Economist's View

Krueger: Immigration Does Not Hurt Lower-Skilled Workers

Alan Krueger says we shouldn't be so quick to conclude that immigration hurts lower-skilled workers in this memo appearing at American Progress and discussed at Think Progress. The evidence he presents on the effects of immigration on lower-skilled workers is in contrast and rebuttal to much of the recent commentary on this topic. He also discusses the guest worker proposal in the memo, but those sections are not included here:  

To: Interested Parties
From: Alan B. Krueger, Bendheim Professor of Economics and Public Policy, Princeton University
Date: April 4, 2006

Re: Two Labor Economic Issues for the Immigration Debate

Immigration policy involves fundamental issues about what and who we are as a country. There are no simple answers on immigration policy because different people can legitimately assign different weights to the welfare of new immigrants, recent immigrants, and various groups of natives. In addition, there is considerable debate and disagreement among economists about the economic impacts of immigration...

[C]onfident predictions that immigrant inflows have depressed the wages and employment opportunities of U.S. workers, particularly of the less skilled, belie an unsettled and often unsupportive research base. The best available evidence does not support the view that large waves of immigrants in the past have had a detrimental effect on the labor market opportunities of natives, including the less skilled and minorities. Any claim that increased immigration ... will necessarily reduce the wages of incumbent workers should be viewed as speculation with little solid research support...

None of these comments are meant to deny the fact that problems faced by low skilled workers in the labor market are serious, or to argue that public policy should not address the problems of less skilled workers. Real earnings for those at the bottom of the income distribution have been stagnant or falling for a generation. There are many policies that would be helpful for less skilled workers that deserve consideration, such as an expansion of the Earned Income Tax Credit, an increase in the child tax credit, a boost in the minimum wage, and increased job training. Stricter immigration policy, however, is unlikely to materially affect the earnings or job prospects of less skilled workers.

Effect of Immigration on Natives’ Wages and Job Opportunities

• One of the clearest and most compelling studies of the effect of immigration on natives’ labor market opportunities was conducted by David Card of the University of California at Berkeley and published in Industrial & Labor Relations Review in 1990. Specifically, Professor Card examined the effect of the Mariel Boatlift — which resulted in 125,000 new Cuban immigrants arriving in southern Florida between May and September of 1980 — on the labor market in Miami. This sudden and unexpected wave of immigration increased the city’s labor force by 7 percent. Most of the new workers were unskilled. Yet Professor Card found that the wages and employment opportunities of unskilled workers who already lived in Miami were not hurt by this large inflow of immigrants. “Even among the Cuban population,” he concluded, “wages and unemployment rates of earlier immigrants were not substantially affected by the arrival of the Mariels.” He reached his conclusions by comparing Miami with other cities that were not affected by the Mariel Boatlift. This study, which is a model for research, was specifically mentioned in Professor Card’s citation when he was awarded the Clark Medal, a prize given by the American Economic Association every other year.
• The central finding of David Card’s study of the Mariel Boatlift — that an unanticipated influx of immigrants does not have a harmful effect on the employment or wages of natives — has been replicated in other settings by other researchers. For example, Professor Jennifer Hunt of McGill University found similar results in a study of the impact on the French labor market of 900,000 people who were repatriated from Algeria in 1962. In addition, Rachel Friedberg of Brown University found that a large inflow of Russian immigrants into Israel after emigration restrictions in the Soviet Union were lifted, which resulted in a 12 percent jump in Israel’s population, did not have a harmful effect on the labor market outcomes of other Israelis.
• Another line of research uses cross-city data to examine how natives’ job market outcomes vary with the share of the workforce in the city contributed by immigrants. This line of research finds mixed results, but is arguably less compelling than studies that focus on large influxes of immigrants to a particular labor because immigrants choose the city in which they settle, and economic conditions in the city are probably an important factor in that decision. By contrast, studies that focus on the natural experiment created by a sudden and unanticipated influx of immigrants to a specific country or labor market have the advantage of analyzing an event in which immigrants entered a labor market for reasons largely beyond their control and unrelated to the state of the economy in the labor market where they sought work. In addition, because these natural experiments are often large relative to the size of the labor market, it is hard to argue that any effect of immigration was offset by an outflow of other residents.
• Studies that claim to find a deleterious effect of immigration on natives’ wages are typically based on theoretical predictions, not actual experience. These theoretical predictions are very sensitive to their underlying assumptions, which are often controversial. Existing theoretical predictions typically do not factor in relevant consequences of immigration, such as an increase in demand for goods and services produced in the U.S. that results from greater demand due to immigrants. They also do not account for entrepreneurship of immigrants. Those studies that predict the largest adverse impacts of immigration on natives’ wages assume that as new workers are added to the U.S. labor market, the size of the capital stock remains unchanged. More realistically, as workers come to the U.S., the capital stock is likely to expand, particularly in the industries where immigrants are most likely to be employed. An increase in investment would mitigate the effects of increased immigration on workers as a whole. Existing theoretical simulations that take investment into consideration show very small effects of immigration on low skilled natives and on average a small positive effect for U.S. residents as a whole.
• Why does immigration apparently have such a benign effect on natives’ wages and employment opportunities? The answer to this question is not clear, but it is probably more complicated than the simple response that immigrants take jobs that U.S. workers do not want. One likely factor is that, in addition to increasing the supply of labor, immigrants increase the demand for goods and services produced in the U.S. This leads to higher wages and employment for all workers in the U.S. Immigration can also result in an increase in capital investment. And many immigrants become entrepreneurs, creating jobs for other immigrants and natives. Immigrant entrepreneurs may be particularly likely to develop export opportunities for American products given their connections abroad and language skills.

