearing. As the committee knows, H.R. 3736, the ''Workforce Improvement and Protection Act of 1998'' will raise the cap on the number of H–1b employment visas issued to highly skilled foreign professionals hired by American businesses. High technology businesses and research universities vitally need this program to recruit foreign talent, especially where an insufficient number of highly skilled Americans are available to fill current job openings. One recent report states that the computer industry has 340,000 unfilled jobs, while American universities produce only 130,000 computer science graduates a year. In order to compete globally, American businesses and universities need the ability to freely hire foreign talent to fill some of these positions. I understand that the current cap of 65,000 H–1b visas will be reached very soon and when that occurs the INS will no longer issue H–1b visas for the remainder of this year.
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Raising the cap on H–1b visas will give American businesses the ability to expand and compete globally. I support raising the present cap from 65,000 to 95,000 for 1998, and to 115,000 by the year 2000.
H.R. 3736 also directs tough enforcement action where it is needed—against those who abuse the program at the expense of American workers. Under the bill, employers who willfully violate the H–1b program face fines that are five times higher than current law. Furthermore, it authorizes additional penalties up to $25,000 on top of those penalties. It also permits the Department of Labor to engage in spot inspections of known violators for a period of up to five years. These important enforcement provisions are necessary and appropriate.
However, I want to bring to the committees attention my serious concerns about other provisions in the bill. What it purports to give with one hand it takes away with the other by imposing a new regulatory structure on businesses that hire H–1b employees. These new requirements may render the program unusable to a large number of American businesses.
H.R. 3736 in its present form increases the Labor Department's authority to initiate investigations on its own. Currently, a complaint surrounding any business is required to commence a Department of Labor investigation. Giving the Labor Department free reign absent any complaint is unwise and potentially unworkable because it would discourage businesses from employing H–1b professionals. Business groups oppose this provision because it would subject those with a higher percentage of H–1b professionals to significantly increased investigations and costs without requiring the Labor Department to implement clearer enforcement guidelines. Further, the Labor Department has a history of not promulgating clear and consistent regulations in this area. In fact, eight years after Congress instituted Labor Department involvement in the B–1b program, there are still no final regulations.
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Even more troubling, this bill adds two new regulatory requirements in the form of layoff and recruitment attestation clauses. At first blush, these attestation clauses appear to be reasonable safeguards that provide protection for American workers so they will not lose their jobs to H–1b employees. In reality, these new requirements will add onerous and unnecessary burdens on American businesses. A vast array of employers oppose the layoff attestation because it would place them under the scrutiny of the Department of Labor every time they have to make decisions regarding their personnel. This alone would effectively eliminate the use of H–1bs by many employers.
These attestation provisions require much more than merely ''checking off a box.'' To ensure compliance, the government would be allowed to micro-manage the human resource policies of American businesses. These additional attestations would seriously harm American employers' ability to recruit the best-qualified people and go after the talent necessary to maintain American superiority against foreign competitors, and could force U.S. companies to move jobs overseas where high tech workers are available.
Current law already contains safeguards to protect American workers. Presently all H–1b employers must attest that:
they are paying the foreign professional a wage that is the higher of what is typically paid in the region for that type of work (''prevailing wage''), or what the employer pays its existing employees with similar experience and duties;
the working conditions of its American workers are not adversely affected;
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there is no strike/lockout at the worksite, or in the occupation for which the foreign professional is sought;
it has posted notice to current employees that it is seeking to hire an H–1b professional.
H.R. 3736 would properly increase the cap on H–1b professionals. However, the added attestations and Department of Labor-initiated investigation provisions will not benefit American businesses and universities. It will not protect the American workforce; it will hurt the global competitiveness of American employers. I am very concerned that in the end these added regulations may cost American jobs.
Thank you Mr. Chairman.
96
58001d.eps
58001e.eps
Mr. ROGAN. Thank you.
Mr. SMITH OF TEXAS. Let me say before I introduce the first panel, I want to thank the members who are here. Mr. Pease, I mentioned in your absence a moment ago, you had taken a flight earlier than expected, just to be here today from Indiana. We appreciate that. Mr. Rogan had to come early from California, so I guess you get the record for the farthest distance traveled at some inconvenience as well.
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Mr. ROGAN. But the weather is nicer here today.
Mr. SMITH OF TEXAS. Good.
Let me introduce our panelists and we will get to their testimony. Dr. George Borjas, JFK School of Government at Harvard University; Dr. Georges Vernez, the RAND Corporation; and Alan Reynolds, the Hudson Institute.
You all know that I have a particular interest in the findings that you have made in various areas. And I appreciate you being here and also the contribution you will be making today to the debate as to what we do about our future work force of America.
And let me say by introducing you all, also, that later on we will be hearing about H–1B high-tech workers. I think we need to emphasize that the H–1Bs are just a tiny sliver of our overall work force numbers. What you all will be talking about is the big picture, which of course includes the tiny sliver, but goes to the more important question of what are the future work force needs of America; what is the match or mismatch between our immigration policy and the needs of the work force.
And when I say the needs of the work force, of course, I am also talking about the needs of the economy, because if we are going to continue to have a growing economy, we are going to need to have a work force that I believe is more highly trained and more highly educated than the one we have today. So welcome to you all.
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Mr. SMITH OF TEXAS. Dr. Borjas, we will begin with you. We won't say how many times you have been here, but welcome back.
STATEMENT OF GEORGE J. BORJAS, JOHN F. KENNEDY SCHOOL OF GOVERNMENT, HARVARD UNIVERSITY
Mr. BORJAS. Thank you very much, Mr. Chairman. And thank you very much to the other members of the committee for having me back and for inviting me to talk a little bit about the latest research and economics, about economic impact and immigration on the United States.
As we all know, the U.S. is now on the verge of yet another historic debate over immigration policy. Up to this point, the debate has focused primarily on illegal immigration and on welfare benefits received by immigrants, and as you all know, the discussions have led Congress to adopt several measures to address those problems.
I believe in the next few years, the immigration debate will likely shift toward a larger, much bigger picture of the character and consequence of legal immigration in the U.S. One question that has historically driven the debate over legal immigration is question of what is economic impact on native workers of more immigrants. That is what I want to talk about today.
Economic theory suggests that the effect of immigration on native workers depends critically on the distribution of skills between immigrants and natives. If the skills of immigrants were similar to those of natives—in other words if, roughly speaking, the number of skilled immigrants was, roughly speaking, equal proportionately to the number of skilled natives and the number of unskilled immigrants was proportionately equal to the number of unskilled natives, then immigration would have little impact on the relative wage of skilled and unskilled workers on the economy.
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If, on the other hand, immigrants were more skilled than natives, we would expect the earnings of more skilled natives to fall because there would be an increase in supply of skilled natives and there would be a shift in income distribution toward the unskilled.
If, conversely, like has been the case over the last few years, immigrants were less skilled than natives, then there would be an increasing supply of less skilled workers overall and wages of less skilled workers would be expected to fall and the distribution of income would shift toward the more skilled.
The point is that any analysis of economic impact of immigration on labor market conditions will critically depend on a comparison of the skills of immigrants and the skills of native workers.
In data that is included in my written report, there is evidence that the skilled composition over the last 20 or 30 years of immigrants has been concentrated mostly toward the less skilled. In other words, there has been a dramatic shift toward an increase in less skilled immigration over the last two or three decades and this shift in the distribution of skills is really responsible for what we are talking about later, which is the fact that there has been a pretty sizable impact on the wages of less skilled workers and an adverse impact on the wages of less skilled workers in the United States.
Now, how do economists try to measure that impact? Historically, immigrants have clustered in a very small number of States in the U.S. In fact, in 1960, 60 percent of immigrants lived in 1 of 6 states: California, New York, Texas, Florida, New Jersey, and Illinois. By 1990, the clustering has increased, so that 75 percent of immigrants live in those six States.
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This geographic clustering is the way that economists tend to exploit the data to address the question of whether immigrants affect native workers in the labor market. In particular, the hypotheses goes something like this. Suppose that immigrants really cluster in California to a large extent. One would expect the natives in California will be somewhat better off or worse off, depending on the way things work, than natives in States where immigrants don't reside.
