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S. HRG. 109–536

IMMIGRATION: ECONOMIC IMPACTS

HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

APRIL 25, 2006

Serial No. J–109–69

Printed for the use of the Committee on the Judiciary

(

(II)

COMMITTEE ON THE JUDICIARY 

ARLEN SPECTER, Pennsylvania, Chairman 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERBERT KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

MICHAEL O’NEILL, Chief Counsel and Staff Director 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

(III)

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page

Cornyn, Hon. John, a U.S. Senator from the State of Texas ............................... 2

prepared statement .......................................................................................... 46

Kennedy, Hon. Edward M., a U.S. Senator from the State of Massachusetts ... 4

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, prepared 

statement and letter ............................................................................................ 58

Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 1

WITNESSES 

Chiswick, Barry R., UIC Distinguished Professor, Department of Economics, 

University of Illinois at Chicago, Chicago, Illinois ............................................ 9

Freeman, Richard B., Professor of Economics, Harvard University, and Program Director of Labor Studies, National Bureau of Economic Research, 

Cambridge, Massachusetts .................................................................................. 5

Holzer, Harry J., Professor of Public Policy, Georgetown University, Washington, D.C. ........................................................................................................... 11

Siciliano, Dan, Executive Director, Program in Law, Economics, and Business, 

Stanford Law School, Stanford, California ........................................................ 7

SUBMISSIONS FOR THE RECORD 

Chiswick, Barry R., UIC Distinguished Professor, Department of Economics, 

University of Illinois at Chicago, Chicago, Illinois, prepared statement ......... 33

Freeman, Richard B., Professor of Economics, Harvard University, and Program Director of Labor Studies, National Bureau of Economic Research, 

Cambridge, Massachusetts, prepared statement ............................................... 48

Holzer, Harry J., Professor of Public Policy, Georgetown University, Washington, D.C., prepared statement ....................................................................... 53

Siciliano, Dan, Executive Director, Program in Law, Economics, and Business, 

Stanford Law School, Stanford, California, prepared statement ..................... 63

Small Business California, Scott Hauge, President, San Francisco, California, 

prepared statement .............................................................................................. 69

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IMMIGRATION: ECONOMIC IMPACTS 

TUESDAY, APRIL 25, 2006

U.S. SENATE, COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Committee met, pursuant to notice, at 9:32 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Arlen Specter, 

Chairman of the Committee, presiding. 

Present: Senators Specter, Kyl, Sessions, Cornyn, Kennedy, and 

Feinstein. 

OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. 

SENATOR FROM THE STATE OF PENNSYLVANIA 

Chairman SPECTER. Good morning, ladies and gentlemen. It is 

9:30, so the Committee on the Judiciary will now proceed with our 

hearing today on the economic impact of immigration, a matter of 

considerable importance on a far-ranging line of issues as to what 

effect immigrants have on our economy. That is only one of many 

considerations which are before us in our deliberations on immigration reform. 

We are concerned with the humanitarian aspects of the United 

States as a beacon of hope, as it has been for the centuries of our 

existence, even before the adoption of the Constitution, a beacon of 

hope which brought my parents to this country. The issue has very 

far-ranging foreign policy considerations. Senator Sessions and I 

spent some time over the recent recess in South American countries—in Colombia and Peru and Brazil—and then briefly in the 

Dominican Republic, and our immigration bill is being very closely 

watched, with our Southern neighbors realizing that we have a 

right to protect our borders, but also being very concerned about 

how we will treat many people from those countries who are in the 

United States, recognizing that many of them are here illegally. 

We face a situation with 11 million undocumented immigrants. 

Nobody is sure of the exact number. We recognize the needs for 

guest workers. The President has proposed a guest worker program, as has Speaker Hastert, as have the Senators who structured the Committee bill to have a guest worker program. 

Today we are going to be looking at a number of complex questions about what is the economic impact of immigration. Are the 

immigrants taking jobs that Americans are prepared to fill? There 

is considerable debate on that subject. Most people say that the immigrant workers take on jobs that Americans will not fill. Perhaps 

that is largely true, but perhaps there are jobs taken which Americans would fill. The panel of experts can shed some light on that. 

2

There are questions as to whether if they do not take jobs that 

Americans can fill, by and large, do the immigrants depress the 

wage scales generally? What is the cost of the immigrant with respect to taxes to State and local on health care and schools contrasted with their contribution? Certainly not an overriding factor, 

but one which has raised some serious issues. Do the immigrants 

contribute more to the gross national product than they take by 

way of wages? Another serious issue. 

We have met the deadline of the Majority Leader, coming forward with legislation which we reported out of this Committee, but 

we have realized that there remain some serious issues to be analyzed, which we will be continuing to do as the bill makes its way 

back to the floor, and I think it will come back. We know that we 

were unable to get it concluded before the last recess. A question 

arose as to how many amendments there would be. Questions arise 

as to what is going to happen in conference. 

I am pleased to see that the President has invited a group of 

Senators to the White House this afternoon to talk about immigration. It is my personal hope that the President will intervene and 

take a position. 

There is concern in the Senate about taking some hard votes and 

not knowing what will come out of conference and concern that 

there will be a conference report which will render those tough 

votes virtually meaningless. These are all issues which are before 

us, and today we will be taking a close look at the economic impact. 

We have been joined by the distinguished Senator from Texas—

one of the distinguished Senators from Texas. Senator Cornyn, 

would you care to make an opening statement? 

STATEMENT OF HON. JOHN CORNYN, A U.S. SENATOR FROM 

THE STATE OF TEXAS 

Senator CORNYN. Thank you very much. Thank you, Mr. Chairman, for the opportunity. I do have just a brief opening statement. 

I want to first of all thank you for calling the hearing because 

I think it is very important that Congress have at its hands and 

disposal the facts on immigration reform, and there is no more controversial area than the costs associated with illegal immigration. 

And I think it is important that we get a factual basis to go forward. 

I would also say that we cannot explore the economic impact of 

immigration without considering how various reform proposals will 

impact the Federal deficit. The Congressional Budget Office estimates that the current Senate compromise bill that is on the floor 

will result in $27 billion in mandatory spending in the first 10 

years alone, including $12 billion for Medicaid, $3 billion for food 

stamps, and $12 billion in earned income tax credits. 

Of greater concern is a proposal that would create a balloon payment in the second decade when millions of currently undocumented immigrants would be granted the full benefits of American 

citizenship and would become eligible for the panoply of Federal 

benefits. That also does not include the additional family members 

that those individuals would then be able to petition to bring into 

the country with them. 

3

The current CBO estimate does not account for that dramatic increase because it falls outside of the usual 10-year budget projection. What is clear is that a large-scale amnesty would cost U.S. 

taxpayers tens of billions of dollars, and the true impact may not 

be felt for years. 