Martin Wolf: Unskilled Immigration

Martin Wolf has a pretty good summary of the economic and equity issues involved with the immigration of unskilled workers. A thought that strikes me is that this debate is partly about how one values costs and benefits to non U.S. citizens. Suppose you can make people better off with a particular policy, but a subset will be worse off worse off, but the subset does not contain any U.S. citizens. It is a Pareto improvement to enact the policy?

Some people will value the costs and benefits to non U.S. citizens highly - those that care deeply about the positive impact of immigration on the lives of the immigrants fall into this category. Some will place very little weight on those outside the country - policymakers such as the Fed do not recognize costs and benefits except as they relate to the U.S. economy and the welfare of its citizens. The Fed has made it clear it is not its job to worry about the unemployment rate in Mexico in the conduct of policy unless it somehow affects the U.S. In making welfare assessments, how those costs and benefits are evaluated can have a big affect on the recommended course of action. And I don't think there's a right answer as to what someone should consider in making such evaluations. A person isn't more or less liberal or progrssive (or conservative) for considering their family or community first and placing domestic low skill wage earners at the forefront, or for caring deeply about immigrants.

If I thought politicians would actually follow through on the proposal, my own view is that those who benefit most from both legal and illegal immigration, those at the higher end of the income scale, would have part of those benefits taxed away to compensate those who are hurt by the policy, low-skilled wage earners in particular. In such a case, a liberal immigration policy would be my preference.

But when immigration places costs on some citizens while others reap most of the benefits and there is no compensation or any political hope of compensation being enacted, the proper position to take on proposals to increase immigration is less clear cut, at least for me, except as an advocate for polices to reduce the costs to unskilled workers as much as possible:

Disputed fruit of unskilled immigration, by Martin Wolf, Financial Times: What should be the response of high-income countries to the pressure for immigration of unskilled workers from poor countries? ... That there should be pressure for immigration of unskilled people into high-income countries is hardly surprising, given the huge wage gaps. The number of illegal immigrants in the US, predominantly from Mexico, is estimated at 11m, up from 4m in 1992. Illegal immigrants make up about 5 per cent of the labour force, but 24 per cent of people working in farming, fishery and forestry, 17 per cent of cleaners, 14 per cent of construction workers and 12 per cent of workers in food preparation.

The Debate over Immigration

The NY Times takes on the immigration debate with this article focusing on whether there are jobs Americans won't do. One dimension of this issue is what economists call the reservation wage, the wage below which a person would prefer not working to working. There are jobs almost all of us will do if the expected wage is high enough (shows like Fear Factor?), and there are jobs, seemingly good jobs, that few of us will do if the wage is too low. Reservation wages vary by person, according to the level of unemployment compensation, the expected probability of getting a job offer, alternative income sources, by occupation, the previous wage, the length of the unemployment spell, it can vary across countries, and in many other dimensions. Thus, the question about who will do what job is partly a question about differences in reservation wages between the immigrant and domestic populations. The reservation wage and willingness to take particular jobs for a young worker who can move back home during the job search may be quite a bit different from an immigrant without such fallback support even though both may have the same underlying work ethic (the graphics are cut from this larger figure):

Immigrants and the Economics of Hard Work, by John M. Broder, NY Times: It is asserted both as fact and as argument: the United States needs a constant flow of immigrants to perform jobs Americans will not stoop to do. But what if those jobs paid $50 an hour, with benefits, instead of $7 or $10 or $15?"

