Merit-based immigration

by Russ Roberts on June 8, 2007

in Immigration

Here is my commentary on immigration that was on NPR’s All Things Considered, yesterday. Listen to it here. Here’s the opening:

According to the White House, the new immigration bill will "Help
Keep The U.S. Competitive In The Global Economy By Establishing A New
Merit-Based System For Immigration That Is Similar To Those Used By
Other Countries."

And how is it going to do that?

going to be a point system to determine who gets one of the precious
380,000 visas that are up for grabs. Highly educated people get points.
People with skills that are in high demand, whatever that means, get
points. Young but not too young? Points. Speak English well? More
points for you. Speak it badly, fewer points. Don’t speak it at all? No

People with the highest point totals get the visas.

people complain that the Bush Administration is too free market. But
the idea that Washington bureaucrats can figure out which skills are in
high demand is an idea straight out of the old Soviet Union. It would
be great if we could get some old communists from the politburo to
administer it, but we won’t be able to. They won’t score high enough on
the point system to get a visa.


The idea that we should base our immigration policy on "keeping the U.S. competitive" is bizarre to me. First, it implies that there are right and wrong kinds of immigrants, bureaucrats can figure out which kind is which and that the goal of immigration is to help maximize GDP. I don’ t think any of those things are true.

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TGGP June 8, 2007 at 10:30 am

Immigrants have externalities. That is one reason a tariff would make some Pigovian sense. However, different immigrants have different externalities. It is not beyond the government's ability to look at what factors correlate with them. This would permit the "tax" on an immigrant to vary with the expected cost he will have on others. What indicator helps show whether the immigrant will have significant externalities and changes dynamically like the market rather than slowly like the government? Wage rates! That's how the market says what is demanded or "needed" most. They also correlate with education, not committing crime or being on public assistance or having children out of wedlock. The alternative to a skill-based system in the U.S has been a family unification system where the immigrants themselves select their cousins and whatnot without taking into account the costs imposed on Americans. This discourages assimilation and would never be considered in a real guest worker system like in the Gulf states. Encouraging them to have their families here is especially stupid since it is the second and third generations that have the worst crime, dependency and illegitimacy problems.

Chris June 8, 2007 at 12:08 pm

The obvious free-market approach to importing the most valuable immigrants is to auction off the visas to those companies who want to hire the them. Not only would that guarantee that the most highly valued would make it in, but it would raise revenue for the treasury and give us an important price signal about how important foreign high-skilled labor is.

Bruce Hall June 8, 2007 at 12:25 pm

Does the philosophy of "come one, come all" (give me your….) depend on a similar philosophy of "now that you are here, good luck…" which was the condition for immigrants during the great 19th century immigrations?

If not, perhaps it is time to examine those philosophies to see if a change in one (welfare support, etc.) requires a change in the other (useful skills) so that our communities are not overrun with social support disasters.

trumpetbob15 June 8, 2007 at 1:06 pm

Okay, I still have one question. Why are we limiting visas in the first place? I am assuming there was a time when the country either couldn't handle too many immigrants at one time or plain discrimination. But massive border crossings have shown us that the country can support a couple million immigrants a year. I would rather just do as Bruce mentioned above, "Come one, Come all" and move onto a debate about how to limit the "dangerous" people from coming in. Then again, my approach is probably too logical for the people in Washington to understand.

Rob Berle June 8, 2007 at 1:27 pm

The Washington Times reports today(6/8/07) that "Foreign nationals make up nearly 90 percent of the… persons arrested in connection with crimes against children, including pornographers and molesters, under Homeland Security's Operation Predator." page three. Th full story of this nations immigration problem is very dark indeed, and needs discussion by its bloggers.

EDITOR'S NOTE: According to the Wikipedia entry for Operation Predator, the program is designed focuses on foreign nationals. So it is not surprising that most of the people it catches are foreign nationals. It is not the case, as this comment implies, that 90% of sexual predators are foreign nationals.

Here is the wikipedia entry:

Brad June 8, 2007 at 2:00 pm

You have a point, but given the combination of how screwed up limiting our current immigration policy is and how the policy has been largely ignored, I think the combination of the new (now likely dead) proposal plus eventual complete ignorance of it will yield a better situation.

But then again, I'm cynical enough to believe that what's behind the current plan is kind of a finesse saying "you don't like the current situation, let us fix it for you and see if you hate it worse" and directed at immigration foes.