Our immigration policy must be capable of adapting to economic 

conditions, and right now the United States is enjoying a healthy 

economy. The economy created 211,000 jobs in March and has created about 2.1 million jobs over the last 12 months. More than 5.1 

million jobs have been created since August of 2003, and unemployment is 4.7 percent, lower than the average of the 1960’s, 1970’s, 

1980’s, and 1990’s. In a climate of strong job creation, foreign workers are less likely to compete with U.S. workers for jobs. 

But because we will not always enjoy a strong economy, our immigration policy must strike the appropriate balance between temporary and permanent workers. A temporary worker program built 

around a floating visa cap would allow the number of foreign workers in the United States to rise and fall based upon market demand and based on conditions in the economy. During a slow economic period, fewer visas would be issued, and U.S. workers would 

face less competition. 

But while the current proposal is described as a temporary worker program, it is anything but. All unskilled workers, 325,000 a 

year, would automatically become eligible for green cards after 

working in the United States for 4 years. That model allows for no 

flexibility when there is a decrease in the number of jobs in the 

United States because of a downturn in the economy. 

Moreover, the current proposal does away with the requirement 

that an employer establish that there are no qualified U.S. workers 

before the company may sponsor an unskilled worker for a green 

card. The combination of permanent status for all unskilled workers and an erosion of U.S. worker protections will undoubtedly 

harm or potentially harm American workers. 

Finally, let me just say, so I do not abuse the Chairman’s generous offer to allow an opening statement, let me just say this 

Committee must consider the impact of U.S. immigration policy on 

sending countries as well. Those countries increasingly are growing 

dependent on remittances sent by workers in the United States. 

From 2000 to 2001, remittances to Mexico and Central America 

grew by 28 percent to $13 billion. Mexican immigrants will send 

as much as $20 billion in remittances in cash this year. No country 

can buildup a diverse economy when the majority of its young motivated workers emigrate to another country. And by placing all 

unskilled workers on a direct path to permanent status, the pending proposal on the floor of the Senate takes us further away from 

the pattern of circular migration that would serve the economic interests of both the United States and those countries that currently 

are sending immigrants to America. 

Thank you very much, Mr. Chairman, for the opportunity and for 

holding this hearing. 

Chairman SPECTER. Thank you, Senator Cornyn. 

Senator Kennedy? 

4

STATEMENT OF HON. EDWARD M. KENNEDY, A U.S. SENATOR 

FROM THE STATE OF MASSACHUSETTS 

Senator KENNEDY. Thank you very much, Mr. Chairman, for convening this hearing on the economic implications in terms of immigration. it is a very important aspect of the issue itself, and we 

have some very distinguished, thoughtful students and professional 

people on this issue, and I look forward to hearing from them and 

thank them all for coming here today. 

Since our beginnings as a Nation, the immigrants have contributed in countless ways to our Nation and our families and our communities, our religious life, and our economic growth, and we are 

here today to learn more about the effects of immigration on our 

economy. 

As Americans, we know that immigrants bring with them a commitment to hard work and a deep desire for the American dream, 

and that is why they came to America, and each of us can tell stories of immigrants who have made a difference in our communities, 

if not from our own family histories, then of the hard-working immigrants in our neighborhoods who established successful small 

businesses, have worked in our vital industries, or cleaned our office buildings. These kinds of immigrant stories are replayed every 

day throughout our economy. 

In fact, every census since 1890 has found that immigrants are 

more likely than U.S. workers to be self-employed. A third of all 

startups in Silicon Valley, for example, were founded by immigrants. Nearly half the Nobel Prizes awarded to U.S. researchers 

in the last century were won by immigrants or children of immigrants, bringing pride and progress to our Nation. 

The overwhelming majority of immigrants, even those here illegally, work, pay taxes, pay into Social Security. In fact, undocumented immigrants pay an estimated $35 billion in taxes each 

year. One study reports that the average immigrant family pays 

$80,000 more in taxes then they consume in services. 

Clearly, in considering the effects of immigration and the appropriate steps for reform, our first priority is to our own citizens. We 

must ensure that the new laws we pursue not only enhance our 

National security but also our job security. In too many cases 

today, our outdated immigration laws displace American workers 

from their jobs or lower their wages. That is why our reforms are 

designed to guard against that abuse. They include support for immigrant wages, legal protections at the work sites, and the right 

to organize unions. They level the playing field by bringing hardworking immigrants out of the shadows and make it less likely 

that employers get away with paying substandard wages. 

There are few debates more essential to America than this, as 

immigration goes to the heart of what we are as a Nation of immigrants. We have a solemn obligation to get it right, and I commend 

our Chairman for holding the hearing today. 

Thank you, Mr. Chairman. 

Chairman SPECTER. Thank you very much, Senator Kennedy. 

Senator Feinstein, would you care to make an opening statement? 

5

Senator FEINSTEIN. No. I am delighted, Mr. Chairman, to have 

these gentlemen here and to listen to them. I do have a statement. 

I would like to place it in the record, if I might. 

Chairman SPECTER. Without objection, it will be made a part of 

the record. 

Chairman SPECTER. We then turn to a very distinguished panel. 

Our first witness is Professor Richard Freeman, the Herbert S. 

Ascherman Profess or of Economics at Harvard University, and I 

pause for a personal note. I know Mr. Ascherman very well, and 

I compliment you on having his chair. 

Professor Freeman received his bachelor’s from Dartmouth and 

Ph.D. from Harvard, serves as the faculty co-chair of the Harvard 

University Trade Program, is the director of the Labor Studies Program at the National Bureau of Economic Research, co-director of 

the London School of Economics’ Centre for Economic Performance, 

is the author of 300 articles dealing with job marketing for a variety of professions, and has written on restructuring European welfare states and the Chinese labor markets, written or edited some 

25 books. So that is quite a background, Mr. Freeman. We expect 

a lot of wisdom from you in 5 minutes. 

[Laughter.] 

STATEMENT OF RICHARD B. FREEMAN, PROFESSOR OF ECONOMICS, HARVARD UNIVERSITY, AND PROGRAM DIRECTOR 

OF LABOR STUDIES, NATIONAL BUREAU OF ECONOMIC RESEARCH, CAMBRIDGE, MASSACHUSETTS 

Mr. FREEMAN. First I better make sure the microphone goes on. 

I would like to organize my comments in three areas, and the 

first will resonate with some of the comments that have just been 

made. 

Immigration is one part of the globalization of the world today, 

and it is connected to what is going on in foreign countries, and it 

affects them. It also affects our trade and capital flows, and if you 

remember back when the NAFTA treaty was being discussed, one 

of the claims that turned out to be erroneous was that the trade 

agreement with NAFTA was going to reduce immigration, illegal 

immigration to the U.S. because of the belief then that there would 

be a substitution. The Mexicans would stay home, make goods, and 

they would come to the U.S. 

It turns out that is much more complicated than we imagined, 

the relation between trade and immigration, and immigration and 

capital flows. But whatever we do in immigration is going to have 

consequences for our trading position, our trade deficit, and for 

where businesses will put their capital in the future. So I think 

that should be a part of this. 

