The Senate Immigration Bill Encourages More Illegal Immigration

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Although the newly-passed Senate immigration bill requires Congress to appropriate $46 billion for border security, its wage provisions encourage illegal immigration by setting wages for immigrants above their true wage. If employers are required to pay immigrants inflated wages, firms will be tempted to hire them illegally.

As immigration reform now moves to the House of Representatives, this government wage-setting provision needs modification.

The immigration bill states that "the Secretary of Labor shall make available to employers a governmental survey to determine the prevailing wage for each occupational classification by metropolitan statistical area in the United States."

Not only does the Labor Department have no reliable way of determining prevailing wages, but the wage estimates produced under the new bill are inflated for entry-level workers, excluding them from being hired legally under the bill.

A cursory analysis of the Occupational Employment Statistics survey published by the Bureau of Labor Statistics shows that it is incapable of generating meaningful, timely prevailing wage data for employers. (A discussion of the survey's methodology can be found here.)

Employers classify their workers into 12 wage categories, but they do not report the skills that go into each category. Further, wages do not include bonuses, overtime, or benefits. That makes it difficult to match up a particular individual such as a recent college graduate with a computer science degree with a prevailing wage.

In any 1,198-page bill, the length of the immigration bill, a few ill-advised words are bound to appear. But it is hard to top the stupidity of the Senate bill's wage-setting provisions in "Subtitle B - H-1B Visa Fraud and Abuse Protections."

Just how bad is the Senate bill? The Labor Secretary is supposed to provide three measures to employers:

The mean, or average, of the lowest two-thirds of wages surveyed,

The average of all wages surveyed, and

The average of the highest two-thirds of wages surveyed.

There is no telling how many hours will be wasted in conjuring these numbers. Employers are supposed to pay potential immigrants either the prevailing wage calculated by the Labor Secretary, or the actual wages paid to other workers with similar characteristics, whichever is higher.

With the prevailing wage defined as an average, it is biased upwards by senior workers.

Under the system in the Senate bill, an entry-level or junior American worker could always be paid less than a foreign worker. So, if the law were followed, employers will be limited to hiring more senior and experienced foreign workers. Younger immigrants will simply not be hired at a prevailing wage that is the average of all wages surveyed, or the average of the lowest two-thirds of wages surveyed. And America needs young, bright immigrants.

The bill requires employers to pay some individuals performing exactly the same work entirely different wages because the Labor Secretary is required to set the wages for young immigrants higher. Different wages for identical work will be certain for younger, less-experienced workers. Such a scheme would be patently illegal under federal labor law today. This provision of the Senate bill is not a step forward but a leap backwards.

Even the Senate itself seems to find its language a bit incomprehensible, a bit like Alice in Wonderland. After writing several pages that would harm a great many businesses and countless American workers, the Senate establishes a "Bureau of Immigration and Labor Market Research" to interpret all of the new numbers.

Among other wondrous responsibilities, the Bureau will "designate shortage occupations." The curious reader might wonder about the methodology and the definition of "shortage occupations." The Senate provides a partial answer: "Such methodology must designated [sic] Alaskan seafood processing in zones 1, 2, and 3 as shortage occupations."

Growing economies around the world have at least one common trait: governments do not set wages for all workers. There is a good reason for the absence of wage setting: it never works. Governments that have tried to set wages invariably fail. The biggest loser is not the government, usually propped up by illegitimate means, but the workers who are deprived of a job and are left with no legitimate means to support themselves.

People seek to come to America not because our laws are perfect, but because they are less imperfect than those in other countries and because America, with all of its weaknesses, still has much to offer. That is why it is important that we get our laws right, especially our immigration laws.

There is much to like in the Senate bill, but there is also much that is simply wrong. The House has its turn now. Provisions of the Senate bill that propose government wage setting are not worth keeping. They will only encourage employers to break the law, leaving America with renewed problems of illegal immigrants.

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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