It is that cross-sectional or that spatial difference where immigrants cluster that really drives the empirical analysis of what kind of impact immigrants are having on native workers. Practically all the literature searches people conduct, trying to measure the impact of immigration on native earnings, really is a comparison of native conditions.
In particular, cities like San Diego, for example, where there are many immigrants, versus cities like Pittsburgh, where there are very few immigrants. And the assumption being if immigration is really adversely affecting native workers, one would expect the natives in San Diego are somewhat worse off than natives in Pittsburgh, and it is that comparison that motivates practically almost every empirical analysis in economics that looks at this problem.
The typical study in economics tends to find that, in fact, natives in San Diego are slightly worse off than natives in Pittsburgh. But the correlation is so weak as to be almost trivial. From that very weak negative correlation, most economists will tend to jump to the conclusion that because natives in San Diego are only slightly worse off than natives in Pittsburgh, that that must mean that immigration doesn't really have that big of an impact on the labor market.
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But I want to argue today that there are two major flaws with that conclusion and that there is a better way of doing things that is sort of the new wave in economic literature. One crucial flaw with that conclusion is the fact immigrants, even though they cluster in six States, do not cluster randomly across the U.S. They don't choose these States just out of pure draw of some random distribution.
Suppose, for example, that conditions in California tend to be quite good compared to the rest of the economy; because immigrants tends to cluster in California, that will tend to build a positive correlation between economics conditions and immigration, and it is just because of the fact immigrants happen to cluster in an unrandom way.
A more serious problem is the fact that immigrants, when they enter a State, are not acting in a vacuum, and by that I mean natives will not sit idly by and watch their opportunities evaporate. Suppose, in particular, immigrants come to a city like San Diego and that they do have an adverse impact on the earnings of natives in San Diego. Natives in San Diego will not just stand by and watch that happen; there will be several responses. Number one, natives who are in San Diego now will now have a bigger incentive to move out of San Diego. By moving out of San Diego, what that means is that whatever supply increase happened in San Diego will now be diffused throughout the whole country, and therefore some of the economic impact of immigration will now also happen in Pittsburgh, where natives will move.
Another way in which natives respond is that natives who are thinking of moving to San Diego will now move someplace else instead, and again that tends to diffuse the economic impact of immigration from San Diego to the rest of the economy.
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And last but not least, people who are thinking of investing money and opening up firms will look at opportunities in various cities, and when they see immigrants flooding San Diego and lowering the unskilled wage there, if one is thinking about opening up a factory that uses those workers, then one will the capital flows to compensate also; and again the capital flows will leave Detroit, for example, and move to San Diego, and again equalize economic opportunities across the whole country.
The point is that negative responses will tend to diffuse the impact of immigration away from the city most affected by immigration toward the whole economy. The key point is that because of that, one cannot look at a particular labor market like San Diego, for example, or California, to conclude anything about the economic impact of immigration.
In the written testimony that I provided to the committee, there is some evidence that in fact there are these kinds of flows going on in the economy and perhaps the clearest evidence of a potential relationship between native migration flows within the U.S. and immigration is what has happened to California's population in the last 30, 40, 50 years.
Prior to 1970—let me rephrase that. California has been growing very rapidly in terms of population throughout the whole century. Prior to 1970, the number of natives living in California was growing quite rapidly, and if I just read a couple numbers to you, I hate to flood you with numbers but these numbers are sort of interesting.
Prior to 1970—let me rephrase that again. 6.9 percent of the native population in the U.S. was living in California in 1950. By 1970, almost 10 percent of natives were living in California—of the entire U.S., was living in California. It turns that out even though California's population has grown continuously since then, the fraction of natives living in California has remained steady at about 10 percent since 1970, yet California's population has grown continuously since then.
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In 1970, 10.2 percent of the population lived in California. By 1990, 12.4 percent lived in California. One way of interpreting the data is the following. Suppose we go back in time to 1970 and I ask you to predict California's share of the population today. Even though you know nothing about the fact millions of immigrants will be moving to California between 1970 and 1998, you could actually do a very good job of predicting California's population today from pre-1970 trends.
One way of interpreting that is the trend essentially continued but the growth in population was essentially replaced on a one-to-one basis by immigrants moving into California.
Now, there are two ways of interpreting that empirical fact. One is for any immigrant that came into California, one native did not move there that would have moved there given the previous trend.
The other possibility is for reasons we don't understand, California's population growth would have stopped in 1970, and had it not been for immigration, California today would be a much smaller State.
We clearly cannot know which counter fact of history is correct, we only know what actually happened. But preexisting trends in California clearly indicate very rapid population growth, which essentially stopped the minute that the immigrants——
Mr. SMITH OF TEXAS. Dr. Borjas, that has been a very quick 5 minutes, I agree. I would like to hear from you myself for hours.
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Mr. BORJAS. Let me conclude.
Mr. SMITH OF TEXAS. Yes, move on. And we will have some questions for you.
Mr. BORJAS. Just 30 more seconds.
What that means is we cannot really look at labor markets to measure the economic impact of immigration. We have to look at the national economy. And recent research that does that shows that because the supply of immigrants tends to disproportionately increase the supply of less skilled workers, immigration has had a very sizable impact on the skilled and unskilled wage. And, in particular, immigration over the 1980 through 1995 period can account for almost half of the decrease in the relative wage of high school dropouts in this country. Thank you.
Mr. SMITH OF TEXAS. Thank you, Dr. Borjas.
[The prepared statement of Mr. Borjas follows:]
PREPARED STATEMENT OF GEORGE J. BORJAS(see footnote 1), John F. Kennedy School of Government, Harvard University
The United States is on the verge of yet another historic debate over immigration policy. Up to this point, the debate has focused primarily on illegal immigration or on welfare benefits received by immigrants—and these discussions have led Congress to tighten restrictions on illegal aliens and to change the eligibility requirements for welfare use by non-citizens.
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In the next few years, the debate will likely shift towards the larger and much more important issue of the character and consequences of legal immigration. There have been two major shifts in legal immigration policy in this century. In 1924, the United States began to limit the number of immigrants admitted and established the national-origins quota system, a visa-allocation scheme that awarded entry visas mainly on the basis of national origin and that favored Germany and the United Kingdom. This system was repealed in 1965, and family reunification became the central goal of immigration policy, with entry visas being awarded mainly to applicants who have relatives already residing in the United States.
The social, demographic, and economic changes initiated by the 1965 legislation have been truly historic. Immigration began to surge soon after the enactment of the 1965 Amendments, reversing a long downward trend in the foreign-born share of the U.S. population. As recently as the 1950s, only about 250 thousand immigrants entered the country annually; by the 1990s, the United States was admitting about 1 million legal immigrants annually, and an estimated 300 thousand aliens entered and stayed in the country illegally. In 1970, the foreign-born share of the U.S. population was 4.8 percent. By 1996, the foreign-born share had increased to 9.3 percent.
Moreover, because of the decline in the number of children borne by American women, immigration now accounts for nearly 40 percent of the growth in population, as compared to about 50 percent at the beginning of the 20th Century. At least one of every three new workers who will enter the U.S. labor market during the 1990s will be an immigrant. By this yardstick, immigrants play a crucial role in determining demographic and economic trends in the United States.
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The 1965 legislation also led to a momentous shift in the ethnic composition of the population. Although persons of European origin dominated the immigrant flow since the country's founding until the 1950's, only about 10 percent of the persons admitted in the 1980's were of European origin. It is now estimated that non-Hispanic whites may form a minority of the population by the year 2050.
The effect of immigration on native labor depends critically on the distribution of skills between immigrants and natives. If the skill distribution of immigrants matched that of natives, immigration would not affect the relative supply of skills and thus would have little, if any, impact on the wage structure. If immigrants were less skilled than natives, we would expect the earnings of less skilled workers to fall, and immigration would shift the distribution of income toward the more skilled. Finally, if immigrants were more skilled than natives, we would expect the earnings of ore skilled workers to fall, and immigration would shift the distribution of income towards the less skilled.
Any analysis of the economic impact of immigration on native labor market opportunities, therefore, must begin by describing how the skills of immigrants compare to those of natives. Table uses data drawn from the decennial Censuses to summarize the key trends in immigrant skills over the 1970–90 period. The relative educational attainment of successive immigrant waves fell dramatically in recent decades. In 1970, the typical immigrant in the country had 10.7 years of schooling, as compared to 11.5 years for the typical native worker. By 1990, the typical immigrant had 11.6 years of schooling, as compared to 13.2 years for natives. The relative decline in the education of immigrants is partly responsible for a substantial increase in the wage gap between immigrants and natives. In 1970, the typical immigrant earned about 1 percent more than natives; by 1990, the typical immigrant earned 15.2 percent less than natives.