Methinks June 8, 2007 at 2:37 pm

The visa issue and the immigration issue are two different things, in my view. Visas do not confer the benefits of either citizenship or permanent residency. Once the visa expires, you have to go home. In addition, you must prove that you are very high skilled labour to even be elligible for an H1-B. Even a fully trained nanny from a British nanny school is not considered "skilled" and is not elligible for an H1-B, for example.

There aren't enough H1-B visas for all the highly skilled foreign workers required by American business. Why they won't allow an unlimited number is truly a puzzle to me. It's true that with an H1-B a foreigner can eventually apply for a greencard if his employer wishes to sponsor him, but by that time, we WANT that person to immigrate. These are the people who are the largest net benefit to the economy! If they can't get the visa issue straightened out, I have little hope for the whole of the immigration issue. I still think our robust welfare state will be a stumbling block for meaningful immigration reform.

Christopher Rasch June 8, 2007 at 4:27 pm

Couldn't the externalities of would-be immigrants be addressed by requiring them to post a bond? (The amount set to, say, 4X the externality imposed by the median immigrant.)

Then if the immigrant commits a crime, goes on welfare, etc, the costs of the immigrant could be recovered from the bondsman. It seems to me that bond dealers would do a better job of screening out "bad" immigrants than a border agent. And our border enforcement efforts could then focus on those few who could not find a dealer willing to sell them a bond.

anon June 8, 2007 at 6:38 pm

mostly agree…but i think if we required prospective immigrants to write an essay refuting the works of Karl Marx and FDR we would be doing everyone a favor ;)

Patrick R. Sullivan June 8, 2007 at 7:24 pm

'Couldn't the externalities of would-be immigrants be addressed by requiring them to post a bond?'

Easily. We could take X% of their earnings as a payroll tax, held against any welfare received, medical care, or lawbreaking. Returning the difference when they decide to go home.

The Cynical Libertarian June 8, 2007 at 7:41 pm

If you love me, press for automatic entry for people with masters degrees :)

Chris June 8, 2007 at 8:18 pm

MeThinks –

The idea is that if you allow an unlimited number of H1-B visaholders in, they will drive wages down of high-tech jobs, displacing Americans who would otherwise take them.

Recognize that when somebody says "there isn't an American to take the job," they usually mean that there isn't an American who can do it at the price the company is willing to pay. After all, they could just hire a reasonably smart American and train them to do the job. Some jobs just require more training than others.

Brad June 8, 2007 at 8:33 pm

Chris, speak about something you know about. I can tell you from experience that when a smallish company (say, under 100 people) gets into the H1-B game, it is precisely because they need a particular person for a particular position, and remotely contracting with occasional travel won't work as well. No net job lost to an insufficiently trained American.

If it's about saving money on a software development team, you simply handle that with outsourcing to India/Estonia/Etceteria and be done with it. You go the expensive H1-B route when you need particular kinds of expertise.

Chris June 8, 2007 at 10:22 pm

Brad –

I don't see that as any different. You're just suggesting that the smaller company can't afford the higher cost. If it REALLY needed a specific person, it could triple the salary and get him to move. If that person wasn't willing to move, the entire company could relocate to where he is. What does your company do when it doesn't get the visa? Just go out of business?

Outsourcing to overseas companies has its own costs — the main one being that projects of any real complexity are much, much harder to manage.

I used to have an engineering position at a large networking company. We often hired co-op students from local universities on education visas, then hired them full-time under H1-B visa applications with job descriptions that were so specific that only the one person would fit the bill. With some effort, we could have found a suitable American, but we had somebody who was a known quantity and had some experience on exactly our project (experience he got working for us during his summers.)

Jason June 9, 2007 at 12:35 am

"Some people complain that the Bush Administration is too free market."

How is a point system set up by the government free market at all? When I think of free market proposals, I think of Chris' suggestion of auctioning off visas. No wonder people don't like "free markets," the term is attached to all sorts of thing people don't like regardless of whether the term is applicable.

John Pertz June 9, 2007 at 1:31 am

Chris said:

"The obvious free-market approach to importing the most valuable immigrants is to auction off the visas to those companies who want to hire the them. Not only would that guarantee that the most highly valued would make it in, but it would raise revenue for the treasury and give us an important price signal about how important foreign high-skilled labor is."

The implication of this line of reasoning is that the lowly skilled immigrants are of absolutely zero use to the U.S economy. Id say that immigrants of all stripes are of use to the U.S and that they hall have valuable contributions to make to the U.S economy.