The second issue, you raised the question of effects on GDP. I 

think all economists believe from evidence that immigration raises 

not only the GDP in the United States, because we have more people now to do useful activities, but it also raises the part of GDP 

that goes to current residents in our country. Some people may lose 

from immigration because they will be competing with the immigrants in some job markets. But other people will benefit from the 

extra products and the lower prices because of that competition. 

6

If you look at the statistics and the various estimates of those effects—and there is some debate about them—I think they are generally—I would say the gains and losses to native Americans tend 

to be fairly moderate or modest. So it is very important to understand that the biggest beneficiaries from immigration tend to be 

immigrants, particularly if you are a low-skill immigrant. If you 

are a person who is working in Haiti, which is a disastrous—has 

been a disaster country for many years, and you can come and 

work in Boston, Massachusetts, the life is immensely raised. If you 

are a poor Mexican, your income in the U.S. will be 6 to 8 times 

what it is in Mexico. 

That means that in our deliberations or your deliberations in 

thinking about this, remember the big beneficiaries tend to be 

these people who are coming. Because they can change their entire 

lives, they are going to be trying to come under almost any possible 

circumstance, and, you know, the hope that the NAFTA treaty was 

going to lower the immigration did not succeed because Mexico did 

not succeed that much. But we do have to worry, as the Senator 

said, about the situation in these other countries. 

This also means, though, that many of these people are willing 

to pay sizable sums of money to be in our country. They are willing 

to pay sizable sums of money to become legal in our country. This 

is a tremendous change in their lives. 

Now I would like to talk a little bit about highly skilled immigrants, which is the other part of this. The country today lives on 

highly skilled, highly educated immigrants coming in and working 

in our universities and in our high-tech industries. We trade in the 

global economy high-tech goods. Our universities draw students 

from around the world. A key input into that are foreign-born, 

highly skilled and educate immigrants. There I think America 

makes a huge gain, and much of the gains are to us. Some of the 

gains are the immigrants, of course. That is why they come. Let 

me just give you one fact. 

Over half of the people in the U.S. who are working as Ph.D. scientists and engineers and are under the age of 45 are foreign-born. 

Over half. And the 1990’s boom was fueled by highly skilled immigrants coming into science and engineering jobs. So that is another 

part of this. 

I assume I am done. I was watching this. 

Chairman SPECTER. You may make your next point, and I appreciate your being mindful of the clock. But you are right in the middle of a point you want to make. Go ahead. 

Mr. FREEMAN. OK. Well, there was one other point I did want 

to make because one of the concerns when immigrants come in that 

they may take some jobs from some Americans or drive down the 

wages of some Americans, and obviously, if there are a large number of immigrants coming in and if they are coming in at a bad economic time, this is something that is very likely to happen, and I 

think there is some evidence for that. 

If we talk about the highly skilled people, the concern is that immigrants come in and they reduce the opportunities and the incentives for Americans to go on in science and engineering, and that 

has been another big issue in Washington this spring. I do not 

think we should see this as a conflict in the following sense: There 

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are a set of policies we can do to help our own workers, native 

workers, in this case native young people who want to go into 

science and engineering, which does not require us not to let in or 

to reduce or to be not so welcoming to foreign-born immigrant scientists and engineers. Every country in the world has policies for 

educating and training its own citizens. We have the National 

Science Foundation graduate research fellowships. We have had 

National Defense Education Act fellowships. So I do not want to 

deny that having a lot of immigrants coming in at the top—it does 

make it more difficult for young Americans to advance in those 

fields, but we can recompense the young Americans with separate 

policies. 

[The prepared statement of Mr. Freeman appears as a submission for the record.] 

Chairman SPECTER. Thank you very much, Professor Freeman. 

Our next witness is Professor Dan Siciliano, Director of the Program in Law, Economics, and Business at the Stanford Law School, 

bachelor’s degree from the University of Arizona and law degree 

from Stanford University, has practiced immigration law and has 

very extensive experience in this field. 

Thank you for joining us, Professor, and we look forward to your 

testimony. 

STATEMENT OF DAN SICILIANO, EXECUTIVE DIRECTOR, PROGRAM IN LAW, ECONOMICS, AND BUSINESS, STANFORD LAW 

SCHOOL, STANFORD, CALIFORNIA 

Mr. SICILIANO. Thank you, Mr. Chairman and Senators. Thank 

you for having me. I am going to focus primarily on the unskilled 

labor side of this debate only because I concur that the high-skilled 

labor issue is clear and necessary, and I do not think I have a lot 

to add. 

I am going to try to weave together three basic concepts, but let 

me tell you the perspective I am not taking. Though I am deeply 

sympathetic to the humanitarian side of immigration, I think for 

today’s purposes I am going to focus on the economic side. And I 

have a deep motivation to do this. I think what you are about to 

decide in the coming weeks will have a profound impact for a generation, maybe two. I have two children, 4–1/2 and 2–1/2, and I 

think doing the right thing here versus doing the wrong thing will 

make a difference of my children reaching hopefully the peak of 

their careers while the United States is still at the peak of its economic powers. And to make the mistake of accidentally doing the 

wrong thing—and that would be, of course, only accidental, but to 

do the wrong thing could mean that my children reach the peak 

of their professional lives when we are no longer the dominant economic power. 

I have three main points that I will try to weave together, and 

then I hope we will all get to answer questions because there are 

so many nuances. If this were easy, you would already have done 

it, I think. 

First, there is the demographic dilemma that we face as a fundamental fact. Productivity growth is moderating. We experienced 

tremendous productivity growth over the last several years. I am 

hopeful we will still have high productivity growth in the United 

8

States, but it is not going to be like it was. It is moderating. We 

are going to go back to our norm of 2 to 3 percent at best. 

Labor force participation rates have also likely peaked. We are 

among the highest labor force participation rates among all industrialized countries, above 66 percent. This is a remarkable and 

wonderful achievement. People in our country enjoy working, do 

work, and are tremendously productive. But we are not going to 

have a higher portion of our country actually be able to work in all 

likelihood. 

Retirement is looming for tens of millions of people, and our 

work force, especially the U.S.-born work force, is older than ever 

before and aging. Nothing wrong with that, but that is just the way 

it is, and this has implications for small businesses and medium 

businesses, where I will focus my thoughts on the impact. 

And we are creating a bit of a conundrum because we have had 

some success in raising the average skill level of the U.S.-born 

worker. This is a great thing, but it does have an interesting impact, and that is that we have a growing skill gap misfit, meaning 

that as our U.S.-born workers become better educated and more 

skilled, we have the need for workplace jobs, jobs that demand less 

skills. And so there is a mismatch between our U.S.-born workers’ 

age, skills, and willingness to work, and the jobs that are being created in the economy, in part as a function of our own demographics, whether they be elder care, retail, daycare, or other types 

of jobs. 