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The table also documents that part of the decline in the relative economic performance of immigrants can be explained by a sizable drop in the relative wage of successive immigrant cohorts. The latest immigrant wave enumerated in the 1970 Census (i.e., the 1965–1969 arrivals) earned 16.6 percent less than natives in 1970. By 1980, the latest immigrant wave enumerated in the 1980 Census earned 27.6 percent less than natives; and by 1990, the wage disadvantage between the most recent immigrant wave and natives had grown to 31.7 percent. As long as we are willing to interpret relative wages as a measure of relative skills, the trend in the wage differential between recent immigrants and natives suggests that there was a rapid decline in the relative skills of immigrants during the 1970–90 period.
The available evidence also suggests that the economic gap between immigrants and natives does not narrow substantially during the immigrants' working lives. Figure illustrates the trend in the wage differential between a particular group of immigrants and similarly-aged natives, so that immigrants who arrived when they were between 25 and 34 years old in the late 1960s are compared to natives aged 25–34 in 1970, to natives 35–44 in 1980, and to natives aged 45–54 in 1990. Consider the group of immigrants who arrived between 1965 and 1969 and who were 25–34 years old in 1970. They earned 12.0 percent less than natives in 1970 and 2.5 percent less in 1990. Over a 20-year period, therefore, the relative wage of this immigrant cohort increased by 10 percentage points.
It turns out that practically all immigrants, regardless of when they arrived in the country, experience the same sluggish relative wage growth. This result is significant because it suggests that more recent immigrant cohorts have not had faster wage growth despite their lower starting positions. Immigrants who arrived between 1975 and 1979 and were 25–34 years old at the time of arrival earned 21.3 percent less than natives in 1980 and 15.5 percent less than natives in 1990, an increase of only 5.8 percentage points. This wage growth is similar to that experienced by similarly aged immigrants who arrived between 1965 and 1969.
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In short, the process of economic assimilation narrows the wage gap between immigrants and natives by only about 10 percentage points in the first two decades after arrival. If the recent waves experience the same extent of economic assimilation as earlier waves, the wage gap between recent immigrants and natives will remain at about 20 percentage points throughout much of the immigrants' working lives. The implication for the economic impact of immigration is clear: current immigration will have a disproportionately large impact on the number of less skilled workers for the next few decades.
Historically, immigrants have clustered in a small number of geographic areas, and this geographic concentration has increased over time. In 1960, 60 percent of the immigrants lived in one of the six main ''immigrant-receiving'' states—California, New York, Texas, Florida, New Jersey and Illinois. By 1990, 75 percent of immigrants lived in these states, and 33 percent lived in California alone. This geographic clustering occurs because immigrants tend to enter the country through a very small number of gateway cities, and the empirical evidence suggests that many immigrants are unlikely to move to other parts of the country as part of the assimilation process. Figure illustrates the impact of immigration on the percentage of the adult population that is foreign-born in California, in other immigrant-receiving states, and in the rest of the country. Prior to 1970, the foreign-born share was steady or declining in each region. Since 1970, this share almost tripled in California (rising from 10.3 percent in 1970 to 26.8 percent in 1990), roughly doubled in the other immigrant-receiving states (from 8.4 to 14.6 percent), and rose slightly in the rest of the country (from 3.0 to 4.2 percent).
Much of the academic research that attempts to measure the economic impact of immigration on native employment opportunities exploits the geographic clustering of the immigrant population in the United States. The idea can be roughly stated as follows: we know that immigrants flock to California. Why not just compare California's labor market outcomes to the outcomes observed in the rest of the country? This approach is, in fact, the approach used in much of the academic literature that attempts to measure the impact of immigration on native labor market opportunities.
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Beginning in the early 1980s, a growing number of econometric studies began to estimate the impact of immigration on native earnings by comparing the earnings of natives who reside in immigrant cities (such as Los Angeles and San Diego) with the earnings of natives who reside in cities where few immigrants live (such as Atlanta and Pittsburgh). These ''spatial correlations'' suggested that the average native wage is only slightly lower in labor markets where immigrants tend to cluster. If one city has 10 percent more immigrants than another, the native wage in the city with more immigrants is only about .2 percent lower. The econometric studies then jumped to the conclusion that the weak spatial correlation must indicate that immigration has little impact on the economic opportunities of native workers.
There are, however, two problems with the spatial correlation approach. Suppose, for example, that immigration into California lowers the earnings of natives in California substantially. Native workers are not likely to stand idly by and watch their economic opportunities evaporate. Many will move out of California into other regions, and persons who were considering moving to California will now move somewhere else instead. As native workers respond to immigration by voting with their feet, the adverse impact of immigration on California's labor market is transmitted to the entire economy. In the end, all native workers are worse off from immigration, not simply those residing in the areas where immigrants cluster.
Moreover, natives might respond not only in terms of labor flows, but also through capital flows. If immigration reduces the wage of less skilled workers in the immigrant-receiving areas, entrepreneurs will take this into account when making their investment decisions and move some of their capital to these areas. Again, these capital flows tend to equalize economic opportunities across areas.
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Therefore, native responses to immigration—whether through labor flows or capital flows—tend to diffuse the economic impact of immigration away from the affected areas and towards the national economy. As a result, a weak spatial correlation does not necessarily indicate that immigrants have a numerically inconsequential impact on native workers.
In addition, immigrants do not cluster randomly across the United States. Cities or states where immigrants cluster have done well in some periods and poorly in others, producing a ''spurious'' correlation between immigration and area outcomes. For reasons that are probably unrelated to immigration, California is a high wage state. As a result, it will look as if immigration improves native economic opportunities in a cross-section dominated by California. To avoid this spurious cross-section ''spatial'' correlation, most analysts relate changes in the economic position of natives in an area over time to changes in the number of immigrants. But a state's economy also fluctuates over time for reasons that are independent of immigration, creating the possibility of spurious longitudinal correlations as well. When California's economy booms (or falls into a recession), there will be a positive (negative) correlation between immigration and the economic position of natives.
Recent work by Harvard economists George Borjas, Richard Freeman, and Lawrence Katz provides what is perhaps the clearest evidence of a potential relation between immigration and native migration decisions in the United States.(see footnote 2)
Divide the country into three ''regions'': California, the other five states that receive large numbers of immigrants (New York, Texas, Florida, New Jersey, and Illinois), and the remainder of the country. Table reports the proportion of the total population, of natives, and of immigrants living in these areas from 1950 to 1990. The resurgence of large-scale immigration into the United States began around 1970 and has continued since. It seems natural to contrast pre-1970 changes in the residential location of the native population with post-1970 changes to assess the effects of immigration on native location decisions.
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The population counts reveal that the share of natives who lived in the major immigrant receiving state, California, was rising rapidly prior to 1970. Since 1970, however, the share of natives living in California has barely changed. However, California's share of the total population kept rising from 10.2 percent in 1970 to 12.4 percent in 1990. Put differently, an extrapolation of the demographic trends that existed before 1970—before the immigrant supply shock—would have predicted the state's 1990 share of the total population quite well.
Because labor (or capital) flows can diffuse the impact of immigration from the affected local labor markets to the national economy, Borjas, Freeman, and Katz proposed an alternative methodology to estimate the impact. The ''factor proportions approach'' compares a nation's actual supplies of workers in particular skill groups to those it would had had in the absence of immigration, and then uses outside information on how the wages of particular skill groups respond to increases in supply to compute the relative wage consequences of immigration.
The immigrant supply shock that occurred between 1980 and 1995 increased the supply of workers without a high school diploma by 20.7 percent. At the same time, this immigrant supply shock increased the supply of workers with at least a college diploma by only 4.1 percent. It has been estimated that the disproportionate impact of immigration on the supply of less-skilled workers can explain about 44 percent of the 10.9 percentage point decline in the relative wage of high school dropouts observed between 1980 and 1995. This perspective thus implies that the adverse impact of immigration on the well being of workers at the bottom end of the skill distribution has been substantial.
