Economic feasibility of amnesty for undocumented workers in the U.S.

Last month, Alex Segura, a member of the Federation for American Immigration Reform (FAIR) special interest group and founder of the Utah Minuteman Project, traveled from his home in Utah to Washington D.C. to protest/lobby for immigration reform. The issue of illegal immigration has and will continue to be a hot-topic for political pundits and candidates as the attention paid to our undocumented friends from the outside ebbs and flows in response to the political climate. One thing is clear, the presence of illegal immigrants affects our social and economic systems and impacts us at all levels of government and commerce in profoundly significant and complex ways.

Since 1986 (when President Regan signed into law SB 1200 which created an amnesty program) it is estimated that there may be as many as 20 million undocumented people in the U.S. at present time with 500,000 more entering illegally each year (although that number may be decreasing with economic recession). It is a little late to try to slam the door for those 20 million people which, to me, is akin to a sunk cost. Will we now throw good money after bad trying to deport illegal aliens?

Illegal immigration cannot be ignored. But is it economically efficient to round ‘em up and put on a bus to Mexico? I think the economic realities of the issue are surprising.

The cost burden of correcting “the problem” will be transferred to government agencies not intended to deal with the scope of work. The Internal Revenue Service will “discourage” businesses (mostly small businesses) from utilizing undocumented labor but that is not really their job or best skill set. The transfer price will be high to law enforcement if given the task of discovering, detaining, and/or deporting 20 million mostly non-violent individuals. If law enforcement is spending time and resource on immigration, there must be a steep opportunity cost to other law enforcement activities. Imagine the impact of non-amnesty on the judicial system. It is mind-boggling to think of our courts trying to deal with the disposition of so many immigration cases. Think of all the frivolous litigation that would have to wait! The U.S. would have to appoint an Immigration Czar and create new quasi-judicial and administrative agencies just to process illegal aliens, if we can catch them. These are avoidable costs. And from a purely economic standpoint it would also destroy the cheap labor underpinnings of our capitalistic system labor inputs would go up causing a leftward shift in supply curve and increasing prices and movement along the demand curve for industries affected by undocumented labor (just about every industry utilizes undocumented labor in some segment).

In an attempt to avoid a bottomless cost center which is pursuing illegal aliens, an amnesty program can actually turn the issue into a profit center. Suppose that in order to get resident alien status with work visa an undocumented worker had to accomplish 4 simple things.

1. Come forward voluntarily and apply for amnesty.
2. Pay a fine/fee of $2,500 for entering the country illegally and to process application.
3. Pass a background screening (to exclude applicants with drug, weapon, violence crime, sex offenses, whatever) and English language proficiency exam.
4. Obtain an employer sponsored bond in the amount of $2,500 per worker to be employed. Now the employer shares the accountability of their hired labor.

Given the economic cost of after-the-fact law enforcement and adjudication of undocumented aliens, advancements in technology that would allow for better management of an amnesty system and a fee structure that could at least off-set the transfer costs of the program, it is more economically feasible to again offer amnesty to undocumented workers in the United States.

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Brooklyn said...

I think you are correct in saying that it is a complicated issue with many variables and I think this is the main reason for the governments hesitation to act. No one really knows the effects of eviction, like the transfer costs and who will take the brunt of those costs. I think it's easier to just continue with the system in place and maybe implement new systems in "baby steps."

Brittanicus said...

E-Verify should be on the national agenda to countermand any illegal alien infiltration into the working environment. Whatever needs to done should take priority to remove the unauthorized labor in our jobless nation. More funding, more modifications until the illegal immigrant fraudulent use of documentation becomes a thing of the past. Using whatever technical programming that is available, to make it's operation inadvisable? Any database including state criminal, FBI, Social Security, Homeland Security, and any other means possible. Ultimately the final version would contribute photo verification, national ID system with biometric data which has been recommended by the Brooking's Institute and Duke University MIT. Supposedly small employers who don't operate computers should have common access in such locations as Post Offices or other approachable government building to identify the workers they are hiring.

There should be no excuse to not install a nationwide mandatory system of worker identification. My suggestion is that--ALL-I-9's should be copied and a duplicates sent to a Homeland Security Clearing House? Creating such an office would be a simple affair, if our state and federal government would be more beneficial to the working American male and female. If our government is sincere in securing our borders, and introducing new immigration enforcement tools, then E-Verify will become the final deterrent and not be weakened by Sen Harry Reid and his administration. I have made a point of speaking to a few business human resources departments, and found most are enthusiastic about the use of Verify. Only 1 of the 6 companies that I investigated determined some false negatives" and "false positives. But they always have a backup system of contacting the Social Security agency nearest to them, until the irregularities are resolved.

Brittanicus said...

All that remains is citizens and legal residents to stop the Obama people from throwing a wrench in the cogs and stopping any technological advancement with E-Verify. E-Verify can be used on a universal level in checking bogus drivers license applications, auto insurance, home purchase, health care and other personal data. It would certainly alleviate the kidnapping of social service programs by the 20 to 30 illegal immigrants in America. It would displace foreign nationals so down-trodden legal single mums with children, homeless vets, senior citizens and even students could get employment. It all depends on all of us to contact our Representative in Washington at 202-224-3121. Tell them you don't want half measures by full permanent implementation? NO MORE DRAGGING THEIR FEET? Tell them your remember them on next election day. YOU ALSO WANT AN END TO ANOTHER AMNESTY.

Don't let them distract you, but repeat your demands without hesitation to these open border jerks. Invest a little time and check what your politicians are doing to our immigration enforcement safeguard at NUMBERSUSA. Read about the consequences of future OVERPOPULATION at WEBCAPS and our collapsing infrastructure, that has been ignored for decades nationwide. Last read factual information at JUDICIAL WATCH that discloses the lawmakers, that are running the country for themselves, friends and business associates. ITS ALL FREE. Read that some of the White House Czars are not true Democrats, but are shadowed by their past Liberal Marxist backgrounds.

Rebecca said...

Wow, Brittanicus, this is an Econ Blog so try to relax a little bit. For the record, it wasn't the illegals, it was the dingos ate yor' baby.

Dr. Tufte said...

For the record, I don't have a student using Brittanicus (at least that has come forward to admit that). Also, I wonder about the choice of name (Brittanicus was the legal heir of the Roman emperor Claudius, he was killed and Nero stepped into that role).

Anyway, immigration policy is a mess. I don't think that, fundamentally, we have any clear idea at all what we do or should think about the situation. Stopping illegal immigration is simply not a very serious problem: many countries do it around the globe. I think perhaps the biggest problem we have is the perception that we're actually trying hard to solve this problem. We're just not. As a thought exercise a few years ago I calculated the cost of building a full wall along the Mexican border - it was in the range of 5% of the Obama stimulus packages bottom line. That's chump change around D.C. I'm not claiming to want that, or that it would be a good thing, but it simply isn't that big of a job for a $13 T macroeconomy.

To get at the big picture, here's a question to think about. For the most part illegal immigrants improve their circumstances by coming here, so they've made a smart choice; so if they're smart and they choose not to do it legally, what costs are we putting in place that make them come to that decision?