Brad June 9, 2007 at 2:09 am

Chris, 2 things… (1) Your "drives down wages" contention is close to false. H1-B's have their own expenses. For example, if you don't have your own in-house lawyer to handle them, plan on $10K-$15K in legal fees the first year. If you're a small company or startup, plan on relocation loans. I hate the class warfare card as much as the next guy, but you're talking salaries over $120K before H1-B competition can really make a cost savings difference for companies.

(2) Find me good engineering students who aren't here on student visas. I'd bet that a lot of great engineering and computer science departments would have to downsize considerably if they couldn't accept foreign students and their money. Maybe in exchange for telling them they need to wait to get a job until every American has had a shot, we could offer them in-state tuition at our public colleges.

Chris June 9, 2007 at 1:25 pm

Brad –

Didn't say I agreed with the "Drives down wages" view. I do, however, believe it's a way to drive down total cost: if it's less expensive to go with an H1-B visa, that's what you do; if it's less expensive to go with a native, that's what you do. "Expense," as I use it, includes time, effort, uncertainty and opportunity cost.

As for your last paragraph, there are certainly a lot of good, native, engineering students. But, that misses the point, which was that there are a number of H1-B visas given to immigrants for jobs for which there are willing and capable Americans. The number of jobs for which there truly isn't a capable American is very low. It's just that it's often less costly (considering all above factors) to go with an H1-B visaholder.

skh.pcola June 9, 2007 at 2:52 pm

Russ said:

"…there are right and wrong kinds of immigrants…"

and then says that he doesn't believe that this is true. Really? Is your moral relativism that loose? How about violent gang members, child molesters, drug dealers, people with communicable diseases, etc.? All have equal value to society relative to Indian engineers, Pakistani programmers, Brit managers, and Aussie financiers? Really? Your PC multi-culti dystopia is will be an ultimate failure.

The Cynical Libertarian June 9, 2007 at 6:35 pm

To be fair, isn't it fairly simple to see which skills are in demand? Just look in through the jobs pages and see which one's offer the most pay and benefits.

The Albatross June 9, 2007 at 10:20 pm

Don't be silly Russ, all we have to do is start measuring the width of peoples' heads, contemplating the bumps in their skulls, and cross referencing that aginst their eye colors and skintones and we should have no trouble figuring out what visas we should issue to what people. Hey, if we can put a man on the moon and predict the effects of climate change 50 years from now, then this should be a piece of cake. You obviously have not heard of this thing called "science."

Please note the preceeding was tinged with heavy sarcasm–I know evryone gets it but sometimes some people trouble.

Methinks June 11, 2007 at 11:53 am


Not true. Americans aren't majoring in science and math and that's a problem. Most of the H1-B holders on Wall Street (the area with which I'm most familiar) have such specialized skills that most Americans can't do them. Heck, most people on the planet can't do those jobs. You can't just train French Lit majors to trade options, for example. Unless, of course, you want to soon be out of business. While there is a very small pool of highly qualified candidates who CAN do the job and the pool of those who CAN and WANT to do it is smaller still. You may say that the company just needs to up the price they're willing to pay but then you run into the problem of the task becoming unprofitable and not worth doing at all.

Something else to consider is that fewer H1-B visas means a higher propensity to offshore jobs. So, would you rather attract these people, the economic activity they will generate and the taxes they will pay to America or not? That's really the bottom line question. I think we should – at least that's an offset to the flood of illegals, a large number of whom end up a net cost and whom we cannot stop crossing the border.

Eric June 11, 2007 at 1:39 pm

I say opening up the labor with unlimited visas will help the US worker, Why?

Labor is not a fixed expenditure, an employer doesn’t simply need a fixed number of workers to perform a given task

Although it may appear that ratcheted-up wages benefit employees, the appearance is deceptive. Trying to force an increase in wage by limiting the pool of employees available in the US will in the long run create less jobs. An example from the past is the Automakers Unions.

When the price of a resource rises, employers will seek substitutes. He might substitute capital for labor, he might automate. He might reorganize his productive technique so as to economize on labor costs. He might move his operation to a nation where wages are lower. The workers who lose their jobs will be worse off. Of course, those workers who keep their jobs will be better off (for the time being), but at the expense of their now unemployed co-worker.

Again, as labor costs (generally) rise, producers will hire less labor and more capital. Example: The high cost of middle-management labor combined with rapid reductions in the cost of computer-processed information was the driving force behind the corporate restructuring of the late 1980s and early 1990s that put hundreds of thousands of white-collar workers in the unemployment lines.

True, we don’t have a fully free market, but the proper response should be to repeal the subsidies, taxes, regulations, and other privileges that suppress competition, capital investment, and hence the demand for labor.

