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How market-based visas meet political needs
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</h3><h4><i>by <a href=”http://discuss.ilw.com/articles/articles/392530-article-how-market-based-visas-meet-political-needs-by-steven-kopits#bio”>
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Steven Kopits
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<p>
Princeton Policy Advisors advocates for a
<a
href=”https://www.princetonpolicy.com/ppa-blog/2019/12/15/market-based-visas”
>
market-based approach
</a>
to solve illegal immigration across the US
southwest border.
</p>
<p>
In this post, we consider some of the related
analytical tools.
</p>
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Bills pertaining to immigration struggle to find
sufficient political support in Congress to pass
into legislation. The prospects for such support
can be assessed ex-ante using
<a
href=”https://www.princetonpolicy.com/ppa-blog/2019/6/21/stakeholder-analysis-for-congressional-staff”
>
stakeholder analysis
</a>
, historically taught in public policy schools like
my alma mater, Columbia University’s School of
International and Public Affairs.
</p>
<p>
In the business world, everything ultimately boils
down to a single objective function, some version
of return on equity. In the world of politics, we
have three separate objective functions which align
with the major ideologies. Egalitarians would like
everyone to be equal, even if all are poor.
Classical liberals (libertarians) want maximum
scope for the individual (which is not conceptually
dissimilar from ROE in practice). And conservatives
want to maximize the benefit to the group and its
members. These objectives cannot be reconciled
mathematically, which is why politics is
so…political.
</p>
<p>
For any given policy, usually two ideologies are
for and one against; or two against and one for.
For example, Medicaid can be justified in
egalitarian terms as taking from the rich to uplift
the sick and poor; or it can be justified in
conservative terms as fulfilling our duty to take
care of society’s weaker members. The egalitarian
approach is bottom up, and the conservative
approach is top down, but either can lead to
essentially the same policy. (And that’s how
Republicans become big spenders, by the way.)
</p>
<p>
In addition to the three ideological groups,
stakeholder analysis also considers economic
interests, in this case, Hispanics, businesses and
unions. Hispanics want legal status, market access,
and to maximize take home pay. Businesses want
ample, low cost labor. Unions want to protect US
workers by limiting foreign competition. As a
practical matter, Hispanics can be lumped with
Democrats, business with classical liberals
(libertarians) and unions perhaps fit best with
social conservatives today.
</p>
<p>
With respect to illegal immigration, each of the
stakeholders has a list of specific goals they
would like to achieve. Our version of this criteria
list by stakeholder group can been seen below.
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<img
alt=”Checklist.png”
src=”https://images.squarespace-cdn.com/content/v1/5a81dd4eb07869101a54cbfe/1577813205674-QIBJOI2RMYY5RGM9TPOX/ke17ZwdGBToddI8pDm48kHTi8W1qglnLDimKypvb9ZRZw-zPPgdn4jUwVcJE1ZvWQUxwkmyExglNqGp0IvTJZamWLI2zvYWH8K3-s_4yszcp2ryTI0HqTOaaUohrI8PIfuIPXxjCjeuMLaR1NedtrnsA_Ofo_6ZwzX8c-7_uVDA/Checklist.png?format=750w”
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Any policy proposal — including HR 5038, the
various Goodlatte bills, a universal immigration
bill like the ‘Strengthening America’s Workforce
Act’, or market-based visas — can be assessed
using this list.
</p>
<p>
<strong>Ideal’s Proposal</strong>
</p>
<p>
For example, Ideal Immigration advocates for a
universal immigration policy which lets in as many
immigrants as businesses care to hire at a visa
price of $2,500 / year. On the chart below, we can
assess the prospects for this proposal by each
stakeholder’s specific criteria.
</p>
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<img
alt=”Ideal.png”
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<p>
Such a proposal largely serves libertarian and
business interests. Conservatives, however, will
flatly reject any unlimited immigration proposal.
Thus, at a minimum, both houses of Congress and the
White House must be held by Democrats for unlimited
immigration to pass. But the situation is much
worse than this. The Ideal proposal was largely
embodied in a draft bill entitled the
‘Strengthening America’s Workforce Act’ (SAWA).
