Understanding U.S. Immigration Policy and Mexican Immigration Trends

1. U.S. Immigration Policy and Immigration from Mexico Gordon H. Hanson University of California, San Diego and NBER

2. Introduction • In the US, there is rising immigration, overall, and rising immigration of the low-skilled, in particular • About 1.2 million new immigrants enter the US each year (800,000 are legal, 400,000 are illegal) • Among recent immigrants, 31% have less than 12 years of schooling (compared to 10% for the US native born) • Mexico is the largest source country for US immigration • Mexico now accounts for 32% of new US immigrants (65% of Mexican immigrants have less than 12 years of schooling) • The number of Mexican immigrants in the US is equal to about 8% of the total population of Mexico

3. Share of the Foreign Born in the US Population

4. Source Countries for US Immigration (%)

5. Debates about Immigration & Immigration Policy • What are the economic consequences of the shift in US immigration from Europe to Asia and Latin America? • George Borjas claims that in poor countries it is the least skilled who have the strongest incentive to migrate to the US, leading to negative selection of immigrants in terms of skill • Former presidential candidate Pat Buchanan claims that immigration from poor countries depresses wages for low-skilled US workers, leading to greater US wage inequality • Former Governor Pete Wilson claims that immigrants make excessive use of US welfare programs, increasing the net tax burden on US native taxpayers • At the core of these debates is the perennial question: who should the US allow to enter the country?

6. Outline • US Immigration Policy • The Migration Decision • The Composition of Immigrants • Where is US Immigration Policy Headed?

7. US Immigration Policy • Legal immigration • Open borders (prior to 1924) • Few numerical limits on immigration • Closed borders (1924-1965) • The Immigration Act of 1924 created the first permanent limits on immigration and set admissions criteria that greatly favored individuals from Western Europe • Porous borders (1965-present) • The Immigration Act of 1965 changed the criterion for admitting immigrants from national origin to family reunification and expanded immigration overall • Legal admissions are capped at 675,000 per year (70% family members of US residents, 20% employment-based) • A special entry category for refugees was created in 1980

8. US Immigration Policy • Illegal immigration: • The US Border Patrol polices US borders, apprehends and deports those attempting to enter country illegally • Centerpiece of US policy: 12,000 officers police border, concentrating on specific points along US-Mexico border • Over the last decade, US enforcement budget has increased dramatically (with most of the increase coming before 9/11) • Government agents monitor US employers suspected of hiring illegal aliens, issue fines to those they catch • Not until 1986 did it become against the law for US employers to hire an illegal immigrant • Employer monitoring is lax, with 300 agents to inspect all US worksites; few fines are levied (most are small) • In practice, US employers are more or less free to hire any worker with a social security card and a green card without risk of prosecution (even if documents are fake)

9. Enforcement Budget of the US INS

10. Border Enforcement by the US Border Patrol

11. Border Apprehensions by the US Border Patrol

12. Investigation of Employers by the US INS

13. US Immigration Policy: Summary • Since 1965, US has admitted most permanent legal immigrants on the basis of family reunification • Over time, this has lead to a shift in source countries for immigration from Europe to Asia and Latin America • US policy on illegal immigration is based on border enforcement (rather than on interior enforcement) • Monitoring of US employers is lax – once an individual crosses the border he or she faces little likelihood of being apprehended • Each year, about 400,000 new illegal immigrants enter the US and there are now 7 to 8 million illegal immigrants in the country • Since 9/11, illegal immigration doesn’t appear to have fallen, but immigrants do appear to be taking fewer back-and-forth trips across the border (smuggler’s fees have doubled or tripled)

14. The Migration Decision • What factors drive the migration decision? • In theory, workers move from one region to another or from one country to another in order to earn higher wages • The higher are wage differentials between the US and Mexico, the larger will be migration flows • US wages are substantially higher than Mexican wages, creating a constant pressure for workers in Mexico to migrate • These pressures get exaggerated during economic crises in Mexico, when the peso depreciates and wages in Mexico collapse (if only temporarily) • But it is important to recognize that many other factors affect the migration decision, including an individual’s family situation, wealth, political and religious beliefs, etc.

