Immigration Policy as Random Rationing

By Alan Reynolds March 2001

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Alan Reynolds, a senior fellow with the Hudson Institute, contributed to the Institute’s influential study Workforce 2020.

An immigration policy would set priorities and establish mechanisms for reaching those goals. By that standard, the U.S. has no immigration policy at all.

The overwhelming majority of permanent immigrants are not admitted on the basis of any evidence of employability, savings, or even minimal English language skills. On the contrary, at least 85 percent of legal immigration is reserved for those who come from only the most horrible countries (refugees and asylees); those whose relatives recently arrived in the U.S. (as relatives themselves, as refugees, or as illegal aliens granted amnesty or asylum); and those who happen to win the annual diversity lottery. None of these three admissions criteria is derived from the slightest consideration of the economic and social impact on the U.S. public at large. The issue is not merely a matter of who gets in, but also of who is kept out. Family unification, refugees and diversity use up so many spaces that there is little room left for anyone else. Various employment-related criteria accounted for merely 11 percent of immigrants in 1997, and skill-based visas for merely 1.6 percent.

A small number of highly-skilled foreigners whose work is in heavy demand may be lucky enough to get temporary visas. At the same time, however, we routinely import huge numbers of poor people with little schooling or skill. Many immigrants had, of course, made enormous contributions. But whether or not that happens is a matter of chance, not policy. So long as the U.S. continues to import hundreds of thousands of undereducated poor people every year that must dilute the nation’s average skill, productivity and real wage, and make poverty a much more intractable problem than otherwise.

Emphasize Self-Reliance

Any serious immigration policy would establish priorities that distinguish between prospective immigrants on the basis of their probable ability to participate constructively in the American society and economy. I propose that the following simple criterion take precedence over all others: Prospective immigrants must be required to demonstrate that they are likely to be able to adequately support themselves and their dependents. Relevant evidence could include having a concrete U.S. job offer, proof of a marketable skill or craft, educational credentials, English language proficiency, or evidence of substantial savings. Any other criteria (such as family unification) would be applied secondarily, only after first providing the required evidence of occupational or financial-self reliance. That is, economic standards would apply to working-age members of any preference groups, such as non-dependent relatives or refugees.

With any limit on the number of immigrants, a higher priority for economic self-sufficiency necessarily requires a lower priority for family unification, refugees and/or the diversity lottery. Admitting more immigrants for such sentimental reasons necessarily means excluding hundreds of thousands of better-qualified applicants simply because they happen to live in peaceful democratic countries such as Hong Kong, Turkey or Botswana. Since aspiring immigrants from such countries could not have qualified as refugees or asylees in the past, future immigrants from such countries are unlikely to have the U.S. relatives needed to be admitted under family unification preferences.

Any serious effort to keep family unification as the dominant policy goal is mathematically incompatible with any binding limit on the annual number of immigrants. Under current rules, one million immigrants today acquire an entitlement to bring in several million relatives in the future. Those relatives, in turn, acquire implicit rights to bring in more of their relatives. As a result, admitting only one immigrant today actually implies admitting many more in the future. The number of immigrants thus tends to expand at a geometric rate, slowed only by increasingly arbitrary bureaucratic quotas and ever-longer waiting lists.

The compounding strains inherent in family unification are the main reason why legal immigration had already exceeded 900,000 by 1996, despite the 1990 statutory cap of 650,000, and why Census projections pretending that combined legal and illegal immigration will never exceed 850,000 are quite unbelievable. Just as the U.S. has no policy for favoring the most desirable immigrants (except with a few temporary work visas), the U.S. also has no effective rationing devices to enforce any binding limits on the number of legal immigrants. If we had prudent standards of admission, incidentally, my preference would then be to enlarge the number of immigrants because the U.S. population is slowing and aging. To criticize America’s non-policy does not prevent one from being strongly "pro-immigration."

There are several ways to reduce the overwhelming priority currently accorded to family unification, at the expense of all other goals. It is not clear why citizens of another country, privileged to become legal U.S. residents, should have any greater right than any other foreigner to bring relatives to this country. Children and spouses of new citizens could still be accorded a high priority, but this too should depend on some evidence of economic self-sufficiency (always the first priority). Citizens might likewise be permitted to bring elderly parents here on proof that they can and will support their parents as dependents, and not have them to live on Supplemental Security Income (even then, however, aged immigrants would have access to Medicare benefits without paying the related payroll taxes). Even the seemingly unobjectionable preference for spouses has encouraged a "mail-order bride" industry (e.g., from Russia or the Philippines), now accelerated with the development of Internet brides.

Reducing the emphasis on family unification involves a political problem familiar to the economics of public choice. Recent immigrants constitute an organized and vocal interest group that lobbies aggressively for easier admission of brothers, aunts, cousins and grandparents. Each member of the public at large, but contrast, has too little influence on this topic to be easily mobilized for effective political action. Some politicians have sought votes complaining about the number of immigrants, but few have dared question the literal impossibility of making good on two open-ended promises — family unification and refuge from all the worlds’ tyrants. It appears easier to be against immigration than to be in favor of careful immigration.

