Wednesday, May 4, 2011

Immigration at a price?

Gary Becker has just published a short monograph for the IEA entitled The Challenge of Immigration: A Radical Solution (see also here). Like most of Becker’s proposals it has a penetrating simplicity and compelling logic to it. I want to consider it briefly (for my earlier assessment of the immigration issue see here).

Here is the Executive Summary:

  • Despite substantial economic growth in underdeveloped countries, there are still huge differences in wage levels between poorer and richer countries.
  • Low fertility, especially in Europe, is also likely to lead to pressures that will encourage migration in future decades.
  • Net migration has grown dramatically in recent years. In 1980, net migration to the UK was approximately zero and by 2005 the figure was 190,000 per annum. In the same period net migration to the USA more or less doubled to 1.1 million per annum.
  • There were very substantial migration flows in the late nineteenth century but the USA imposed restrictions from the 1920s onwards. Those restrictions are onerous and involve bureaucratic controls.
  • Given the extent of welfare states in countries with higher incomes, it would be difficult to go back to a policy of free migration.
  • There would be many advantages to a policy of charging immigrants a fee. If a fee of (say) $50,000 were charged, it would ensure that economically active migrants who had a real commitment to the country were most attracted. This fee could be used to lower other taxes.
  • Charging a fee would be a much more efficient way of controlling economic migration than the use of quotas and other bureaucratic systems of control.
  • Even a fee of $50,000 would allow people on relatively low earnings to enter the USA if there were skill shortages. Given the level of wage differentials, such a fee could be paid back in a few years or in a decade or so.
  • Certain categories of migrant might be allowed to benefit from a loans system to enable them to pay the fee over a period of years. This could operate rather like a student loans system in higher education.
  • One advantage of using a fee rather than administrative controls would be that illegal immigrants would have a strong incentive to regularize their status – and would be allowed to do so legally. Such people would have to pay the required fee but would then be free to choose much more remunerative occupations. As such, the use of the price mechanism in migration policy could alleviate the scourge of illegal immigration.

My general reaction to this proposal was quite negative for a few reasons.

  1. It appears to solidify the role of government in “centrally planning” the immigration market. Any kind of central planning smells bad – incentive and knowledge problems – abuse, corruption, unavoidable errors of judgment, etc. It also means that government officials get to decide how many immigrants is the “right” number, rather than leaving this to the market.
  2. The immigration fee would be paid to the government and would become a source of revenue for it. Becker suggests that this revenue (which could be substantial) could be put toward the budget deficit and obviate the need for some taxes going forward. This argument is surprisingly naïve. It is almost certain that the government will simply expand its commitments to include the revenue. In other words it will simply fuel the expansion of government. This is a proposal for expanding government revenue, not one for simply redistributing the way that revenue is used, as is the case with vouchers.
  3. The proposal is basically a mechanism for allocating immigrants between the legal and illegal categories. The higher the fee, the more likely it is to deter legal migration, leaving the potential migration two, not one, options; not to migrate or to migrate illegally.
  4. Becker suggests a government funded, or supported, loan program for lower income immigrants to be able to pay the fee. (At $50,000, even low income earners would be able to pay this loan in a few years.) Who needs another government loan program? Most certainly this would turn into a dei facto subsidy.

Further thought, however, has inclined me more in favor of the proposal for the following reasons (referring to the list above).

  1. The role of government will be diminished. So while it is clearly not ideal it does reduce the necessary bureaucracy and its scope of decision making. Responses to the level of the immigration fee set could be made public and as a way to use “market data” to adjust the number of immigrants admitted. I still don’t like this at all; but I have to concede it is a lot better than what we have.
  2. Expanding government revenue by this proposal remains a big problem for me. This could be made much more palatable with a more detailed circumscribing of the use of this money; keeping it out of general revenue. Maybe it could be used for a comprehensive education voucher program. [In the high welfare states, like California, they would want use this money to pay for health-care and education of immigrants. I would resist this, since immigrants are likely to pay for them themselves in their taxes.]
  3. The proposal definitely creates a mechanism by which illegal immigrants could regularize their status. It seems it would also avoid the thorny question of amnesty and the moral qualms surrounding it. At $50,000 it is likely to all but remove the illegal immigration problem.
  4. One need not have government involved in any loan program. If immigration were economically profitable private companies would fund loans for the fee.

So, all in all, it seems to me this proposal would be a vast improvement over what we have. It is clearly much more politically palatable and likely than more the more radical changes that many of us would like to see along classical liberal lines. Would it foreclose such changes completely? Is it worth taking that risk? Though my heart is not in it, I would have to say yes. What do you think?

1 comment:

Michael vB said...

Currently many illegal aliens are paying substantial sums of money to have someone slip them over the border. Would Becker's proposal not be a way of shutting down some of the illegal entrants and making things more attractive for the would-be legal immigrants? Of course, it still does not solve the problem of the bright, talented young Hispanic graduates already in this country whose parents brought them across the border as infants. They know no other home. They are hardworking, well educated, eager participants in the market place. I see no economic reason to deny them a green card.