Krugman's Notes on Immigration

Paul Krugman follows up on his column on immigration:

Notes on Immigration, by Paul Krugman, Money Talks, NY Times: Immigration is an intensely painful topic for a liberal like myself, because it places basic principles in conflict. Should migration from Mexico to the United States be celebrated, because it helps very poor people find a better life? Or should it be condemned, because it drives down the wages of working Americans and threatens to undermine the welfare state? I suspect that my March 27 column will anger people on all sides; I wish the economic research on immigration were more favorable than it is.

In writing this piece I drew mainly on three sources, research papers by economists I know and trust. First is a paper, “Immigration Policy,” by Gordon H. Hanson (pdf) of the University of California at San Diego. Mr. Hanson is one of my former students, and a leading expert on all matters having to do with U.S.-Mexican economic relations, especially issues having to do with income distribution. This paper gives a good overview of the (small) gains from immigration and the fiscal impacts.

Second is a paper by George Borjas and Lawrence Katz of Harvard, “The Evolution of the Mexican-Born Workforce in the United States." (pdf). Mr. Borjas is a leading expert on immigration issues; Mr. Katz is one of America’s leading labor economists.

Third is a paper by Mr. Hanson, Matthew Slaughter of Dartmouth (another former student) and Kenneth Scheve (pdf) of the University of Michigan. This paper alerted me to the way immigration penalizes more generous states.

Like all research results, the conclusions of these papers may have to be revised in the light of future research. But I’m afraid that the three negative conclusions I stressed in the column are fairly robust.

First, the benefits of immigration to the population already here are small. The reason is that immigrant workers are, at least roughly speaking, paid their “marginal product”: an immigrant worker is paid roughly the value of the additional goods and services he or she enables the U.S. economy to produce. That means that there isn’t anything left over to increase the income of the people already here.

You might ask why, in that case, there are any gains from immigration. The answer is that when a country receives a lot of immigrants, the wage paid to immigrants reflects the marginal product of the last immigrant, which is less than that of earlier immigrants. So there is some gain. But as Mr. Hanson explains in his paper, reasonable calculations suggest that we’re talking about very small numbers, perhaps as little as 0.1 percent of GDP.

There is, by the way, a possible out from this argument in the case of high-skill immigrants. You could argue that, say, South Asian engineers who move to Silicon Valley add to the dynamism of the region, generating benefits much larger than their wages. (Economists know that I’m talking about “positive externalities.”) But that’s not an argument you can easily make about Mexican migrants who haven’t completed high school.

My second negative point is that immigration reduces the wages of domestic workers who compete with immigrants. That’s just supply and demand: we’re talking about large increases in the number of low-skill workers relative to other inputs into production, so it’s inevitable that this means a fall in wages. Mr. Borjas and Mr. Katz have to go through a lot of number-crunching to turn that general proposition into specific estimates of the wage impact, but the general point seems impossible to deny.

Finally, the fiscal burden of low-wage immigrants is also pretty clear. Mr. Hanson uses some estimates from the National Research Council to get a specific number, around 0.25 percent of G.D.P. Again, I think that you’d be hard pressed to find any set of assumptions under which Mexican immigrants are a net fiscal plus, but equally hard pressed to make the burden more than a fraction of a percent of G.D.P.

Should High-Skill Labor Immigration Be Limited?

This editorial in the Wall Street Journal arguing for increased immigration of high-skill labor, along with the commentary by Krugman on the need to limit low-skill immigration that follows, illegal immigration in particular, completes an immigration daily double. While discussing the impact of immigration on domestic low-skill workers, Krugman highlights research by Borjas and Katz showing that immigration of low-skill labor lowers wages for workers in those markets. Following up on Krugman's statement that "a review of serious ... research reveals some uncomfortable facts about ... immigration... If people like me are going to respond effectively to anti-immigrant demagogues, we have to acknowledge those facts," a recent paper by Borjas, "Immigration In High-Skill Labor Markets: The Impact of Foreign Students on The Earnings of Doctorates," shows that high-skill immigration has lowered wages as well. Thus, the argument made below that wages are not undercut because "it's illegal to pay these high-skill immigrants less than the prevailing wage" misses how the prevailing wage is affected by immigration:

The Other Immigrants, Review and Outlook, Wall Street Journal: Lost in the heated debate about the future of millions of illegal laborers in the U.S. is that our system for admitting foreign-born professionals is also in tatters. While globalization has increased the competition for international talent, U.S. businesses are frustrated by processing delays, long backlogs and especially the failure of Congress to increase the annual limits on visas for skilled immigrants. The Senate Judiciary Committee is scheduled to resume its mark-up of Arlen Specter's immigration bill today. And the good news is that it contains long-overdue provisions for hiring more of the foreign professionals who help keep our economy competitive.