It is no favor to immigrants themselves (not to mention those excluded, or the general public) to maintain a policy that is poverty-blind — indifferent to the reality that immigrants without basic education and language skills are uniquely vulnerable to fraud and abuse, and very likely to suffer perpetual poverty, even if they manage to find some sort of work.

Certification Is Backwards

Refugees and relatives account for the overwhelming bulk of legal immigration, yet these are the only immigrants who do not need Labor Department certification that they will not have an "adverse impact" on labor markets. This protectionist scheme is based on the hoary fallacy that the number of jobs is limited, so immigrants supposedly take jobs away from natives. In reality, immigrants with jobs are the least of our immigration problems. Working immigrants create jobs by spending and investing their earnings.

Bureaucratic certification, like occupational licensing, invites rent-seeking by occupational lobbies hoping to gouge consumers by making sure that newcomers lack valuable job skills. The solution is simple: Certification designed to ensure that immigrants will not have good jobs must be totally replaced with our proposed skill-based criteria to ensure that future immigrants will have good jobs.

Certification’s perverse bias against skills helps explain why those with special skills and certain employment are now admitted only on temporary visas, for no more than seven years, while far greater numbers with no known skills at all are routinely granted permanent green cards. Admitting more engineers or computer scientists under H1-B quotas is better than nothing, but why kick them out later? In globally mobile industries, such as high tech, bottlenecks arising from scarcity of qualified workers can be alleviated just as easily by moving the work to foreign countries as by moving foreign workers here. America will either import the needed skills or export some of the best jobs.

There is no denying, however, that paranoia about "immigrants taking away our jobs," does have political importance. One way to alleviate such concerns might be to make cyclical adjustments in annual immigration quotas (currently set at 650,000 come rain or shine, albeit with big leaks). If the unemployment rate was unusually high during the third quarter of any year, then the immigration quota could be reduced for the following year, and vice-versa when the unemployment was low. Such adjustments would be tiny relative to the size of the labor force, but might nevertheless prove comforting to influential groups which might otherwise be hostile to immigration. For similar reasons, it would also be constructive to find a way to encourage greater geographic dispersion of immigrants (such as having smaller cities that are short of workers make that fact prominently known on the Internet), since the concentration of immigrants in just a few major cities puts a strain on schools, social services, and traffic.

Fine Illegals

Although legal immigrants far outnumber illegal immigrants (and the latter are virtually compelled to work), politicians commonly emphasize the illegal fraction in order to avoid confronting the fact that there are virtually no economically or socially relevant standards for legal residence in the United States.

Half of illegal immigration is not the result of sneaking across the border, but of overstaying a tourist visa. To deal with this, I would impose a system of fines that grows geometrically larger (doubled each month) the longer someone remains after the visa has expired. Anyone would be free to leave without paying the fine, or could be deported. But such persons could never again be admitted without paying the overdue fine, plus interest.

Gambling with Immigration

The current immigration regime turns out to be mainly based on country of origin. Because the last batch of immigrants mainly came from a few countries in Asia and Latin America (and, to a lesser extent, from the former Soviet Union), the next batch is destined to come from the same countries unless U.S. policy is dramatically reformed. Family preference actually translates into national preference.

The diversity lottery attempted to put a tiny patch on the national favoritism resulting from emphasizing nepotism in U.S. immigration rules. Yet the necessity of using a lottery to squeeze millions of applicants into 55,000 slots illustrates just how random the U.S. admissions criteria have become.

Once the primary objective of immigration policy shifts toward the immigrant’s prospects of economic self-sufficiency, there is no longer any plausible rationale for the whimsical diversity lottery. Diversity of ethnicity may be desirable, but diversity of literacy is not. By 1997, only 31.3 percent of Mexican-born U.S. residents had acquired a high school degree in either their native country or the U.S., and (not coincidentally) 33.9 percent fell below the U.S. poverty line.1 Yet U.S. scholars continually fret over poverty, illiteracy and education-based "income gaps" without so much as mentioning the obvious role of immigration policies that are blithely indifferent toward poverty and illiteracy.

In the future, the message to those who aspire to live in the United States must be that merely being related to a former immigrant, or having the bad luck to be born in some terrible tyranny, is no longer sufficient to obtain a green card. We will take such matters into account, but we will also demand some proof that the relative or refugee is unlikely to end up as permanent ward of the U.S. taxpayer. Prospective immigrants must be advised, for example, that the odds of being admitted will be greatly diminished if they drop out of school in their home country, and that the odds will be improved if they learn a little English. These are positive, helpful themes, even for those who ultimately remain in their native countries. English, for example, is the language of international business and the language of the Internet. Bilingual schooling and citizenship tests discourage economic assimilation.