Ray G June 11, 2007 at 10:41 pm

Sorry if I missed this in the comments, but my question is fairly simple: is there no line to be drawn at all? Anyone and everyone can just come right in?

Sounds nice on paper, just like Utopia sounds great in theory. . . but. . .

Chris June 12, 2007 at 12:02 am

MeThinks –

I don't doubt that there are a few high-skill jobs where some tiny portion of the planet's population is capable of doing it. I suspect, however, that there are either far fewer such jobs than H1-B visas, or (because of the lottery) the H1-B visas aren't being used to fill those positions.

I'll also agree that we graduate fewer tech majors nowadays. But, I know a number of extremely qualified software developers who switched careers when the tech bubble burst because they couldn't find software jobs. If such people were so extremely hard to hire, companies would have hired them when they were available, with or without a project to work on.

Going offshore is not the panacea that some claim — it is much, much harder to manage and off-shore developers tend to move from job to job (taking their experience and your IP with them) much more frequently. All those play into the cost as well.

I don't really have an issue with the H1-B visas per se — I've known a number of folks who used them as a bridge to their green cards and they're now productive & contributing members of society; we're better off with them than without them. I just get annoyed when Bill Gates talks about this huge hi-tech labor shortage when he hasn't availed himself of the available hi-tech labor.

skh.pcola June 12, 2007 at 5:04 am

To those who think protecting our borders and enforcing existing laws is extreme: Do you honestly, rationally, believe that every single earthling who wants to come here has something to add to our equation? We aren't simply speaking about Mexicans. The vast majority of about half of the earth's countries would empty if your idealistic dream of "free borders" (or whatever epithet you prefer to assign this concept) comes to fruition.

Again, your moral relativism leaves me agape. I agree with the unlimited H1B suggestion above, disagree with the opinion that such a policy would depress wages in the targeted industries, and believe that extrapolating "unlimited H1Bs" to "Let's welcome everybody!" is a net loss to our culture. Maybe I'm just a bigot, but every foreigner who wishes to come here is not an asset. I personally don't believe that is bigoted–just prejudiced (in the literal sense of the term)–but your mileage may vary.

Pierre June 12, 2007 at 9:17 am

Hahaha, do you really think half the world want to go to the USA ?
Better die.

"every foreigner who wishes to come here is not an asset" : what are your criteria and what makes them relevant ?

"I agree with the unlimited H1B suggestion above, disagree with the opinion that such a policy would depress wages in the targeted industries" : it would depress nominal wages actually, but increase real wages. You just need to privatize the welfare state : education, health care, Medicare…to suppress some of the incentives to immigrate. And cut down subsidies.

"Maybe I'm just a bigot" : no, you're an utilitarian bigot.

Chris June 12, 2007 at 10:53 am

Pierre –

Actually, I also think a large portion of the rest of the world would move to the US if it were easy to do so. If you're poor in Africa, you starve to death; if you're poor in the US, you probably own a TV and are on food stamps. We enjoy one of the highest living standards in the world, and it should not be surprising that other people want that as well. While 1/2 seems a bit high, the number is clearly large.

Britain and France are having a tough time assimilating their immigrants. It's at least conceivable that we could have similar issues if we liberalize immigration too much.

Pierre June 12, 2007 at 12:58 pm

The problem in France is more about unemployment than immigration. Populist parties claim that immigration causes unemployment…
The problem in Britain is its excessive tolerance to Islamic fundamentalism.

But I don't think that there is a cultural problem with Hispanics.

skh.pcola June 12, 2007 at 2:09 pm

"The problem in Britain is its excessive tolerance to Islamic fundamentalism."

LOL. That's rich, if you're saying that as a Frenchman. Are there any cars left in France? The "youths of indeterminate extraction" have been torching them at a healthy clip.

"The problem in France is more about unemployment than immigration."

No kidding? How's that socialism working out?

Pierre June 12, 2007 at 4:42 pm

"Are there any cars left in France?"

Have a nice day.

Pierre June 12, 2007 at 6:49 pm

"The problem in Britain is its excessive tolerance to Islamic fundamentalism."
LOL. That's rich, if you're saying that as a Frenchman."

and especially

Quote :
"The Muslims in France are a special case: 71% have a positive view of Jews. This is the only Muslim population or sub-population surveyed whose opinion of Jews is more favorable than not."

BTW there has been no Islamic bombing in France since 1995.
Where did 7/7 and 9/11 take place ?

"No kidding? How's that socialism working out?"

At least better than its American counterpart of the 30's.

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