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Source: Borjas (1995, Table 1). The statistics are calculated in the subsample of men aged 25–64 who work in the civilian sector, who are not self-employed, and who do not reside in group quarters.
58001a.eps
58001b.eps
Source: Borjas, Freeman, and Katz (1997, Figure 1). The calculations use the 1950–90 U.S. Censuses. The adult-age population contains all persons aged 18–64 who are not living in group quarters.
Source: Borjas, Freeman, and Katz (1997, Table 8). The calculations use the 1950–90 U.S. Censuses. The adult-age population contains all persons aged 18–64 who are not living in group quarters.
Mr. SMITH OF TEXAS. Dr. Vernez.
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STATEMENT OF GEORGES VERNEZ, DIRECTOR, CENTER FOR RESEARCH ON IMMIGRATION POLICY, RAND
Mr. VERNEZ. Thank you, Mr. Chairman.
As you know, my colleague Kevin McCarthy and I have just completed a comprehensive analysis of the effect of immigration in the State of California over the past 30 years; in fact, doing what Dr. Borjas said shouldn't be done.
Certainly California is a unique State as far as immigration is concerned. It has about one-third of all immigrants residing in the United States, and those immigrants, relative to the rest of the nations, are much more likely to come from Mexico, Latin America, and Southeast Asia, and have a much lower level of education. Hence, I think the California experience is very relevant to the topic of this hearing.
We have concluded from our analyses that immigration continues to benefit California's employers in the economy at large. It is doing so at increasing cost to low-educated workers, both natives and foreign borns, and to the public sector. One major reason is a widening gap between the State's economic needs and the skill levels of immigrants.
Let me elaborate briefly on these points: Immigration benefits employers in the economy at large because immigrant labor, particularly low-skilled labor, is less expensive than native-born labor and is equally productive. As a result, immigrants have provided California employers with a comparative advantage within the United States, everything else being equal.
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On the down side, however, the employment prospects and wages of less-educated workers have dropped steadily because a greater number of workers, both native born and foreign born, are competing for a fixed number of jobs.
The California economy created 7 million jobs between 1960 and 1990. Eighty-five percent were filled by workers with one or more years of college, and 15 percent were filled by workers with only a high school degree. There has been no job growth in the number of jobs filled by workers with less than 12 years of education during that period of time.
High school dropouts have been most affected by these trends. The employment rate, for instance, among these workers fell from 67 percent in 1970 to 47 percent in 1990.
Now, clearly, the main reasons for this decline are increased worldwide competition, technological advances, and the availability of cheap labor in developing countries.
Immigration to the State has also been a factor, however. We have estimated that immigration has contributed 15 to 25 percent of this decline. Immigration also has had a downward effect on the wages of unskilled workers. Between 1970 and 1990, real wages of native-born high school dropouts declined by 24 percent in California, with about one-tenth of the decline attributable to immigration.
Immigrants themselves have also been affected. The typical image of an immigrant is that he enters the country at a wage that is slightly below a native-born and, over time, within 10 years, catches up and reaches parity with native-borns in terms of wages. That is still true for educated immigrants, particularly college-educated immigrants.
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It is no longer true, if it has ever been true, for low-educated immigrants. They enter commanding relatively low wage and they make no economic progress over their lifetimes. In other words, a large portion of those immigrants, which are about 50 percent of all immigrants in California, will live in poverty throughout their lives at very low wages.
These trends which have contributed also to immigration, have a growing effect on the demand for State and local government services and public institutions. Schools have been the hardest hit by immigration. Because immigrants in California are young and have fertility rates that are about 30 to 40 percent higher than native-born residents, their presence in the State has contributed to a 33 percent K–12 enrollment from 1986 to 1996.
The full effect of this increase has not yet been fully felt in high school, community colleges, and the university systems. We have projected a 30 to 40 percent increase in the size of the high school graduating class between 1995 and the year 2005. In less than 10 years, the system will have to grow by about 30 percent if it is to accommodate this growth in the number of students, or otherwise deny a post secondary education to an increasing proportion of California youths.
This educational challenge is all the greater because a large proportion of these children, predominately Hispanic and southeast Asians, are being raised in low-income families in which both parents have less than a high school education.
Research very often is contradictory on many things, but on one thing research has always been consistent; that is, there is a very high correlation between the education of the parents and the resources of the parents and the eventual educational attainment of their children.
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Today, for instance, native-born Hispanic youths are 30 percent less likely to go to college after high school and three times less likely to graduate from college than a non-Hispanic-white student. Why is that significant? Because Hispanic students now account for 40 percent of the entry class into school in California and about 15 percent in the Nation and therefore will have a strong bearing on the quality of the future labor force.
Let me conclude with two suggestions. Two of the most important recommendations contained in our report proposes changes in immigration policy and education policy.
One minute?
Mr. SMITH OF TEXAS. Dr. Vernez, maybe I will follow up with my first question to you on that point. Thank you very much.
[The prepared statement of Mr. Vernez follows:]
PREPARED STATEMENT OF GEORGES VERNEZ(see footnote 3), Director, Center for Research on Immigration Policy, RAND
Mr. Chairman and members of the House Subcommittee on Immigration and Claims, thank you for the opportunity to testify on Immigration and America's Workforce for the 21st Century.
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My colleague, Kevin McCarthy, and I have just completed an analysis of immigration in the state of California between 1960 and 1990. Our findings, documented in Immigration in a Changing Economy: California's Experience, are particularly relevant to the topic of this hearing.(see footnote 4)
As you probably know, about one-third of all foreign-born people in the nation now reside in California. Along with their children, they account for two-thirds of the state's population growth since 1980. Relative to the rest of the nation, immigrants to California are more likely to come from Mexico, Latin America, and Southeast Asia. Compared to the rest of the nation, they are less likely to have completed high school. In fact, nearly half the immigrants to the state have less than 12 years of schooling.
As these immigrants enter a state economy that is increasingly skill-based, the costs to the public sector are getting steeper. The state must educate an increasing number of children born to immigrants and keep them in the education system long enough to provide them the skills required by most jobs. In short, the widening gap between the needs of the state's economy and the skill levels of incoming immigrants places a heavy burden on the education system. Furthermore, increasing numbers of low-skilled immigrants are competing with native and foreign-born workers for low-skilled jobs, a sector that has not grown in the last 30 years.
Our study concludes that the benefits of immigration to the state continue to outweigh the costs. However, unless immigration policy changes and unless greater investment is made in the education of the children of immigrants who are already residents of the state, the costs of immigration will increase.
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The remainder of my testimony elaborates on these points.
On the benefit side, in the past 30 years immigration has helped California's economy grow about 15 percentage points faster than that of the rest of the nation. The main reason for this accelerated growth is that immigrant labor—particularly low-skilled labor—is less expensive than native-born labor and is equally productive. As a result, immigrants have provided California's employers with a comparative advantage over their competitors in other states.
On the cost side, however, the employment prospects and wages of less-educated workers have dropped steadily because a greater number of workers—both native-born and foreign-born—are competing for a fixed number of jobs. Of the 7 million new jobs created in California from 1960 to 1990, 85 percent were filled by workers with one or more years of college and 15 percent were filled by workers with only a high school degree.(see footnote 5) Since there has been no job growth in the unskilled sector, less-educated newcomers are now taking jobs vacated by retirees or by workers moving out of the state.
These immigrants are also taking jobs from native-born high school dropouts. The employment rate among these workers fell from 67 percent in 1970 to 47 percent in 1990. Although the main reasons for this decline are increased world-wide competition, technological advances, and the availability of cheap labor in developing countries, immigration to the state has also been a factor. We estimate that immigration has caused 15 to 25 percent of this decline. Employment among high school graduates has also declined, although not as sharply.
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Overall, between 1960 and 1990, we estimate that between 130,000 to 190,000 native-born people were not working as a result of immigration. This figure represents about 3 to 5 percent of all those unemployed or out of the labor force.
Immigration has also had a downward effect on the wages of unskilled workers. Between 1970 and 1990, the real wages of native-born high school dropouts declined by 24 percent in California, with about one-tenth of this decline attributable to immigration. Foreign-born workers have also suffered wage erosion. They receive increasingly lower earnings relative to native-born workers when they arrive, and they actually lose earning power over their lifetime. Unlike immigrants with some college education, who reach earning parity with the average native-born worker in the state within about 10 years, immigrants with less than a high school degree (about half the state's immigrants) fall increasingly behind the average native-born worker during their working lives.