Refugees and Asylees

It is easy to offer impassioned arguments that the U.S. "should" open its doors to all self-described oppressed and persecuted peoples of the world. But that is not about to happen. Such an open-ended commitment has never happened in modern times. The U.S. has selectively welcomed only refugees from Communist countries in recent decades, such as Cuba and Vietnam, as a Cold War political tactic. Due to the dominant priority accorded to family unification, many subsequent immigrants continue to arrive from these same (former Communist) countries.

Many problems the public tends to associate with immigration are most valid for refugees, because refugees are often poorly educated and (unlike other immigrants, particularly the illegal sort) refugees are instantly entitled to Supplemental Security Income, Medicaid, food stamps, etc. Yet a refugee, unlike illegal immigrants going through the motions of seeking asylum, at least waits for a U.S. invitation. The prolonged legal process of seeking asylum rarely bears fruit, yet it provides a way for illegal aliens to remain here after they have been detected, which may encourage illegal immigration.

Any decision to admit a large number of refugees should, in my judgment, be limited to one or two years and require a separate act of Congress.

When it comes to favoring one motive for immigration over another, there is no choice but to make choices. It is a waste of words to plead for unlimited refugees, or for unlimited family unification. Since there are practical and political limits on the number of immigrants society is likely to tolerate, then to admit more refugees regardless of their capacity to support themselves and their families must mean admitting fewer immigrants whose services may be sorely needed in the U.S. economy. Those who might prefer to reserve more spaces for refugees and asylees (or for family unification) are logically obliged to advise us which of the many other legitimate motives for immigration are to be thwarted and why.

Reduce Reliance on Non-Price Rationing

The number of foreigners who wish to live in the United States is much larger than the quota Congress attempts to place on the annual number of immigrants. That makes this a rationing problem — a topic for economists. There are very few mechanisms for rationing — the price system, the queue, the lottery, evasion (illegal immigration), or political clout (letting politicians and bureaucrats decide who gets to live here).

When it comes to rationing nearly everything else of value — to decide who gets what — the U.S. relies entirely on the price system. Experiments with more chaotic methods, such as waiting in line for gasoline in the seventies, were properly met with considerable complaint.

When it comes to rationing the incredibly valuable right to live in the U.S., however, the uses include every rationing technique except the price system.

The favored rationing technique is a mixture of arbitrary political preferences and ever-increasing waiting lists. Foreigners offered a U.S. job requiring less than two years’ experience find themselves in "Employment Third Preference" class, waiting ten years for a visa. Permanent residents sponsoring an unmarried child older than 21 fall into family category 2B, with a six-year wait. Brothers and sisters of U.S. citizens are in "Family Fourth Preference," with a waiting list of more than one million.

Such primitive non-price methods of rationing always work poorly, partly because they cannot deal with varying intensity of motivation (if they could, anyone more eager to live in the U.S. could easily bribe someone in less of a hurry who happens to "own" an earlier spot in the queue). Using long waiting lists to ration entry discourages the most skilled or affluent people who have other attractive options, such as moving to Canada or New Zealand where skills or affluence are promptly welcomed. Allowing politicians and bureaucrats to decide who gets the first chance to live in the U.S. tends to favor friends and relatives of lobbying groups with the most votes or most generous campaign contributions. And the diversity lottery is ludicrous, a monument to the intellectual bankruptcy of Congress.

Several economists have proposed that immigration rights be auctioned to the highest bidder, but there are formidable practical and political problems with that. It would be quite easy, however, to make partial use of the price system to alleviate such obvious rationing problems as 10-year waiting lists and lotteries. All that would be needed would be to charge successful applicants an immigration fee, as Canada does, while offering a loan if immediate payment poses a hardship.

Immigrants expect to obtain most of the benefits of immigration (which is why they immigrate), yet taxpayers in general now bear all of the costs. U.S. taxpayers also make financial commitments to new immigrants, offering many services and benefits, yet immigrants make no commitment to the U.S. other than the modest cost of transportation to and fro.

A modest one-time fee of, say, $2000 per immigrant would significantly shorten the waiting lists by thinning-out those applicants with weak, uncertain motivation. An immigration fee (like the proposed fines for overstaying visas) would take advantage of demonstrably potent economic incentives to greatly reduce reliance on such clumsy devices as waiting lists and lotteries.

Even after making better use of the price system to balance supply and demand, however, we must still rely on some criteria for determining each immigrant’s eligibility. The most sensible and ultimately most compassionate criteria are those that demonstrate the potential immigrants have sufficient human and/or financial capital to become productive members of the economy and society. In the absence of a binding multi-year job contract, such admissions criteria would require the equivalent of a resume — occupational experience, formal education or other skills, including English language skills — preferably enhanced by the added security of a "settlement fund" (accumulated savings).

Using evidence of economic self-sufficiency as the primary requirement, relegating other objectives to a secondary or tertiary rank, would soon make immigration far more successful and less controversial.


1 Bureau of the Census press release cb99-195, October 15,1999