After this bill was sent around for comment, it
picked up a clause which prevents undocumented
immigrants from participating, ie, no amnesty. This
implies businesses could import, say, legal, lower
cost Asian labor to displace undocumented Hispanic
workers in the US. This is a deal killer for
Hispanics. And unions will reject the proposal
because it opens the US labor market to unlimited
foreign competition. Thus, our framework shows that
Ideal’s proposal is unlikely to garner material
support on either left or right. It is a
non-starter by a very large margin.
</p>
<p>
<strong>Market-based Visas</strong>
</p>
<p>
Market-based visas are predicated on the assumption
that employers are entitled to hire employees; that
we will never deport undocumented immigrants in
material numbers; and that conservatives are
entitled to limit guest workers to the lowest
number which ends the black market in Hispanic
labor.
</p>
<p>
As the chart below shows, MBVs achieve conservative
goals with the exception of mass deportation and
with the requirement to increase the migrant
headcount by 500,000 to allow for the demand
effects of legalization. Businesses have to accept
that they will have to provide pay and working
conditions at levels comparable to those for
unskilled US labor — but employers can access more
workers faster as compensation. Democrats and
Hispanics receive legal status for seven million
undocumented Hispanics and on demand access for
migrant labor, subject to visas numbers set to
conservative preferences and the resulting market
price for a visa. Everyone has to make a
concession, but these are the necessary steps
associated with lifting a prohibition. After a
one-time adjustment is absorbed, the system should
work reasonably well for most stakeholders.
</p>
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<p>
Thus, MBVs can meet the requirements of all the
major stakeholder groups with one material
concession from each.
</p>
<p>
This is a political oddity. Legislation is
ordinarily a partisan affair. Nevertheless, those
who care to look — and we have — will quickly
find that black markets arising from prohibitions —
including the prohibition in migrant labor —
generate such incredibly bad side effects that it
is in fact possible to make policy which is Pareto
optimal for all. By Pareto optimal, we mean better
than current policy or any likely alternative which
could be passed in the next, say, five years. In
the case of illegal immigration, MBVs provide
<em>
each and all ideological and economic interest
groups a Pareto optimal solution.
</em>
Ending prohibitions is the equivalent of ceasing to
hit yourself on the head with a hammer: not that
much of an achievement in terms of insight or
technique, but boy, you feel a lot better
afterwards. Strange as it may seem, fixing illegal
immigration is conceptually trivial, and, on paper
at least, achievable with all the major
stakeholders participating in the process.
</p>
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<p>This post originally appeared on <a href=”https://www.princetonpolicy.com/ppa-blog/2019/12/31/how-market-based-visas-meet-political-needs” target=”_blank”>Princeton Policy Advisors</a>. Reprinted with permission.</p>
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<a name=”bio”></a>
About The Author<br/>
</h4>
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<p>
<a href=”https://wolfsdorf.com/professionals/personal-joseph-barnett/” target=”blank”><b>Steven Kopits</b></a> heads Princeton Policy Advisors. For most of his career, Mr. Kopits served as a strategic management consultant and investment banker in Hungary and the United States. His work has focused primarily on the private sector, with some sector consulting for the governments of Hungary, Norway, the United Kingdom and the United States. He developed expertise in the management of black market issues working in Hungary after the fall of communism there.
While in Hungary, Mr. Kopits served, among others, as a Director of Financial Advisory Services at Deloitte & Touche, and later as Managing Director of T-Venture Hungary, Deutsche Telekom’s corporate venture arm. He also served on the boards of several companies, both public and private.
In the US, Mr. Kopits served as an investment banker at Dahlman Rose & Co., and then as Managing Director for Douglas Westwood Ltd., a UK-based consultancy specializing in the energy sector.
He holds an undergraduate degree from Haverford College, an MBA in Finance and Accounting, and a Masters specializing in International Economics from the School of International and Public Affairs at Columbia University.
He writes frequently on policy topics for a variety of publications, including Foreign Policy and The National Interest, and is a regular contributor to CNBC and The Hill, for whom he writes principally on topics related to illegal immigration.
</p>
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