These trends have contributed to immigration's growing effect on the demand for state and local government services. The costs of immigration to the state's public sector have been well documented in a recent report from the National Research Council.(see footnote 6) The report estimates that in 1996 the net annual public costs for state and local services were $3,463 per immigrant household. That amounts to an annual tax burden of $1,170 per native-born California household. The reason for this high cost to the California taxpayer is not that immigrants are greater users of public services than natives with similar income and family composition: It is simply that a greater share of immigrants have low incomes and large families.
Of all public institutions, schools have been the hardest hit by immigration. Because immigrants to California are young and have fertility rates that are 30 to 40 percent higher than native-born residents, their presence in the state has contributed to a 33 percent growth in K–12 enrollment from 1986 to 1996 (from 4.4 million to 5.8 million).
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The full effect of this increase has yet to be felt on the state's high schools, community colleges, and universities. We have projected a 30 to 40 percent increase in the size of the high school graduating class between 1995 and 2005. Even a substantial decline in immigration between now and then would have little effect in this growth rate. Most of the students in the senior class of 2005 are already in the state's school system.
This educational challenge is all the greater because a large proportion of these children—predominately Hispanic and Southeast Asian—are being raised in low-income families in which both parents have less than a high school education. Research consistently shows that although the children in such families will be more educated than their parents, they will lag well behind other students, particularly in college attendance.
Today, for instance, native-born Hispanic youths are 30 percent less likely to go on to college after high school and three times less likely to graduate from college than non-Hispanic white students. Considering that by the year 2005, Hispanic youths alone will constitute 40 percent of all high school students in California—and more than 15 percent in the nation—their prospects will have a strong bearing on the quality of the future labor force.
In our report, we make a number of recommendations to address these trends, at both the federal and state levels. Two of the most important recommendations propose changes in immigration policy and education policy.
With regard to federal immigration policy, we do not recommend a radical overhaul. But to address the stagnation of job opportunities by low-skilled labor, we suggest two incremental changes. First, the number of legal immigrants admitted to the United States should be reduced to a more moderate range—which means somewhere between 300,000 per year, the average during the 1970s, and 800,000 per year, the average during the 1990s. Second, we propose that a better balance should be found between the demands of family reunification and the demands for higher-skilled labor in the workplace.
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With respect to education policy, it must be recognized that a disproportionate share of the children of immigrants, most of whom are born in the United States, are concentrated in a handful of states. Significant resources in investments for education will have to be made in those states just to keep up with increasing enrollments. But more than that is required: States should support special programs to encourage high school graduation and college attendance, particularly within the Hispanic community, and to enhance the English proficiency of immigrants and their children who already reside in the state.
These recommendations imply that a better balance should be struck between the interests of those who are already here, both native and foreign-born, and those who are seeking to come to the United States.
Mr. SMITH OF TEXAS. Mr. Reynolds.
STATEMENT OF ALAN REYNOLDS, DIRECTOR OF ECONOMIC RESEARCH, HUDSON INSTITUTE
Mr. REYNOLDS. Thank you, Mr. Chairman. Since you were kind enough to set a precedent by quoting from the Hudson Institute study, ''Work Force 2020,'' I am going to begin by doing the same.
In the 1990's, immigration accounted for fully half of the increase in the labor force. Immigration policy remains unchanged. Immigrants will constitute an increasing share of workers in the early 21st century. Thus, the job qualifications of immigrants will have an increasingly important impact on the skill and education levels of the work force.
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Unless they acquire more schooling in the U.S. than they did in their native countries, which parenthetically implies a burden on the taxpayer, recent immigrants will account for a rising share of the otherwise dwindling number of Americans who lack a high school education.
Now the reason that immigrants accounted for about half of the growth of the labor force in the early nineties was not that immigration accelerated but, rather, that the labor force has slowed down from about 1.7 percent, a little less in the eighties, to about 1.1 percent in the nineties. And given the slowdown in the labor force and the aging of the labor force, one could make a case for large numbers of immigrants—that there would be some benefits from large numbers of immigrants; but the key question, of course, is even if you were running short of willing and able workers, the key question is ''able,'' and that is where this panel, I think, is in total agreement.
As it comes time to add more workers or to replace retiring workers with young people, immigration becomes extremely important at the margin and this adds up to quite a few numbers as 10 or 20 years pass.
The average skill level of U.S. workers' productivity, average real wages, may well be diluted in the future if too many immigrants come here with below-average skills and are ill-prepared to improve those skills in a rapidly changing economy.
The second point related to that is that an increased supply of unskilled immigrants must depress real wages for unskilled natives unless there was matching increase in capital formation in low-wage industries. I find that extremely unlikely. I don't think capital is going to flow into sweat shops and broom-making and industries of that sort, nor do I think that is desirable. So in that case, an increase in supply of unskilled labor with capital being the same means the capital-labor ratio falls; real wages for productivity fall too, which is simply another way of saying I agree completely with Dr. Borjas.
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Up until 1965, from 1924 to 1965, immigration policy was rationed according to country of origin and this was thought to be unfair and irrational. But, in practice, current policy still does that and it does that because the previous wave of immigrants bring in their relatives, so there is the importance of relatives in our immigration priorities. The percentage of immigrants in the family-sponsored category was 63.9 in 1995, 65.1 percent in 1996. And that means de facto immigration quotas are heavily biased in favor of aspiring immigrants from Mexico, the former Soviet Union, the Philippines, Vietnam, Dominican Republic, El Salvador, China, India, and Cuba.
Recent immigrants from these countries bring in their relatives and their relatives then sponsor more relatives, so we end up with a country-based system, inadvertently; which Congress attempted to patch with diversity quotas, but that really isn't working.
With the family sponsorship, the diversity—the 55,000 for diversity and the lottery, refugees and asylees, are using up at least 85 percent of available slots, which doesn't leave much room for any other criteria, such as employment prospects.
The 1990 law permits up to 140,000 employment-based immigrants a year, but actual figures have been much lower, about 85,000 in 1995 and 117,000 in 1996, really trivial numbers.
Moreover, the work-related visas are usually temporary, while the much larger numbers of immigrants admitted for other reasons are permanent.
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The dominant criteria for U.S. immigration quotas—which are having a relative here, coming from a really terrible country, or winning a diversity lottery—those criteria are obviously unrelated to any concept of what is good for the U.S. economy or society. No one would sit down and say these are what we would begin with if we were starting fresh. Instead, the prevailing criteria are limited to just two, among many, conceivable interests of the immigrants themselves.
Immigration policy is all about methods and criteria of rationing a relatively small number of spaces among a much larger number of people who would like to live in the United States. It is a rationing question. And there are only four possible rationing methods. One is the queue, waiting in line; first come, first served. Another is the lottery. Another is allocation by political or bureaucratic preference, putting people into categories and having import quotas on categories. The last is the price system. Current policy mainly relies on the queue. Foreigners who are offered a job with less than 2 years of experience are in the employment third preference class and must wait 10 years. Bringing in an unmarried child over the age of 21 has a 6-year wait and so on.
Instead of relying on these arbitrary import quotas and waiting lists, I propose to make somewhat more use of the price system, as Canada does, by requiring a modest immigration fee. Canada's is 975 Canadian dollars. That would tend to reduce the waiting list by weeding out marginal applicants with a weak commitment to this country.
As far as illegal immigration, half of the problem is due to overstaying legal visas. I proposed system fines that would grow geometrically larger, the longer the overstay was overdue. For example, doubled every month. Anyone could leave without paying the fine but they couldn't come back in.
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Anyway, the bottom line is we must rely on some criteria for determining an immigrant's eligibility, and I suggest the most sensible and ultimately most humane criteria are those that demonstrate the potential immigrant's ability to support himself or herself and their family. And that would include things like formal education, occupational experience, training or other skills, certainly including English language skills, and accumulated savings.
