Pricing Immigration Visas

by Reihan Salam

Diana Furchtgott-Roth argues that U.S. policymakers have much to learn from Canada’s approach to immigration. I agree with her, yet I see Canada’s emphasis on attracting, and indeed recruiting, skilled immigrants as its chief virtue. Furchtgott-Roth, in contrast, maintains that “more work visas are also needed for unskilled workers.” It’s not clear to me that the U.S. is suffering from a pronounced drought of less-skilled workers, though I understand that low-wage employers are inclined to disagree.

She draws attention to two proposals for fee- or auction-based allocation of visas:

One simple way to reform immigration policy is for Congress to keep the same system we have now, but issue more employment-based visas, both to skilled and unskilled workers. Congress could also endorse the sale of visas or auctioning them off to raise revenue at the outset of the process.

Dallas Federal Reserve economist Pia Orrenius and Professor Madeline Zavodny of Agnes Scott College propose that the government auction off work permits to employers that allow them to hire foreign workers. This would simplify our complicated immigration system and create revenue for the Treasury. The authors suggest initial minimum prices — that would fluctuate according to demand — of $10,000 for a high-skill permit, $6,000 for a low-skill permit, and $2,000 for a seasonal permit. The permits would become tradable.

University of Chicago economics professor Gary Becker has proposed raising even more money by auctioning off green cards to individual immigrants, starting at $50,000, raising about $50 billion annually. Green card purchasers might buy houses, go shopping, or start businesses, all of which helps our economy. Crumbling cities, such as Chicago and Detroit, could be rejuvenated with legal immigrants.

The underlying logic of this approach strikes me as attractive. Immigration can generate both positive and negative externalities. Skilled immigrants can strengthen existing talent agglomerations, and less-skilled immigrants can make skilled natives more productive by specializing in labor-intensive household production. Yet immigration also tends to increase congestion costs, and the cost of meeting the various social needs of immigrants and their children can be nontrivial. Ideally, you’d want the price of a work permit to be tied not just to employer demand, but also to the broader social cost of immigration.

Orrenius and Zavodny suggest that the minimum price for a high-skill permit be much higher than that for a low-skill permit. Given that demand for high-skill permits is quite high, this makes intuitive sense. It is also true, however, that the net cost associated with low-skill immigration is likely to be somewhat higher than for high-skill immigration. This is particularly true if we factor in the cost of educating the children of immigrants, and if we assume that on average the children of low-skill immigrants tend to require more resources to achieve the same results as the children of high-skill immigrants.

Jacob Vigdor has proposed a system of “assimilation bonds,” in which immigrants would pay an initial fee to secure a visa, yet this fee would be returned to them over time as they earn income, achieve English language proficiency, and reach various other milestones. This strikes me as roughly the right approach, though I’d be inclined to set a different (and higher) price for low-skill permits than for high-skill permits. The downside of this kind of price differentiation is that it undermines the elegant simplicity of Vigdor’s proposal, but that strikes me as an acceptable tradeoff.