So our success, which we should be proud of, in helping raise the 

average skill level and education level of U.S.-born workers has 

created in turn a challenge which we need to manage. And if we 

do not manage it, we create our own problems. 

The way this impacts with job growth I think is the second key 

point. We have reasonably reliable Bureau of Labor Statistics data 

that assumes the presence of the current level of immigration, both 

undocumented and documented, and assumes a continued flow. 

This data set is for 2002 forecasting into 2012. We assume kind of 

a trend line 3-percent GDP growth rate, which turns out to be, it 

looks like, about right. 

If we follow that, we have expected job increases in the range of 

14.6 percent across this time period to 2012. This means we go 

from 144 million jobs in the United States to about 165 million 

jobs. Our current rate of immigration and population growth implies a growth rate of 11.7 percent during that time, which means 

we will go from, you know, to about 162 million available workers 

for those jobs. 

This has many possible implications, many of which can be debated, but one key take-away point is we know at least if we are 

currently utilizing—and I would assume that we would enforce 

wage and hour laws and utilize in a fair and equal way. But if we 

are utilizing immigrant work, whether documented or undocumented, to pull that out of the economy has some grave implications with respect to matching people to the jobs that we want to 

fill if we hope to have this growth. 

Finally, and I think maybe the most important point is: Does immigrant labor present in the United States negatively impact 

wages? I will concur with Professor Freeman, by and large, and 

9

point you to a most recent study by Giovanni Peri out of UC-Davis 

that changes one component of the model, and it says: Do we believe essentially that small and medium-sized businesses and business people are smart? Not necessarily book smart, but street 

smart. I would say yes. And then we say: If they have more options 

in the labor market, are they able to dynamically alter the way in 

which they run their business, open a lunch shift, open another 

hotel, expand their business if they have more options? And it 

looks like Giovanni Peri has demonstrated that the answer is yes. 

This means that U.S.-born workers benefit in large part from the 

influx of immigrant labor because one of the hardest things we 

know small and medium-sized businesses do is to procure effective 

and train effective and retain effective employees in the work force. 

It is going to be very hard to predict what will help us weather 

this much bigger storm of globalization, and I think one thing we 

do not want to do—and this is my concluding point—is we do not 

want to inadvertently increase the uncertainty and increase the 

challenges to the small and medium-sized business person because 

they have largely been the engine of robust resilience and economic 

growth through all the various storms that we have weathered. 

And if we impair them, I fear that we may, in fact, impair the 

economy. And we have the evidence in front of us that seems to 

say immigrants, documented and undocumented, have by and large 

benefited most of the economy. 

There are some offsetting components, and I think we will hear 

the debate. But it is nuanced, and I just do not want us to inadvertently tie the hands of the small and medium-sized business 

people who have been the important part of our economy. 

Thank you. 

[The prepared statement of Mr. Siciliano appears as a submission for the record.] 

Chairman SPECTER. Thank you very much, Professor Siciliano. 

We now turn to Dr. Barry Chiswick, head and research professor 

at the Department of Economics at the University of Illinois at Chicago, bachelor’s degree from Brooklyn College, master’s from Columbia, and a Ph.D. from Columbia. From 1973 to 1977, he was 

senior staff economist at the President’s Council of Economic Advisers. He has done extensive research in the economics of immigration and the economics of minority and income distribution. Eleven 

books, 130 journal articles, and most recent edited volume, ‘‘The 

Economics of Immigrant Skill and Adjustment.’’ 

Thank you for joining us, Professor, and we look forward to your 

testimony. 

STATEMENT OF BARRY R. CHISWICK, UIC DISTINGUISHED 

PROFESSOR, DEPARTMENT OF ECONOMICS, UNIVERSITY OF 

ILLINOIS AT CHICAGO, CHICAGO, ILLINOIS 

Mr. CHISWICK. Thank you very much. It is a pleasure to be here. 

The issue before Congress is not whether to have a completely open 

door nor a completely closed door regarding immigration, and so 

the question then comes down to how many immigrants per year 

and what are the characteristics of these immigrants. 

I think it is not helpful to talk about immigrants as if they are 

an undifferentiated whole. I think it is much more helpful to unVerDate 0ct 09 2002 11:49 Aug 24, 2006 Jkt 028335 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\28335.TXT SJUD4 PsN: CMORC
10

derstand the issues to think in terms of high-skilled immigrants 

and low-skilled immigrants as a simple way of specifying the 

issues. 

Over the past 20 years, there has been a very large increase in 

not only the number of low-skilled immigrants coming to the 

United States legally and illegally, but also their share in the immigrant population. This has come about in part because of three 

factors. One was the 1986 amnesty, the Immigration Reform and 

Control Act which brought amnesty, but also brought employer 

sanctions, which were never effectively enforced. That amnesty actually encouraged additional low-skilled illegal migration in the anticipation of future amnesties. 

The regular immigration system, where we issue about 1 million 

visas per year, focuses on kinship ties. The question that this policy 

asks is: To whom are you related? And two-thirds of the immigrants coming in come in under kinship criteria, and only about 7 

percent are skill-tested. For only about 7 percent do we ask the 

question: What are your contributions to the American economy? 

As a result of these factors, we have had a large increase in lowskilled immigration, and this has had the effect of decreasing the 

wages and employment opportunities of low-skilled workers who 

are currently resident in the United States. 

Over the past two decades, the real earnings of high-skilled 

workers have risen substantially. The real earnings of low-skilled 

workers have either stagnated or decreased somewhat. 

Now, low-skilled immigration is not the only cause of this, but 

it is a significant factor in this development. Low-skilled immigrants make greater use of government benefits and transfer than 

they pay in taxes. So in terms of the public coffers, they serve as 

a net drain; whereas, high-skilled immigrants have the opposite effect. And the consequences of low-skilled immigration are pretty 

much the same whether they are in legal status or illegal status, 

although the net effect on the public coffers is actually more negative for legal immigrants, legal low-skilled immigrants. In the 

earned legalization program that some people are talking about, 

just a euphemism for amnesty, these individuals will eventually be 

getting full benefits from Government income transfer systems. 

The question before Congress is: Will the 21st century be the 

American century as the 20th century was the American century? 

In order for this to happen, for it to be the American century, we 

need to alter our immigration policies to increase the focus on attracting high-ability, high-skilled immigrants, the ones that Senator Kennedy referred to who did the startups in Silicon Valley, 

who won the Nobel Prizes. 

But we also need to look at the other end of the income distribution and provide greater assistance to low-skilled Americans in 

their quest for better jobs, for higher wages. And one of the ways 

that we can help them in this regard is by reducing the very substantial competition that they are facing from this very large and 

uncontrolled low-skilled immigration that is the result both of our 

legal immigration system and the absence of enforcement of immigration law. 

11

I urge Congress to think not in terms of piecemeal reform of immigration law, but to think in terms of a comprehensive reform of 

immigration law. 

Thank you very much. 

[The prepared statement of Mr. Chiswick appears as a submission for the record.] 