A constructive and compassionate immigration policy must put primary emphasis on making sure that new entrants have sufficient human capital or financial capital to become, in a reasonable length of time, productive members of the economy and society.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Reynolds follows:]
PREPARED STATEMENT OF ALAN REYNOLDS, DIRECTOR OF ECONOMIC RESEARCH, HUDSON INSTITUTE
Last year, the Hudson Institute published Workforce 2020, the sequel to Workforce 2000. I did the background research on immigration for this project, and contributed some sections of the report. Unlike Workforce 2000 (which was commissioned by the Department of Labor), Workforce 2020 was privately funded. My own research has been entirely privately funded. The views I express here are my own, not those of my employer or associates.
Let me begin by quoting a representative passage from the new Hudson study:
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In the 1990s, immigration accounted for fully half of the increase in the labor force; if immigration policy remains unchanged, immigrants will constitute an increasing share of workers in the early twenty-first century. Thus the job qualifications of immigrants will have an increasingly important impact on the skill and education levels of the workforce. Unless they acquire more schooling in the U.S. than they did in their native countries, recent immigrants will account for a rising share of the otherwise dwindling number of Americans who lack a high school education.
Immigration is not inherently good or bad. Given the slowing and aging of the population, a plausible argument could be made that the U.S. might benefit from more rapid increases in the number of working-age immigrants than we have experienced in recent years. There would be more people paying Social Security taxes, for example.
In my view, the most important immigration issue is not whether the numbers of immigrants should be larger or smaller, but whether or not U.S. policy can prudently continue to be indifferent about inviting huge numbers of permanent residents who lack basic education or language skills.
A few preliminary observations:
1. Growth of the U.S. labor force has already slowed dramatically (from more than 1.6% a year in the 1980s to about 1.1% in the 1990s) and is apt to slow further if tax and transfer policies are not redesigned to improve work incentives for older Americans and second earners. We are running short of willing and able workers. This is likely to be a chronic problem for the foreseeable future. Slow growth of the labor force explains why estimates of future economic growth are closer to 2% than to the 3% norm of the postwar era.
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2. Immigration accounted for half of all new additions to the labor force in the first half of this decade. At the margin, when it comes time to add more workers, or to replace retiring workers with young people, immigrants will be increasingly important. The average skill level of U.S. workers, productivity and real wages, may be diluted in the future if too many immigrants bring below-average skills to the job, and are ill-prepared to improve those skills to keep up with the economy's rapid changes.
3. Census assumptions that the sum of legal and illegal immigration can forever be held below 900,000 a year seem unrealistic. External pressures on the borders are not getting any lighter. The population of Asia alone is expected to grow by one billion people by the year 2020, and the population of Latin America and the Caribbean by 155 million.
4. An increased supply of unskilled immigrant workers must depress real wages for unskilled natives unless that increased supply of unskilled labor was matched by increased investment in businesses that make use of unskilled workers. Shifting scarce capital toward low-wage industries is quite unlikely to happen, and it would be wasteful if it did.
5. Concerns about a ''shortage'' of high-tech employees are misleading. If certain skills become very scarce relative to demand, then salary offers for those jobs will increase—enticing more people to acquire these skills. A better way of putting the issue is that if immigration policy shifted toward putting greater emphasis on immigrants' skills, then skill-based wage differentials would narrow—unskilled jobs would then pay more, and skilled work a bit less. Under current policy, the opposite outcome is more likely, and more troublesome.
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6. Under current law, the schooling or skill of legal immigrants is almost 90% a matter of random luck. Two-thirds of immigrants are admitted solely because they have family members living in the United States, and another 16% are refugees or asylees, and 5–6% win the ''diversity'' lottery. Employment-related criteria have accounted for no more than 13% of immigrants lately, and that figures overstates the true significance of employability due to double counting. Employment-related visas are limited to 140,000, but have been smaller. Work-related visas are often temporary, while the much larger numbers of immigrants admitted regardless of employability are permanent.
CURRENT POLICY
From 1924 to 1965, immigration was rationed according to country of origin. In practice, current policy still does that. This is because the previous wave of immigrants has extremely preferential treatment when it comes to bringing in more relatives from the same countries. The more immigrants who arrived from a certain country in the recent past, the more can be expected from that country in the near future.
From 1990 to 1995, new immigration (aside from legalization under amnesty) averaged about 737,000 a year. Of those, immediate relatives accounted for 238,242 immigrants a year, and family-sponsored relatives accounted for another 220,103. That is, nearly two-thirds (62.2 %) of immigrants were admitted solely because they had family members here. This percentage of immigrants in family-sponsored categories has been rising lately—to 63.9% in 1995 and 65.1% in 1996. Another 16% of immigrants in the first half of the nineties (119,000 a year) were refugees and asylees—mainly from former communist countries: the Soviet Union and Eastern Europe, Vietnam, Laos and Cuba.
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We have inadvertently restored the old system of favoring immigrants depending on country of origin. But the new favoritism is no longer for immigrants from democratic countries with high levels of prosperity and skill, but for immigrants from the same countries that accounted for the last group of immigrants. This means de facto immigration quotas are heavily biased in favor of aspiring immigrants from Mexico, the former Soviet Union, the Philippines, Vietnam, the Dominican Republic, El Salvador, China, India and Cuba. Recent immigrants from these countries bring in their relatives. And their newly arrived relatives, in turn, sponsor still more relatives from the same countries.
To patch this problem, Congress added ''diversity'' quotas. The rationing dilemma in this case is so extreme that a lottery is used, with odds not much better than other lotteries. In one 30-day period (ending March 12, 1996), some 6.5 million applications were reportedly received for these 55,000 diversity visas.
With family sponsorship, diversity and refugees using up at least 85% of the available spaces, that does not leave much room for any other criteria, such as employment prospects or investment. The 1990 law permits up to 140,000 employment-based immigrants a year, but the actual figures were only 85,336 in 1995 and 117,499 in 1996. Highly restrictive investment-based criteria (called ''employment creation '') have admitted only about 500 people each year.
The dominant criteria for U.S. immigration quotas—having a relative here, coming from a really terrible country, or winning the diversity lottery—are obviously unrelated to any concept of what is good for the U.S. economy or society. Instead, the prevailing criteria are limited to just two (among many) conceivable interests of the immigrants themselves namely, escaping from a politically repressive country, or being able to live closer to other family members. Unless Congress is willing to increase the numbers of legal immigrants, any decision to put greater emphasis on employment qualifications requires putting less emphasis on family ties and/or refugee status. If the numbers are limited, there is no choice but to make choices.
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HOW OTHERS DO IT
The percentage of foreign-born residents in Canada is twice as high as it is in the U.S. Yet Canada puts a much higher priority on economic criteria (employability and assets) than the U.S. does, and is also contemplating adding a very strict language requirement. Only half of Canada's immigrants fall into the family reunification category that so dominates U.S. policy, and Canada appears somewhat more strict about refugee qualifications.
Canadian immigrants need 70 out of 100 points. As many as 15 points can be awarded for knowledge of English or French, with another 15 points possible for specific vocational preparation. Education earns up to 12 points. Experience counts for 8 points if the applicant has a job in Canada, which is itself worth another 10–20 points depending on the occupation. Personal suitability and other miscellany make up the balance. An immigration who arrives with a half a million Canadian dollars is rightly considered unlikely to end up dependent on welfare, for example, regardless how those assets are invested. There are also immigration categories for entrepreneurs, the self-employed and investors. Canada also makes limited use of the price system to help balance supply and demand. There is a fee of C$975 for every successful immigrant, with loans available for those unable to pay.
Critics see Canadian policy as harsh, or as a futile exercise in picking winners. But it does at least offer potential immigrants some rules that are not entirely capricious, it does not rely so heavily as the U.S. system on long waiting lists, and it puts a reasonably high priority on the applicant's ability to be financially self-sufficient.
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New Zealand actively recruits immigrants, but not without some rules. Applicants must meet ''a minimum standard of English'' (equivalent to an 11 year old native). Their immigration department notes that ''a job offer that is waiting for you is a good way to determine if you are the type of person New Zealand needs.'' Arriving with ''settlement funds'' of more than 100,000 New Zealand dollars helps too. The country's point system favors youth, subtracting points after age 30 and noting frankly that ''a person over the age of 55 on the Skills category and 64 for the Business Category will not be accepted.''
Obviously, the U.S. public might favor quite different standards and priorities than either Canada or New Zealand, if the issue was ever put to them in this way. But so long as immigration depends as heavily as it has on having relatives in the U.S., on being willing to wait a long time, on winning a lottery, or on being granted refugee or asylee status, the U.S. cannot really be said to have any coherent immigration standards at all.