Under Mr. Specter's proposal, the annual cap on H-1B guest worker visas for immigrants in specialty fields like science and engineering would rise to 115,000 from 65,000. Moreover, the new cap would not be fixed but would fluctuate automatically in response to demand for these visas. ...

Another important reform addresses foreign students who want to work here after graduating from U.S. colleges and universities. It doesn't make a lot of sense in today's global marketplace to educate the best and brightest and then send them away ... to start businesses and develop new technologies for U.S. competitors. But that's exactly what current U.S. policy encourages by limiting the employment prospects of foreign students who would rather stay here.

Mr. Specter would let more foreign students become permanent residents by obtaining an advanced degree in math, engineering, technology or the physical sciences and then finding work in their field. .... The reality today is that the U.S. ... and our economy will suffer if bad policy limits industry's access to intellectual capital.

Anti-immigration groups and protectionists want to dismiss these market forces, arguing that U.S. employers seek foreign nationals only because they'll work for less money. But it's illegal to pay these high-skill immigrants less than the prevailing wage. ...

According to a new study by the National Foundation for American Policy, our broken system for admitting foreign professionals also contributes to outsourcing. Since 1996 the 65,000 annual cap on H-1B visas has been reached in most years, sometimes only weeks into the new year. This leaves employers with the choice of waiting until the next fiscal year to hire workers in the U.S. or hiring people outside the country.

"Many companies concede," says the report, "that the uncertainty created by Congress' inability to provide a reliable mechanism to hire skilled professionals has encouraged placing more human resources outside the United States to avoid being subject to legislative winds." ...

[T]he U.S. labor market has ... long been a magnet for highly skilled and educated foreigners, many of whom attend school in America at some time in their lives. In a world where these brains have more options than ever in Asia and Europe, we drive them away at our economic peril.

Do Workers Oppose Immigration Because They Don't Understand Economics?

Bryan Caplan at EconLog says workers oppose immigration because they don't understand economics, not because of the effect on wages and income:

EconLog: More Cool Work By Hainmueller and Hiscox, by Bryan Caplan: In "Educated Preferences: Explaining Attitudes Toward Immigration In Europe," Hainmueller and Hiscox confirm what I've been telling economists for years: Low-skilled workers are more opposed to immigration because they are less economically literate, not because they selfishly calculate that immigration is especially bad for their pocketbooks:

[P]eople with higher levels of education and occupational skills are more likely to favor immigration regardless of the skill attributes of the immigrants in question. Across Europe, higher education and higher skills mean more support for all types of immigrants. These relationships are almost identical among individuals in the labor force (i.e., those competing for jobs) and those not in the labor force.

As a professor, I work in one of the few labor markets that is almost totally open to foreign competition. How often do you think I've heard an American professor grumble that foreign Ph.D.s "Are taking our jobs!"? Try never. P.S. For more on Hainmueller and Hiscox's work, see here.

The idea that workers will be less opposed to globalization and immigration with more education was echoed recently by Mankiw:

Maybe the answer is [to] put an economics course in every high school and we’ll be OK,” said Summers, taking a jab at Mankiw who earlier suggested that introducing economic principles to Americans in high school would help people better understand globalization.

What happens when they learn that immigration or geographic expansion of labor markets through digital technology reduces wages?:

The simplest supply-demand framework implies that “an increase in supply will, other things being equal, tend to depress wage rates” (Samuelson, 1964, p. 552). ... This study ... seems to suggest that the supply-demand textbook model is correct after all: increases in labor supply do move the labor market along the demand curve and lead to lower wages for competing workers.