Chairman SPECTER. Thank you, Professor Chiswick. 

Our final witness on the panel is Professor Harry Holzer, Associate Dean and Professor of Public Policy at Georgetown, summa 

cum laude, Phi Beta Kappa, undergrad at Harvard, and a Ph.D. 

from Harvard. He served as chief economist for the United States 

Department of Labor, and his research has focused primarily on 

labor market problems of low-wage workers and other disadvantaged groups. His books include ‘‘The Black Youth Employment 

Crisis,’’ ‘‘What Employers Want: Job Prospects for Less-Educated 

Workers,’’ and ‘‘Employers and Welfare Recipients: The Effects of 

Welfare Reform in the Workplace.’’ 

We appreciate your being with us, Professor Holzer, and the floor 

is yours for 5 minutes. 

STATEMENT OF HARRY J. HOLZER, PROFESSOR OF PUBLIC 

POLICY, GEORGETOWN UNIVERSITY, WASHINGTON, D.C. 

Mr. HOLZER. Thank you, Mr. Chairman. Good morning. 

I want to once again associate myself with the point of view that 

most economists believe that, on average, immigration is a good 

thing for the overall economy. It does lower costs. It lowers prices. 

It enables us to produce more goods and services and to produce 

them more efficiently, and I share that view. At the same time, 

there are at least some potential losers in this process. There are 

some costs as well as benefits. We need to consider the whole range 

of costs and benefits and to whom they accrue as we make our policy choices. So let me start by looking at this issue of the labor 

market and competition, especially at the low end of the market. 

Now, there is one view, Mr. Chairman, that you expressed earlier 

that maybe immigrants mostly take the jobs that other native-born 

workers do not want. The prototypical case of that would be jobs 

in agriculture, in which very few native-born workers are interested. On the other hand, there are jobs in industries like construction that I think are more appealing to native-born workers, and 

many native-born low-income men might be interested in more of 

those jobs, although employers often prefer the immigrants, especially in residential construction. Then there is a range of sectors 

in between those examples—janitorial work, landscaping, food 

preparation, where the wages and benefits are generally low and 

the appeal is very limited to native-born workers. 

Now, absent the immigrants, employers might need to raise 

those wages and improve those conditions of work to entice nativeborn workers into those jobs. On the other hand, as that process 

starts, employers would have other options to consider. They might 

well substitute capital for labor, which simply means they would 

substitute machines and equipment for workers and their jobs as 

wages started to rise. Or they might move their resources to other 

lines of business, more productive lines of business. So businesses 

would have other options besides simply raising wages if the immiVerDate 0ct 09 2002 11:49 Aug 24, 2006 Jkt 028335 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\28335.TXT SJUD4 PsN: CMORC
12

grants were not here, and I think they would exercise those options. 

The statistical studies generally show, on net, there might be 

some modest negative effect of immigration on the earnings of high 

school dropouts. There might be some modest negative effect, mostly in the short run. Over the long run, as capital flows adjust to 

the presence of workers, most of these negative effects disappear, 

and certainly we see little evidence of negative effects for anyone 

except high school dropouts. And even for them the effects seem 

modest. 

Two other points: as stated earlier, the amount of competition 

really does depend on the state of the economy. With the very 

strong economy in the late 1990’s, no one really worried much 

about competition from immigrants. Maybe those days will return. 

But it also does depend on the legal status of the immigrants, and 

I believe that when immigrants are illegal, they do more to undercut the wages of native-born workers because the playing field is 

not level, and employers do not have to pay them market wages. 

So legalization might reduce the extent of competition these workers face. 

Now, there are other economic issues, the most important of 

which is reducing the prices of a wide range of consumer goods. 

Some of those lower prices do benefit mostly high-income consumers. When they hire gardeners, domestics, when they go to restaurants where the food is prepared by immigrants, the benefits 

mostly accrue to higher-income consumers. On the other hand, 

when immigrants work in construction, they reduce the price of 

housing. When they work in agriculture, they reduce the price of 

food. When they work in health care and elder care, they reduce 

the price of those services, and those will disproportionately benefit 

lower- to middle-income consumers. And I think those are important benefits. 

We have heard about the baby-boomers retiring. I think there 

will be many ways in which labor markets will adjust to the retirement of baby-boomers, but immigration is one adjustment mechanism. I think the presence of immigrants will be important in some 

key sectors during that time period. One is the science and engineering sector that Richard Freeman has already talked about, but 

there are other sectors where the less educated immigrants could 

really matter as well. 

For instance, take the health care sector. The demand for health 

care workers and elder care workers will be enormous when the 

baby-boomers retire and as they live longer. That is a sector where, 

because of caps on third-party reimbursements, expenditures are 

limited. The normal market forces will have trouble clearing those 

markets. And I think the presence of immigrants to help take those 

jobs will matter and will make those services more available. 

Finally, there are a range of fiscal issues that have already been 

alluded to. There are fiscal costs in the short run for schooling and 

a range of other services for immigrants, but I believe as time goes 

on, the fiscal balance becomes more positive. I believe that over 

time immigrants, their children, their grandchildren, will be working, contributing to the Social Security and Medicare systems. I believe, on net, their impact on those fiscal balances will be positive, 

13

largely—probably not massively positive, but more positive than 

negative, and I think that is a good thing. 

So, finally, what does all this mean about policy? I agree with 

Professor Chiswick, we are not ready to open the floodgates on immigration. We will continue to have controls on immigration, and 

we need to find cost-effective and humane ways to limit those immigrants. I am not exactly sure what those methods are. I am not 

sure anyone knows, but we will continue to seek them. But I think 

paths to legalization for those who are here and those who will remain here make sense. Keeping them illegal hurts the immigrants 

themselves. It certainly hurts their children, many of whom are already American citizens and will stay here under any circumstances. And legalizing these immigrants, I believe, will reduce 

some of the competition that they provide to native-born workers 

by leveling the playing field and allowing them to earn market 

wages. 

I do not believe these paths to legalization will create dramatic 

increases in the flows of illegal immigrants. The flows have been 

fairly constant now over many years, despite various changes in 

policy. I think the incentives for them to emigrate will be large either way, so I do not expect massive new flows in response to any 

paths to legalization. 

Finally, I would say less educated workers in the U.S. have 

taken a beating in recent years, for many different reasons. I think 

immigration is one of the smaller reasons. If we want to help less 

educated native-born workers, there are a whole variety of things 

we could do to improve education and training, improve child care 

and health care, provide wage insurance to those displaced, and 

maybe even start to fix some of the broken laws and institutions 

that used to protect those workers more than they do now. I think 

these things would help native-born workers a good deal more than 

limiting immigration flows. 

Thank you. 

[The prepared statement of Mr. Holzer appears as a submission 

for the record.] 

Chairman SPECTER. Thank you, Professor Holzer. 