RATIONING METHODS
Immigration policy is about rationing something of great value—the right to live in the United States. The question boils down to methods and criteria of rationing a relatively small number of spaces among a much larger number of people who would like to live in the United States.
There are only four possible rationing methods—the queue, the lottery, allocation by political or bureaucratic preference, or the price system (a fifth option, of course, is to immigrate illegally). Current policy mainly relies on a mixture of political preference categories and the queue, although the lottery is used too.
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Foreigners offered a U.S. job requiring less than two years' experience find themselves in ''Employment Third Preference'' class, and must wait 10 years for a visa. Permanent residents sponsoring an unmarried child over age 21 are in a family category 2B, which has a 6 year wait. Brothers and sisters of U.S. citizens are in ''Family Fourth Preference,'' which recently had a waiting list of more than one million. Marrying a U.S. citizen can push you ahead in the line, which has created a booming market in mail order brides. Ordinary citizens have no idea how these quotas on importing various categories of people are established, which makes the process vulnerable to the tug and pull of interest groups and log-rolling.
I propose making somewhat more use of the price system, as Canada does, by requiring a modest immigration fee. This would be far more ''fair'' than relying entirely on arbitrary quotas and multi-year waiting lists. A user fee on immigration services of, say, one or two thousand dollars per accepted immigrant would serve as a means of reducing waiting lists by weeding out marginal applicants with a weak commitment to the U.S. As another another example of the price system, a trial program could begin with an auction of diversity quotas, to replace the current use of gambling.
Even with some use of price system, there will still be quotas and queues. The normal problem of the future will not be job creation but the opposite—finding enough qualified workers, to do the work demanded of a high-tech economy. Still, it might be socially soothing to adjust annual immigration quotas downward in recessions, and upward when jobs are plentiful, by adopting a formula that would link a portion of the coming year's immigration quota to unemployment rates in the preceding third quarter.
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Half of the problem of illegal immigration is not due to sneaking across the border, but to overstaying legal visas. I propose a system of fines that grows geometrically larger the longer a visa was overdue (e.g., doubled every month). Anyone would be free to leave without paying the fine, or could be deported, but such a person would never again be readmitted without paying the fine plus penalties for late payment. Illegal acts must carry some sanctions for those who commit them, and financial sanctions seem more appropriate. Imprisoning illegal aliens puts their burden on U.S. taxpayers, and wastes limited court time and prison space that could be better devoted to violent criminals.
Those seeking asylum should ask before arriving, like refugees, not just settle here illegally and hire a lawyer. Out of half a million asylee cases received from 1990–94, only 4.5% were approved. This post-1980 opportunity for illegal aliens to remain in the U.S. by going through the motions of applying for asylee status (and often remaining long after the case is denied), is an unnecessary invitation to abuse.
Regardless how many immigrants are legally admitted, a key question is how best to ration valuable immigration rights. What is needed is not another rousing defense of immigration in general, nor an equally indiscriminate closing of the borders, but a serious, comprehensive reexamination of the criteria and methods by which rights to U.S. residence have been regulated.
We must rely on some criteria for determining an immigrant's eligibility. I suggest that the most sensible (and ultimately the most humane) criteria are those that demonstrate the potential immigrant's ability to support himself and his family formal education, occupational experience, training or other skills (including English language skills), and accumulated savings.
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A constructive and compassionate immigration policy must put the primary emphasis on making sure that new entrants have sufficient human and/or financial capital to become productive members of the economy and society.
Mr. SMITH OF TEXAS. Thank you, Mr. Reynolds.
I think it is important to point out it is not just coincidental that all three of you seem to see eye to eye on many issues. I say that that is not coincidental, because you all are aware in the last 18 months there have been a half a dozen studies on our current immigration policy that surprisingly have all reached the same conclusion. And the conclusion, the consensus of these half dozen studies, including your own, is that our current immigration policy, at least in some respects, does not serve the best interest of America. And as I mentioned, we seem to have a mismatch between the needs of the work force, future needs of the work force of America, and our current immigration policy. I think that you all agree that in that respect, our current policy is flawed and that we need to do something—and we will talk about that in just a minute—to give a greater priority to immigrants who have an educational level that will enable them to find a job and work, and to work and to contribute and to produce when they come to America, thereby not only strengthening the economy but supplying the needs of our work force as well.
Dr. Borjas, let me address my first question to you. You mentioned in your opening statement the fact—in fact, this was the last point I think you made—that the large numbers of low-skilled foreign workers are responsible for half the decline in relative wages among those in America who lack a high school education. You also point out at the end of your opening statement, I believe, that the adverse impact of immigration on the well-being of workers at the bottom end of the skilled distribution has been substantial.
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What, specifically, do you recommend that Congress do in order to correct that situation?
Mr. BORJAS. Before we can address that issue, we have to address another question, which is what do we want to attain from our immigration policy, what is it the country wants to have by having a particular kind of immigrant? If we, for the sake of argument, say we want to improve the living conditions of native workers and we care about native workers both in terms of their per-capita income as well as distribution of income, then it is pretty clear that a more skilled immigrant flow would tend to provide both the higher per-capita income to native workers, as well as ameliorate the problems of having a more unequal income distribution, which arises when you have less-skilled immigrants coming in, in the kind of changing economy we have been having in the last 20 years.
As all of you know, we have a lot of income growth inequality in the last 20 years, and having a less-skilled immigrant flow coming in only makes our problem worse. So both in terms of solving—not solving, but ameliorating the problem of income inequality and increasing per-capita income for native workers, one would think an immigration policy that not only depended on family preference but also included some other measures of individual immigrants that come in would be preferable.
Mr. SMITH OF TEXAS. Thank you. Dr. Borjas, I appreciate also in your testimony you pointing out the problems of what we call the spatial correlation approach, where you can't just necessarily compare cities, and I think that was an important contribution as well.
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Mr. BORJAS. Thank you.
Mr. SMITH OF TEXAS. Dr. Vernez, you mentioned in your testimony that our current immigration policy not only contributes to the unemployment rate among those who haven't finished high school in America but also depresses the wages of those individuals, and that you agree with Dr. Borjas. You also mentioned the problem is not just of this generation but it is of future generations as well, since oftentimes there is a correlation between the educational level of a parent and the employment and productivity of the child.
I thought it might be interesting, and I know we have a couple Californians here, that you conclude that the annual tax burden on a native-born California household is $1,170 due to our immigration policy today; is that correct?
Mr. VERNEZ. That is a conclusion reached by the National Research Council, and we agree with that. That was probably the best estimate to be made in recent years, but that is not our estimate.
Mr. SMITH OF TEXAS. That is the National Research Council's?
Mr. VERNEZ. Right. And the reason for the cost, of course, is not so much that immigrants are using services at a higher rate than natives if they have the same income and family composition, it is mainly because they have lower income and larger family size.
Mr. SMITH OF TEXAS. In your recommendations for policy changes you say, ''We propose that a better balance should be found between the demands of family reunification and the demands for higher-skilled labor in the work force.'' And you say that specifically we recommend that, in the RAND study, ''Specifically we recommend that current policies be modified to place greater emphasis on the educational levels of new immigrants.''
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How specifically would you recommend that we do that? I agree with you, obviously, but how can we implement that?
Mr. VERNEZ. There are various ways that can be implemented. Of course, one way, without changing very much the architecture of immigration policy as it is now, would be to increase the number of immigrants who would be allowed to come for employment-related reasons, and of course you could tie to this an education criterion.
The other would be to proceed a little bit like Canada is proceeding, which is a point system that would provide different points for education, for English proficiency, in addition to points for family reunifications. That would require much greater change in the architecture of immigration policy.
Mr. SMITH OF TEXAS. Thank you, Dr. Vernez.
If my colleagues will let me, I am going to sneak in one more question for Mr. Reynolds.
You mentioned in your comments what the Hudson Institute had concluded, which was that unless the education and skill levels of the American work force are upgraded, America's productivity and prosperity will grow less quickly. America must stop recruiting workers for jobs that do not exist or exist only at the lowest levels. And then you say that, in your view, the most important immigration issue is whether or not U.S. policy can imprudently continue to be indifferent about inviting large numbers of permanent residents who lack basic education or language skills.