Making it in America: Social Mobility in the Immigrant Population

George Borjas looks at social mobility across generations for immigrants to the U.S.:

Making it in America: Social Mobility in the Immigrant Population, by George J. Borjas, NBER WP 12088: Abstract The ultimate impact of immigration on the United States obviously depends not only on the economic, social, political, and cultural shifts that take place ..., but also on the adjustment process experienced by the immigrant household across generations. This paper documents the evidence on social mobility in the immigrant population and summarizes some of the lessons implied by the evidence. There is significant economic "catching up" between the first and second generations, with the relative wage of the second generation being, on average, about 5 to 10 percent higher than that of the first generation. At the same time, there is a strong positive correlation between the socioeconomic outcomes experienced by ethnic groups in the immigrant generation and the outcomes experienced by their children, and a weaker correlation between the immigrants and their grandchildren. In rough terms, about half of the differences in relative economic status across ethnic groups observed in one generation persist into the next. As a result, the very large ethnic differences in economic status that characterize the current immigrant population will likely dominate discussions of American social policy for much of the 21st century.

Immigration and Wages in High-Skill Labor Markets

This paper is from the NBER. It examines the impact of the immigration of high-skilled labor on the earnings and finds that immigration has reduced earnings significantly:

Immigration In High-Skill Labor Markets: The Impact Of Foreign Students On The Earnings Of Doctorates, by George J. Borjas, NBER WP 12085, March 2006:   I. Introduction The rapid growth in the number of foreign students enrolled in American universities has transformed the higher education system, particularly at the graduate level. In 1976, 72.4 thousand foreign students were enrolled in graduate programs, making up 5.5 percent of total enrollment. By 2000, 232.3 thousand foreign students were enrolled, or 12.6 percent of enrollment. The impact is even greater at the doctoral level. For example, the fraction of doctoral degrees awarded to foreign students rose from 11.3 to 24.4 percent during the same period, with nonresident aliens receiving a remarkably high share of the doctoral degrees awarded in the physical sciences (36.5 percent of all doctorates awarded in 2000), engineering (50.7 percent), and the life sciences (25.7 percent).

Many of these newly minted doctorates remain in the United States after receiving their doctoral degrees... Despite the large size of the supply shock and despite the importance of the labor market for doctorates in determining technological change and economic growth, there has not been any study of how the foreign student program affects labor market conditions for high-skill workers. This paper provides an initial attempt to address a question...: Has the foreign student influx into doctoral programs harmed the economic opportunities of competing native workers?

There already exists a large literature ... that attempts to analyze the ... impact of immigration. This literature, however, has been in a state of flux and confusion for many years. The simplest supply-demand framework implies that “an increase in supply will, other things being equal, tend to depress wage rates” (Samuelson, 1964, p. 552). Despite the intuitive appeal of these theoretical implications, ... it has proved surprisingly difficult to demonstrate empirically that immigration has a sizable and significant adverse effect on competing workers. For example, a widely cited survey by Friedberg and Hunt (1995, p. 42) concludes that “the effect of immigration on the labor market outcomes of natives is small.” This conclusion is difficult to reconcile with the textbook model because the immigrant supply shock in recent decades has been very large, and most studies of labor demand ... conclude that the labor demand curve is not perfectly elastic (Hamermesh, 1993)...

This paper uses data drawn from the Survey of Earned Doctorates and the Survey of Doctoral Recipients to analyze the impact of the influx of foreign students on the earnings of doctorates. ... The empirical analysis ... clearly shows that a foreign student influx into a particular field at a particular time has a significant and adverse effect on the earnings of competing doctorates in that field who graduated at roughly the same time. A 10 percent immigration-induced increase in the supply of doctorates lowers the wage of competing workers by about 3 to 4 percent—remarkably similar to the elasticity estimates reported in Borjas (2003)... Because the magnitude of the immigrant supply shock in particular fields has been sizable, this elasticity implies that many doctorates employed in the United States, whether native-born or foreign-born, have experienced a substantial wage loss.

These results have implications in a number of different policy contexts. For instance, there has been a long-standing debate about whether immigration affects labor market conditions for native workers at all. This study ... seems to suggest that the supply-demand textbook model is correct after all: increases in labor supply do move the labor market along the demand curve and lead to lower wages for competing workers.

It is also the case that economic opportunities in high-skill labor markets are among the key determinants of the career decisions made by the native-born student population. The increase in the number of foreign doctorates has clearly reduced economic opportunities in some fields relative to others, and may be an important factor driving native students to enter particular occupations and avoid others. For example, the wage that could be earned by native postdoctoral workers employed in research biology labs is much lower than it would have been in the absence of the immigrant influx, perhaps motivating bright U.S.-born undergraduates to pursue professional occupations that have not been targeted by immigration. The low wage paid to postdoctoral workers in these biology labs, however, still offers a very attractive opportunity when contrasted to the compensation available in other countries, so that the incentives for even more foreign students to enter the United States are not greatly reduced. ... In the resulting equilibrium, research labs find that they must keep recruiting from abroad because “natives do not want to do the type of work that immigrants do.”...