We will now go to the panel of Senators for 5-minute rounds of 

questioning. As a matter of scheduling, the Senate is in morning 

business until 10:45, and then there is going to be 10 minutes before a vote starts, which will be shortly before 11 o’clock, if the projections of time are accurate. So we will keep that in mind as we 

proceed with the round of questions. 

Professor Holzer, you eloquently articulate a large number of 

problems, and then you said you are not sure you know the answers. And then you added to that you are not sure anybody knows 

the answers. 

Well, we have got to make some judgments. Nobody could ever 

accuse Congress of knowing the answers or coming up with the answers, but we do have to legislate and we do have to figure out, 

as best we can—and I have been to a few of these hearings, and 

I cannot recall four witnesses who have more in their pedigree 

lines, more books, more titles, than you four. We do not want to 

take jobs away from Americans, although to the extent that it may 

be minimal, you cannot avoid it. But overall we want to direct our 

14

efforts to not taking jobs from Americans. And, also, to the extent 

we can, we do not want to lower wages. 

Now, we are trying to figure out what kind of a guest worker 

program to have. With the experience you professors have had, 

what methodology should the Judiciary Committee have in recommending to the Senate the structuring of the number of guest 

workers? Professor Holzer, you profess not to know the answers, 

but we need your best estimate here. 

Mr. HOLZER. Senator, I have some skepticism about guest worker 

programs because there is at least a concern and I think some evidence— 

Chairman SPECTER. You have some skepticism? Now, wait a 

minute. Does that mean you would not have them? There is nothing we do around here without some skepticism, but the question 

is— 

[Laughter.] 

Mr. HOLZER. I understand that. 

Chairman SPECTER. The question is: Will we have them? 

Mr. HOLZER. I think they have limitations relative to my first 

choice, which is creating pathways to permanent legal status. 

Chairman SPECTER. They have limitations. Do they have advantages? 

Mr. HOLZER. They also have some advantages for meeting demand, certainly in the short run, in those sectors where— 

Chairman SPECTER. How do we assess the demand? 

Mr. HOLZER. I think one can look at a variety of measures: job 

vacancy rates in certain sectors, in certain occupations and industries, wage pressures, things of that nature. 

Chairman SPECTER. Could you take a look at those factors and 

others? You probably cannot do it in the 2 minutes and 38 seconds 

remaining, but could you take a look at those factors and give us 

a professional projection as to what we ought to do by way of guest 

workers? Let me apply that question to the entire panel. We are 

really searching, and you men have written extensively and have 

studied this extensively. And without taking the time now to identify them, if you could do two things, identify the factors which are 

in play and assess for us how you would structure a guest worker 

program and what we ought to look for, we would be deeply indebted to you. 

Professor Chiswick, you say the last century was the century for 

the American economy, and we face a lot of challenges on the next 

century. The head of China was just here, and we are looking at 

very complex competition from China, perhaps from India and 

other sources. Is a guest worker program an indispensable item to 

have the 21st century an American economic century? 

Mr. CHISWICK. Well, actually, I would say that the best guest 

worker program is no guest worker program. One of the maxims 

in the immigration research field is that there is no such thing as 

a temporary worker. The issue arises when the temporary contract, 

when the guest worker period is over. How does one get them to 

leave the country? 

Chairman SPECTER. Well, how about recognizing that they are 

not temporary but they are going to be permanent? How do we assess the contribution of the immigrant to the economy? Does the 

15

immigrant produce more by way of gross national product contribution to the economy than the immigrant is paid? 

Mr. CHISWICK. Well, I think we have substantial research on 

that issue, and what we find is that high-skilled immigrants have 

a significant positive contribution and that low-skilled— 

Chairman SPECTER. Positive over what they are paid. 

Mr. CHISWICK. In terms of the American economy, in terms of 

what they pay in taxes versus what they take in benefits, in terms 

of their increasing the productive capacity of the economy, in terms 

of their increasing productivity. 

Chairman SPECTER. I only have a few seconds left, and I see Professor Freeman nodding vigorously in the affirmative. You have got 

the balance of my time. 

Mr. FREEMAN. I wanted to make a comment more favorable to 

the guest worker programs, actually. I think it is very complicated. 

People are going to come in, and they are coming in, and they are 

working illegally. That would be the natural place where you would 

want guest workers if you want to reduce the illegal immigration. 

We know that Americans are hiring them, and Americans would 

get very upset if they were forced out. Business people would get 

very upset. So they are clearly contributing something that is 

showing up in the profits and the lower prices that Americans benefit. 

So I would think of the guest worker program or something of 

that nature is the extent to which it would substitute for a worse 

form of guest worker program, namely, an illegal guest worker program, which is what we are running today. So I do not think the 

comparison is between no guest worker or a guest worker. It is between a legalized program and an illegal program. 

Chairman SPECTER. Thank you, Professor Freeman. 

Senator Kennedy? 

Senator KENNEDY. Thank you, and I think you put your finger 

right on it, Professor Freeman. We know at least 400,000 are coming in here. Ten years ago it was 40,000; now it is 400,000, sometimes 600,000 or 700,000. In the legislation it is 400,000 to try and 

have those that are going to come in here come in in an orderly, 

legal way with labor protections in this country. 

Let me get to this point that the Chairman has made, Dan, with 

your analysis. You gave us some projections. You talked about the 

limitations in terms of productivity, the numbers in the labor force, 

retirement issues, and then the job growth. And you talked about 

GDP, 14 percent and 11 percent. You talked about legal and the 

illegal. Maybe you could just flesh those figures out a little bit. 

What you appear to be saying is that if you consider the numbers 

of both legal and illegal, you get a certain rate of growth, and without them you get another different rate of growth. And that is what 

I would be interested in. 

Maybe we cannot parse between the legal numbers the Chairman talked about, whether that is 500,000 or we are looking at just 

the general range of numbers now. Could you expand on that? 

Mr. SICILIANO. Sure. Thank you, Senator Kennedy. I think this 

also answers Chairman Specter’s question in part, which is: What 

is the true net economic contribution and where does it come from 

and why? And so from my viewpoint, and in light of the demoVerDate 0ct 09 2002 11:49 Aug 24, 2006 Jkt 028335 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\28335.TXT SJUD4 PsN: CMORC
16

graphic numbers, it appears that our economy is on the trend 

growth rate, we hope, at 3 percent or better. Now, that growth rate 

of GDP is reliant on many factors. One of the key factors is available workers to fill the jobs that are created. So even while at the 

high-skill level you have Nobel Prize winners and other people inventing companies, somebody needs to build the buildings, clean 

the buildings, you know, service the lavatories in which these people are operating. And this is a part of the capacity for GDP to 

grow. 

So to put a finer point on it, if you look at the fiscal economic 

impact, which is the Government coffers impact, it might be true 

that lower-skilled workers, just like all of us on average, actually, 

at the moment because of deficit spending, have a negative impact 

on the fiscal bottom line. But that should not be confused—and this 

would be a mistake to confuse this. That should not be confused 

with the economic impact. It is a little like my younger sister who 

recently said, ‘‘I am earning more, but look at all the taxes I am 

paying. I am paying more taxes.’’ I said, ‘‘ Yes, but you are earning 

more.’’ 

