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Wednesday, May 30, 2007

George Borjas on the Proposed Point System for Allocating Visas

This is an example of what economics studies - the allocation of scarce resources. In this case, the scarce resource is permission to immigrate to the United States and the question is how we should allocate the right to enter the U.S. among the many people wishing to come here.

One solution is to implement a price system and let the impersonal marketplace solve the problem for us. Under this system, those most willing to pay get to enter. But this brings up issues of equity and fairness - under a market-based system of prices, poor immigrants from some countries such as Mexico would be effectively barred from entering.

If that is unacceptable - if we want to offer immigration to a wider class of people - than how should we allocate the right to immigrate? Family connections? Education and skill levels? Should there be quotas for individual countries? Should we try to displace as few domestic workers as possible, or do we want to maximize economic growth no matter the impact on the current workforce? Should we give preference to those who would be helped the most?

Here's George Borjas with a discussion the current proposal to solve this problem, a point system that allocates the positions based upon several characteristics, with education a key factor:

The Proposed Point System: A Nod To The Economic Way of Thinking, by George Borjas: Buried deep in the 628-page immigration bill is a small table describing the point system that will determine whether a person qualifies to enter the United States in the future.

A few caveats: First, the point system will not go into effect until 2015 or so. Second, the ... point system will apply to only about a third of the legal immigrants. Third, the bill does not define the "passing grade." I presume that since there will only be a limited number of merit visas, ... and visas would be granted to the higher-scoring applicants until they run out.

Putting those qualifications aside, however, the point allocation to various types of skill characteristics doesn't seem bad at all. Why, if it wasn't for the amnesty and the guest worker program, this could be a proposal worth discussing. So let's give credit where credit is due--whoever came up with the actual point allocation knew what he/she was doing and had clearly looked at comparable point systems around the world.

If the proposed point system were enacted, it would mark a fundamental change in the philosophy underlying U.S. immigration policy. In Heaven's Door, I argued that such a scheme would increase the economic benefits that immigration imparts on the United States. A common critical reaction was that the point system was un-American: that kind of system would have prevented our parents and grandparents and great-grandparents from ever coming to this country. The fact that politicians can now openly talk about merit immigration and award many extra points to those who have graduate degrees marks a sea change in the way the political elite thinks about immigration. If nothing else, it is a victory for those who think immigration policy should take into account the economic costs and benefits--regardless of how un-American that accounting might be.

At the same time, I suspect that the enactment of such a system could have explosive political consequences. It would drastically change the ethnic composition of legal immigrants.

Look at the graphics attached to this post and you will see that applicants with a science, technology, engineering or math background (STEM in the bill's jargon) are going to get an awful lot of points. A young worker in these fields would likely get at least 40 points because of his work experience, 28 points because of his education, and 15 more points because, more likely than not, he would be fluent in English. A total of at least 80 points (out of 100). Contrast this with the points that a high school dropout would get. Even if he is in an occupation that is rapidly growing (perhaps construction), that would only buy him around 20 to 30 points. And he would be unable to count on getting any "family preference points" because that provision doesn't trigger in until he has accumulated at least 55 points because of his skills.

In short, there are large swaths of the world's population that would lose out in the points competition. A country where the vast majority of its population lacks even a high school diploma (let me think, hmmm....Mexico!) will not be sending too many immigrants with merit visas. And this change in the national origin mix of the immigrant population, for better or worse, will surely become a contentious point in the immigration debate.

A point system is, essentially, a set of administered rather than market prices, i.e. it's a rule for allocating visas set by the government. Because of that, the government can change the point values as it wishes, and, as noted above, change the composition of the flows (e.g. more weight to family, more weight to the potential to improve the immigrants life, points for political oppression, etc.). Thus, in that sense, this is just a hidden way of imposing quotas - we can change proportions at will by adjusting point values and adding/deleting categories. For this reason, it's important to be clear about the goals of the program - what are we trying to maximize - and to evaluate the point system (and alternatives to it) in terms of its ability to achieve those goals.

The reason to specify the goals of the visa program is that the evaluation of the costs and benefits of immigration depends upon the weighting used in the evaluation. If the goal of immigration is to maximize our economic growth, we will evaluate the benefits of immigration differently (and hence assign different point values to various categories) than if our goal is to reduce suffering in the world. Moving an engineer from Canada to the U.S. might improve growth, but it does less to alleviate world hardship than allowing a poor person from Mexico to come here. There are a wide variety of criteria to consider, and we cannot evaluate the costs and benefits of immigration (and then set an allocation mechanism to maximize net benefits) without first specifying what it is we are trying to maximize.

Thus, first we should ask: what are our goals, what are we trying to accomplish with the immigration program? Then, assuming a point system is the best way to get there, we should choose the categories and the point values to come as close as we can to attaining our goals. Third, we should evaluate the success of the program and readjust point values as needed to improve the ability of the program to meets its objectives.

I am uncomfortable with the fairness of a pure market system for the reasons given above, but I'm equally uncomfortable with an ad-hoc administered system. Whether we use a point system or some other mechanism to allocate the right to immigrate here, I believe we have to be very clear about what it is we are trying to accomplish with our immigration program. Given that, what should our goals be?

    Posted by on Wednesday, May 30, 2007 at 02:43 PM in Economics, Politics | Permalink  TrackBack (0)  Comments (9)

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