The president, and the Republicans in general, continue to twist in the wind on DACA and illegal immigration. Mexico still refuses to pay for the president’s Wall. In its absence, he has been forced to alternative ideas like raising visa fees as funding source. Properly implemented, that idea could be a winner.
Illegal immigration across the Mexican border is really a black market labor problem. Border jumpers can triple their net wages compared to Mexico, and earn almost ten times as much as they would in Guatemala. They come for the money.
Black markets are always created by government. They arise when government tries to keep willing sellers from willing buyers, ostensibly for our own good. Drugs are the biggest black market goods, and the banning of alcohol during Prohibition is the most notorious. We have been pursuing the ‘wars on drugs’ for fifty years, and yet today, the street price of a dose of heroin is less than a pack of cigarettes. The war on drugs has been, as was Prohibition, a striking failure. Black markets are almost impossible to eradicate.
{mosads}So will be the case with illegal immigrants — and why I forecast that illegal immigration would be near ten year highs in 2018. There are many ways to circumvent a wall when jobs are waiting on the other side.
For example, migrants can simply overstay their visas. According to the Center for Migration Studies, 42 percent of all illegal residents over-stayed their visas rather than coming undocumented over the border. For those who came on visas, the wall is irrelevant. Almost 19 million people entered the U.S. from Mexico last year on tourist visas. Even if every illegal Mexican were deported and the wall built a mile high, the entire undocumented Mexican population of 6.7 million could be reconstituted from visa overstays, theoretically, in as little as four months. If there is work and a material wage differential to Mexico, workers will come, on foot, with tourist visas, by water or air. But they will come.
As with tobacco, legalizing the migrant market and taxing it would make more sense. Here’s how it might work. In a market-based approach, an eligible Central American – one with a clean criminal record — could purchase a work visa at a market rate in return for on-demand access to the U.S. labor market. This visa would provide no rights to any social programs in the U.S., but would allow the conduct of daily business, for example, opening bank and mobile phone accounts, renting property and allowing holders to obtain U.S. driver’s licenses. Our estimates put the value of such a permit around $10 per day, representing an effective tax rate of 13 percent for the typical unskilled Central American worker. Fees from such visas would net the federal budget more than $30 billion annually.
The market would be managed by matching the price to the volumes of visas issued. If the price goes down, the number of visas could be reduced. If the value goes up, more visas could be issued. By this means, the government could insure that prevailing U.S. wages are maintained and unemployment among migrants is minimal.
Visas would not be tied to the individual as such. Rather, they would act more like airline tickets. At the market price, anyone can buy a seat. But no seat is reserved for any particular individual. If you want to get on the plane, you have to pay for the ticket. By analogy, a Mexican with a clean record could always work at will in the U.S. if it makes economic sense. If not, that visa will be available for another Mexican to purchase, with the system optimizing the price and revenues much like, say, Southwest Airlines manages its seat capacity.
If visas are always available on demand, Mexicans will have no need to sneak over the border. Why risk your life on an eight day March through the desert and pay a coyote $4,000 when you can pay the U.S. government $3,600 and come and go as you please? Every year, as many as 700 people on the two sides of the border die trying to get to the U.S. These deaths would be all but eliminated.
Sanctuary cities would disappear. If a Central American immigrant can purchase a visa on demand, the ability to stay is simply a matter of money. There is no one to protect. And if a migrant is not eligible for a visa, they are not worth protecting, because they have disqualified themselves through criminal behavior.
Nor would we need a wall or 17,000 border agents to man it. We would need excellent detection and high speed helicopters to intercept those very few trekking across the desert, confident that they are up to no good. The vast majority would enter through official crossing points. If Trump wants to use the visa proceeds to build a wall, go ahead. But with market-based system, we would not need one.
The average middle class voter gets it. They know that illegal immigrants are here because employers need them to do jobs that most Americans reject as too hard, too distasteful or too menial. Even so, the average citizen wants to get control over the immigrant flow, be properly compensated for granting market access, and have the ability to quickly identify and expel problem migrants. A market-based approach does all that.
Only Trump — not Hillary Clinton or Jeb Bush — could even propose market-based immigration. It requires a business mentality not beholden to generations of ossified left and right dogma. If Trump could pull it off, he would be a hero to almost all moderates, many conservatives and Hispanics, and not a few Democrats. It is a huge opportunity for a President looking to make his mark.
Steven Kopits is the president of Princeton Energy Advisors, a consultancy firm in Princeton, New Jersey.