And so we may have a modest net negative fiscal impact for all 

low-wage workers in the United States, not just immigrants. That 

is not unique to immigrants, documented or undocumented, but 

what we do know is it helps us achieve a higher rate of growth and 

national income goes up, which benefits everybody. It becomes your 

challenge, I think, to talk about how to, you know, work that out 

at who shares and how at the pie level. But it is clear that this 

divide between available workers and the demand for workers will 

slow down economic growth if we do not manage it appropriately. 

Senator KENNEDY. Let me just get to the high-skilled/low-skilled. 

I think most of us would like to believe that we are going to train 

our own people to be able to take these high-skilled jobs. And we 

have under our current programs training resources that are paid 

into the fund to try to continue to upgrade skills for Americans. 

But we are not able to get quite there at the present time. 

Other countries, industrial countries, have required training programs. They pay—what is it?—in European countries a percent 

and a half, other countries, so that they have required training programs, which we do not have, continuing training programs which 

we do not have. 

So how are we going to adjust? What is your sense about how 

we are going to—we have seen a significant—actually, we are getting the skills, but where people that are going to into these highskilled programs, but how are we going to get Americans up to 

speed so that those Nobel laureates are going to be the sons of native workers rather than foreign workers? What can you comment 

on that? 

Mr. SICILIANO. I think there are two issues. One, you know, the 

expanded H–1B program with the continued diversion of moneys 

into special training programs is a good start, so we need the talent 

in the first place. We need that high-skilled talent to maintain our 

competitive edge, which gives us some runway into which to develop and train native talent. It cannot happen overnight. So the 

first question is: What do we do to make sure over the next 20 

years we still get the world’s absolute best and brightest, lure them 

17

to our best universities, have them pay for that education, make 

them enamored of the United States, and then they stay here and 

then have children. 

Now, you divert that money and you direct it into targeted training, and that is a bigger issue, I think, to entice U.S.-born workers 

into the difficult and long-term training that will prepare them for 

a modern, very knowledge-based economy. But the start is to make 

sure we keep the industries here because we lure the right talent 

here, and then we do something over the next 20 years so that the 

5-year-olds right now do end up getting the double Ph.D., electrical 

engineering and applied physics, and go on to win the Nobel Prize. 

But you are talking about the 5-year-olds, not the 25-year-olds. We 

need the 25-year-old to get an H–1B, have their own Government 

pay to go to Stanford University, get that Ph.D. there, and then 

work at Google, stay here. Good deal for us. 

Senator KENNEDY. My time is up, but, Professor, you talk about 

the more comprehensive. What we are not dealing with is the underlying immigration bill where you talked about the disparity between kinship and skills with only a smaller percentage in terms 

of skills and the other emphasis on kinship. Those are policy issues 

about reunification of family members here rather than just having 

the skills. So that is a broader kind of issue. I think it is obviously 

related to it, but as you correctly point out, that is not part of the 

current debate, but it is something we ought to think about. 

Thank you, Mr. Chairman. 

Chairman SPECTER. Thank you, Senator Kennedy. 

Under the early bird rule, we turn to Senator Cornyn. 

Senator CORNYN. Thank you, Mr. Chairman. 

I would like to turn to the issue of a guest or temporary worker 

program, and one of the things I would just note is that the choice 

of descriptions I think is a problem when it comes to talking about 

immigration because I do not know of any guest that you would invite into your home that would permanently move in and refuse to 

leave. And I am intrigued by the concept that there is no such 

thing as a temporary worker program because people will not 

leave. 

But let me talk just a bit, Professor Freeman, starting with you. 

We have heard, of course, the huge attraction that the American 

economy and the opportunity here for immigrants provides, but you 

seem to agree with at least some of what I said earlier on in talking about the benefits both to—assuming we can have a temporary 

worker program, people come and work temporarily and then return to their country of origin with savings and skills that they 

have acquired in the United States, perhaps to return again later, 

that there would be perhaps an advantage to the United States to 

be able to have people come when we need them, when the economy is doing well, when we need those workers, but then not come 

during times when they would be competing with American workers. And so it would be of some benefit to American workers not 

to have that competition when the economy is doing poorly. But, 

second, the importance of helping those economies which are now 

basically seeing a mass exodus of their young work force to the 

United States and the difficulty they will have of ever establishing 

jobs and an opportunity for their own people. 

18

So do you see some benefit to trying to figure out a policy that 

will restore this circular migration pattern? 

Mr. FREEMAN. You are clearly right. The circular migration—we 

have seen the circular migration pattern occur for the Koreans and 

for the Taiwanese, and also they have also created, you know, businesses that compete with ours, and they learned their skills here. 

At one point we are going to see the Chinese high-level immigrants 

begin to go back to China, and that will be a great sign for China 

and will be more competition for some American businesses. 

But I do not think we should be afraid of competition, and I 

think it is much better to build the skills in these other countries. 

I think obviously if we could control the flows, we would have the 

guest or temporary workers come in when we have a shortage and 

leave when we have a surplus. But people have their own lives, obviously, and there is a huge advantage to living in the U.S. than 

living elsewhere. 

Senator CORNYN. Let me ask you, Professor Chiswick, because 

you said there is no—I am paraphrasing. You said there is no such 

thing as a temporary worker because people will not leave, and 

Professor Freeman seems to agree that that is a challenge. But if 

we have incentives built into a program, let’s say the money that 

you would ordinarily pay, the employer and employee pay for Medicare and Social Security would be put into an account that they 

would receive upon their return to their country of origin when 

their temporary visa expires, if we would be serious about worksite 

verification so that only authorized visa holders could legally work 

in the United States, would you see those as possibly some ways 

that we could make sure that we could actually enforce the term 

of those temporary visas? 

Mr. CHISWICK. Well, I think you have pointed to a very important issue. The 1986 Immigration Reform and Control Act brought 

in employer sanctions, but there has really been no political will to 

enforce employer sanctions. Employers need a fool-proof way of 

identifying who has a legal right to work in this country and we 

have the technology to provide them with that information. And I 

would urge Congress to act speedily in terms of developing or authorizing the Government to develop such a system. 

But you also need to have the resources to enforce the law in 

terms of the inspectors and the inspections. We have relied on border control to enforce immigration law. The border is a sieve. Even 

if one strengthens border enforcement, there will still be ways of 

penetrating the border. Border enforcement by itself cannot effectively stem the flow of illegal aliens. It needs to be complemented 

by stringent enforcement of employer sanctions. 

Senator CORNYN. Let me ask you to explain just in conclusion 

your statement that amnesties encourage future illegal immigration. That will be my last question. Can you explain what you 

mean by that? 