15. US-Mexico Hourly Wage Differentials (1990 US dollars)

16. US-Mexico Hourly Wage Differentials (1990 US dollars)

17. Macroeconomic Volatility & Real Wages in Mexico

18. Border Apprehensions and Mexican Real Wages

19. The Migration Decision: Summary • Large differences in wages between the US and Mexico are an important determinant of Mexico to US migration • Large swings in Mexican wages, due to macroeconomic instability in the country, contribute to surges in illegal immigration from Mexico in the US

20. The Composition of Immigrants • The Negative Selection Hypothesis • Is George Borjas right? In poor countries, is it the least skilled who have the strongest incentive to migrate abroad? • If Borjas is right, then US immigration policies would have the effect of attracting individuals who are the least equipped to get along in the US economy • Immigration and Inequality • Since the late 1970s, the wage gap between more-skilled and less-skilled workers has widened substantially • Is immigration a contributing factor? • What consequences does Mexican immigration have for the distribution of wages in Mexico and in the US?

21. lnW Mx Wage US Wage s* S Theory: The Borjas View of Negative Selection

22. lnW Mx Wage US Wage sL sU S Theory: An Alternative View of Migrant Selection

25. Wage Densities for Mexican Migrant and Non-migrant Males, 2000

26. Wage Densities for Mexican Migrant and Non-migrant Females, 2000

27. The Composition of Migrants: Summary • Mexican immigrants in the US have high education levels relative to residents of Mexico • It is not the least skilled who migrate from Mexico but those who are among the country’s middle-income earners • By removing a disproportionate number of individuals from the middle of Mexico’s wage distribution, migration to the US raises the inequality of earnings in Mexico • Since migration from Mexico appears to depress wages for less skilled US workers, it appears that Mexico to US migration raises wage inequality in both countries

28. Where is US Immigration Policy Headed? • Over the last several decades, US immigration policy has shifted to allow greater inflows from poor countries • Those entering from Asia and Latin America appear to be well educated relative to their source-country compatriots • This is no clear evidence that the US is attracting lower quality immigrants, as some have claimed • What is true is that today new immigrants are poorer on arrival relative to US natives than in the past • US immigration policy is a mess • Despite massive increases in spending on border enforcement, the population of illegal immigrations has more than doubled in the last ten years to around 7 to 8 million individuals

29. Where is US Immigration Policy Headed? • The costs of illegality • Illegal immigrants face uncertainty about recouping investments they make in themselves, their businesses and their communities • They don’t make transactions they would make with more secure residency rights, leaving gains from trade unrealized • The private provision of public order • Since political constraints make the government unwilling to address illegal immigration, other actors have stepped in to offer illegal immigrants more secure residency rights • Banks and local governments increasingly recognize the matricula consular(a Mexico issued ID) as legal identification • Some state governments allow illegal immigrants to obtain drivers licenses and other government services • By ignoring illegal immigration, the US federal government is allowing others to define how residency rights are allocated

30. US Public Opinion on Immigration Where does US inaction on illegal immigration come from? An ambivalence about immigration: A plurality of the US electorate feels immigration should be reduced, while at the same time a large majority feels that immigrants improve the country Question: Do you think immigration in the United States should be increased, decreased, or left the same as it is now? Increased: 8% Left the same: 42% Decreased: 47% Question: Do you think immigrants help improve our country with their different cultures and talents? Yes: 69%No: 28%Don’t Know: 3%

31. Households Using Means-Tested Programs by Country of Origin, 2000 (%)

32. Immigration and Population in US States, 2000

33. Percent of School Children with Immigrant Mothers, 2000

34. Local, State, and Federal Expenditures and Revenues by Foreign-Born and Native Households in California