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When you say that the immigration policy today is unrelated to any concept of what is good for the U.S. economy or society, in what ways could we change our policy to better reflect the goals that you stated and the goals that I agree with?
Mr. REYNOLDS. The implication of those remarks is that if you want to increase the emphasis on skills, you have to deemphasize something else or else immigrate more people, and that is just mathematically the problem. So if we put such high emphasis on a family reunification, meaning bringing in more people from the same countries the last batch came from, and if we put such high emphasis on refugee status, then, by definition, there is less room available for the others.
I suspect that something along the lines of the Canada and New Zealand point system is what I am aiming at. I think the system has to be totally crossed out and started over again. That is a little strong, but that is basically what it is. It just sort of evolved. I don't think anyone has really tried to design an immigration policy for the United States.
Mr. SMITH OF TEXAS. Thank you, Mr. Reynolds.
We have just been joined by the Ranking Member, Mr. Watt of North Carolina.
We will first go first to questions from Ms. Lofgren, the gentlewoman California.
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Ms. LOFGREN. Thank you, Mr. Chairman.
This is obviously a very interesting and useful hearing for the committee. Many of our later witnesses will talk about the H–1B program, the temporary visa program for skilled immigrants. I think it is worthwhile to take a look at the entire picture to see where we are.
I am mindful that while it is very easy to pick apart some of these issues and to focus on problems, our country is the envy of the world. Everyone wants to come here. When you talk about economic problems, our economy is stronger than any other in the world—it is stronger than Europe, it is stronger than Asia. To some extent, we can't be doing everything wrong because we are having the wonderful benefit of whatever it is we are doing.
I am looking, however, at how we might consider changes. A background of anxiety exists in some parts of the country over diversity, not just immigration itself. Looking at your statement, Mr. Reynolds, I note on page 2, you are talking about a phenomenon that does exist in terms of a category feeding upon itself. I do not disagree with that. I quote, ''The new favoritism is no longer for immigrants from democratic countries with high levels of prosperity and skill, but for immigrants from the same countries that accounted for the last group of immigrants. This means de facto immigration quotas are heavily biased in favor of aspiring immigrants from Mexico, the former Soviet Union, the Philippines, Vietnam, the Dominican Republic, El Salvador, China, India, and Cuba. Recent immigrants from these countries bring in their relatives and their newly-arrived relatives in turn sponsor still more relatives.'' You go on to say that this is a problem that Congress tried to patch with the diversity program.
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Are you saying that having people come from Vietnam or from China or India is in itself a problem for America?
Mr. REYNOLDS. No. What I am saying is if you have a limited number of immigrants and that you have biased the system in favor of immigrants, let's say from El Salvador, you are restricting immigrants from Hong Kong and Turkey.
Ms. LOFGREN. I guess the concern I had in reading this is it feeds into some of the hate mail I receive. I am not suggesting, however, that you are doing that.
Mr. REYNOLDS. Let me make it clear. I am pro-immigration, I just don't think we have an immigration policy. I am pro-Mexico, for example. I spent a lot of time down there, I am published down there, they know me down there. I am an ex-Californian. My house is now owned by a Mexican family. So, no; I mean, obviously there are skilled and unskilled people. But you are not doing people a favor by bringing them in here when they are not able to cope.
Ms. LOFGREN. So the point you are trying to make is not where these folks are coming from, but their level of skill, not the country or the color of their skin or their ethnicity or their religion or anything of that nature?
Mr. REYNOLDS. Why should you favor one country over another. You should favor people over another, perhaps for criteria that have to do with the national interest, but not one country over another people.
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Ms. LOFGREN. Thank you. That is very helpful.
I would like to go back to Dr. Borjas. I have looked at your charts. It is very difficult, I think, to get facts everyone agrees on because we don't do a very good job of collecting statistics in this country and it is very difficult when you have poor data to extrapolate and make findings.
I see the mean educational attainment and the wage differential and the like. Have you specifically taken a look at the economic impact of, for example, Ph.D. level immigrants or master's degree immigrants and how many jobs are created by each scientist, in industry? Or is that a benefit or burden?
Mr. BORJAS. I have estimated benefits from immigration at the national level, not by education groups so much, but at the national level. And in fact, the National Academy of Sciences report that has been mentioned before cites several of these studies that tried to estimate the benefit from immigration, including my own study. And almost every study that exists right now that estimates benefits at the national level tends to find that, yes, there is a net benefit, but the net benefit tends to be surprisingly small.
Ms. LOFGREN. If I may interrupt, because I know the Chairman is going to, and probably will be stern about our 5-minute limit, I read those reports as well. But, again, it is very difficult to quantify. How do you quantify, the positive economic impact of, for example, Andy Grove of Intel. He was an immigrant. Intel employs a lot of Americans, including my neighbors in Silicon Valley. Or James Gosing over at Sun Microsystems, who invented Java. The economic impact of that invention is huge, but there is no attempt to quantify that in these figures. Have you tried to quantify these factors?
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Mr. BORJAS. There are benefits and costs that are impossible to quantify and the ones that cannot be quantified cannot be quantified.
Ms. LOFGREN. Thank you very much. I see my red light is on, Mr. Chairman.
Mr. SMITH OF TEXAS. Thank you, Ms. Lofgren.
The gentleman from Indiana, Mr. Pease, is recognized.
Mr. PEASE. Thank you, Mr. Chairman.
Dr. Borjas, you spoke early in your presentation about the clustering phenomenon and seemed to conclude, or implied, that the clustering was entirely an economic phenomenon. Does your study at all indicate that there may be noneconomic reasons for that clustering as well and, if so, how does that affect what you presented earlier?
Mr. BORJAS. Let me clarify what I meant to say. Clustering happens. There are economic impacts that follow from the clustering. What I was talking about today is the economic impacts that follow from the clustering. When immigrants cluster in a particular place, the locale will be affected the most, and then through flows, that impact is distributed away from that locality. But why that clustering happens can be due to both economic impacts, good jobs, attracting particular kinds of immigrants, but also the networks. I mean, social networks are incredibly important in determining where immigrants end up in the United States. So I certainly do not mean to imply clustering is just an economic matter, but it has economic impacts.
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Mr. PEASE. Okay. That is helpful.
Dr. Vernez, you went through your presentation and then got to the point and said, ''I now have two recommendations to make,'' and that was the end. You may have been able to make a couple other points, but I wanted to be sure you were able to share with us your recommendations completely.
Mr. VERNEZ. I appreciate that. We had several recommendations, but the two most important is one concerning immigration policy and one that concerns education policy. I know this is not the domain of this subcommittee, but I think it is important and needs to be done.
With respect to immigration policy, we are certainly suggesting a shift and a better balance between low-educated and better-educated immigrants, as I mentioned earlier. We also suggest that we should somewhat reduce the level of immigration from the current high, of about 900,000 now to somewhere in-between that number and the 300,000 that we had in the 1970's. In other words, looking for a moderate level of immigration, as opposed to what is now a fairly high level of immigration.
Part of it, of course, is to reduce-low educated immigration. The other, of course, is because the economy fluctuates. When you are in a booming economy, certainly you can have a higher level of immigration, but you always also have a slowdown in the economy, as has happened in California when we had a very deep recession for 5 to 6 years. During that time, there was no job growth, while immigration continued at a very high level, and it created a major backlash against immigration, which in the long run is not in the interest of formulating good policy. With these considerations, we feel that immigration policy in this country should be somewhat more flexible.
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With respect to education policy, what I mentioned is basically that there will be two impacts on the education system. One occurs in those States where there is a high concentration of immigrants. There the demand for education is increasing very rapidly, and these States have a lot of difficulties in meeting the demand for resources to meet the needs to educate this new population.
The second is a shift in the composition of the student body, particularly, as I mentioned, toward Hispanics. Because their parents have low levels of education and they have low incomes; their children may graduate from high school, but they are not going to go to college in high proportion enough. With that level of education, they are not going to be able to compete in an economy that requires a college education in order to get an adequately-paid job.
Mr. PEASE. Dr. Vernez, thank you. I understand your concern on the educational attainment level of immigrants, and I understand the point that you just made about advocating a smaller number of immigrants. If changes were made in the immigration policy to require higher le