Finally, although the foreign student program grew rapidly in the past three decades, this growth occurred without any systematic study of the costs and benefits that such a program entails for the native-born population. This paper addressed an important component in such a cost-benefit analysis—the cost borne by doctorates in the U.S. labor market. There is an equally important component that has not yet been analyzed carefully, namely the benefits of the program, such as the possibility that the sizable increase in the skill endowment of the workforce accelerates the rate of scientific discovery. These benefits could be very large and accrue to particular parts of the population, so that high-skill immigration may have significant efficiency and distributional effects that have yet to be analyzed.

Illegal Immigration Enforcement in the Workplace

I don't know if it is from growing up in an agricultural area of Northern California, having family involved in the tractor business and in farming, or what, but illegal immigration has never bothered me much one way or the other. Growing up, many of my friends and classmates were second generation immigrants and perhaps that changes your view. My concern was always with the working conditions and prejudices illegal workers had no choice but to tolerate, not the workers they might have displaced. Summer jobs on farms were readily available, so it wasn't as though we felt crowded out by the illegal workers. I spent summers harvesting tomatoes, prunes, and sugar beets and trying out my high school Spanish on co-workers (which was tolerated, even encouraged good naturedly) and always thought a reason to end illegal immigration was to avoid the temptation to exploit those with no recourse in the legal system. I agree with the article, very few people have an incentive to change the system - most everyone in the small town I grew up in knew where to find illegal workers, but nobody called immigration to complain. But there are those who are passionate on this issue and they do have a point - if there is a law on the books, why do we avoid pursuing the best means of enforcing it? A distinct change in workplace enforcement is evident in the figure:

The Search for Illegal Immigrants Stops at the Workplace, by Eduardo Porter, Economic View, NY Times: It may seem that the United States government has declared all-out war against illegal immigration. ... Yet a closer look reveals a very different portrait of immigration policy. It seems designed for failure. Most experts agree that a vast majority of illegal immigrants who make it across the border every year are seeking work. But the workplace is the one spot that is virtually unpoliced. ...

In a strategy document in 1999, the Immigration and Naturalization Service put monitoring the workplace last among its five enforcement priorities. Today, the Bureau of Immigration and Customs Enforcement ... devotes about 4 percent of its personnel to enforcement in the workplace, down from 9 percent in 1999. ... in 2004, the latest year for which there is data, the immigration authorities issued penalty notices to only three companies.

The current approach hasn't halted illegal immigration: some 400,000 to 500,000 illegal immigrants enter the United States every year, almost double the rate of the 1980's... Regardless of whether the United States ought to have more or less immigration, the nation's policy must be flawed when almost half of all immigrants come in illegally. Indeed, some experts argue that the basic reason illegal immigration hasn't stopped is that the country doesn't want it to. Gordon H. Hanson, an economist at the University of California, San Diego, said the ineffective approach was the product of a collection of interests.

"Employers feel very strongly about maintaining access to immigrant workers, and exert political pressure to prevent enforcement from being effective," Professor Hanson said. "While there are lots of groups concerned about immigration on the other side" of the argument, "it's not like their livelihood depends on this." Employers have long been the main driver of immigration policy, Professor Hanson said. Not surprisingly, they tend to dislike the provision in current immigration law for penalties against employers.

That may explain why fines for hiring illegal immigrants can be as low as $275 a worker, and immigration officials acknowledge that businesses often negotiate fines downward. ... After the terrorist attacks of 2001, the government limited immigration enforcement in the workplace to what it deemed "critical infrastructure" — places like nuclear power plants and airports — that could be vulnerable to terrorism. Even in the late 1990's when the economy was booming and labor markets were tight, the I.N.S. virtually stopped looking for illegal immigrants in the workplace.

Employers might not favor a guest worker program to allow immigrants to work here legally, if such a program included harsher policing of the workplace. "A guest worker program would offer secure legal access to immigrant labor, but at the risk that this labor would come in smaller quantities or with more strings attached," Professor Hanson said. ...

So why hasn't workplace enforcement increased? "It's an open question," said Mr. Stana of the G.A.O. "Have we turned a blind eye to this in the interest of keeping the economy humming?"