Mr. CHISWICK. Sure, because an amnesty sends the signal that 

when the pressure gets strong enough, there will be another amnesty forthcoming. So amnesties set the stage for future illegal migration, and actually the more talk there is of pending amnesty 

legislation—whether it is called amnesty or earned legalization, it 

is really the same thing—the more talk there is, the greater the 

19

incentive for people to enter the United States illegally so that 

when the amnesty has passed, they are physically present in the 

United States. 

Chairman SPECTER. Thank you, Senator Cornyn. 

Senator Feinstein. 

Senator FEINSTEIN. Thank you very much, Mr. Chairman. May 

I enter into the record, please, a statement by the Small Business 

California Group? 

Chairman SPECTER. Without objection, it will be made a part of 

the record. 

Senator FEINSTEIN. Thank you very much. 

I approach this, gentlemen, mainly from the California approach. 

The Department of Finance of the State has just done a report 

which shows that the number of illegal aliens in California is 2.4 

million and that the entry rate is about 73,000 a year. 

As I talk to individuals in the State, what becomes very clear to 

me is that the problem is the lack of opportunity in Mexico, and 

that is devastating that there is no hope, no jobs, no opportunity 

for people. Therefore, coming to the United States for many, most, 

really becomes a question of survival. 

Is there anything as economists you can recommend that the 

United States could do to help, or the people or the Government 

of Mexico could do to turn that around? 

Mr. CHISWICK. I would be happy to take a stab at that question. 

Senator FEINSTEIN. Please, quickly, if you could. 

Mr. CHISWICK. I think NAFTA in the long run will have strong 

beneficial effects on the Mexican economy. But I think we also have 

to encourage the Mexican government to free up their economy, to 

reduce the extent of Government ownership and control of various 

sectors of the economy, to encourage private investment in the 

Mexican economy, to invest more resources in the educational system for the young people in Mexico. 

One of the negatives of the large low-skilled immigration from 

Mexico to the U.S. is that some of the most enterprising of people 

are leaving Mexico. So in some sense, we are hurting Mexican economic development by draining off some of their entrepreneurial 

talent. 

Senator FEINSTEIN. Let me mention another point. I happen to 

believe that the weakest part of the bills that I have supported is 

the guest worker program. From a California perspective, it is impossible to say to somebody you can come here for at least 6 years 

by renewing your guest worker permit, but at the end of 6 years 

you have to go home. The experience we have had is quite simply 

people do not go home. Therefore, it seems to me that the H–2A 

program, where you bring someone for a limited period of time, has 

a much better opportunity to work because then they do go back 

and forth across the border. 

What do you believe is the optimum amount of time that an individual will come as a guest worker and then actually go home at 

the end of that period of time? 

Mr. SICILIANO. Senator Feinstein, I think one thing to consider 

is that by limiting the amount of time that and employer may utilize a guest worker, it alters their behavior in terms of their incentives to invest even in a low-skilled guest worker. So even a lowVerDate 0ct 09 2002 11:49 Aug 24, 2006 Jkt 028335 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\28335.TXT SJUD4 PsN: CMORC
20

skilled worker will require a certain amount of training and investment, and the shorter the duration of that opportunity for employment, the less investment there is, which is bad for everyone. 

I think one of the possible alternative views here is to recognize 

some of the limitations that occur if you create a temporary guest 

worker program and then instead try to identify those lesserskilled individuals who, in the long run—if you created boundaries 

of wage and hour rules, allowable behavior on the part of businesses, and then screened up front for who you would allow to 

enter on that basis and create some path, assuming continuing employment, and a very high bar for behavior and civic behavior, then 

perhaps you can solve both problems, because I believe the evidence demonstrates and I think a lot of the arguments assume that 

the economy will work it out. If there are no opportunities, people 

will go back. 

Senator FEINSTEIN. But that is difficult to do. Therefore, if you 

take the 10 to 12 million people that are here already that work 

in agriculture, construction, landscaping, housekeeping, et cetera, 

and provide a steady stream of employment and enable them to 

have a pathway to legalization, are you not really doing the best 

thing possible economically to see that there is economic upward 

mobility? 

Mr. SICILIANO. I see. With that subset, yes, I would argue that 

that is the right path, and then on the other question I would 

defer. I am sorry that I don’t have a solution. 

Senator FEINSTEIN. Anybody else, quickly, 7 seconds? 

Mr. CHISWICK. Well, I think that we can learn a lot from the European experience. They have their guest worker programs in most 

of the European countries and what they have found is that although some go back as the natural course of events—there is always some return migration—they had a very difficult time in encouraging them to go back. The riots that we saw a number of 

months ago in the immigrant communities in France are an example of the consequence of failed guest worker policies, and I would 

not like to see the United States fall into that same trap. 

Senator FEINSTEIN. Thank you very much. Thank you, Mr. 

Chairman. 

Chairman SPECTER. Thank you, Senator Feinstein. 

Professor Holzer, did you want to make a comment? 

Mr. HOLZER. Just one small comment. It seems to me that there 

is probably no single optimal duration for guest worker policies. 

Following up on Professor Siciliano’s point, it is going to vary a lot 

when you compare H–2A workers to H–1B workers. It seems to me 

to make a lot more sense to have perhaps longer durations for the 

H–1B workers because to get those individuals to come here, those 

individuals who want to make more investments, the kind of work 

they do requires greater startup, greater training. And at the end 

of the day, if those workers decide to stay, I think we all agree that 

the economy would benefit certainly from increasing the permanent 

presence of highly skilled workers. 

Senator FEINSTEIN. Would you confine a guest worker program 

to those two programs? 

Mr. HOLZER. Not necessarily. I think I am relatively more sympathetic to the H–1B program because, number one, certainly in 

21

the late 1990’s it was so clear that the short-term demand in 

science and engineering was so strong, in the short run there was 

no way that we were going to meet that demand domestically. 

I also very much like the political compromise of taking the fees 

that we generated by raising the caps and investing those in the 

training of domestic workers. So to me, that was a very nice compromise that I think benefited all involved. 

Senator FEINSTEIN. Thank you. I appreciate it. Thank you, Mr. 

Chairman. 

Chairman SPECTER. Thank you, Senator Feinstein. 

Senator Kyl. 

Senator KYL. Thank you, Mr. Chairman. Thank you, panel. One 

of the arguments for not being as tough in enforcing the law especially at the border is that in the years past there was a lot of circular migration especially from Mexico and Central America, people who came here, worked for a while and then went back home. 

It wasn’t hard for them to continue that process, but once we began 

strong border enforcement, then they were stuck and stayed. 

I don’t know that there is any evidence to support that or refute 

it, but it has been the basis for a lot of people talking about this 

concept of circularity, and I want to get back to that concept and 

also ask you this question in view of the fact that at least a couple 

of you are very skeptical that a temporary worker program really 

ends up being temporary because people don’t want to go home. I 

mean, what I just said may to some extent refute that, but clearly 

there are people that probably fall into both categories. 

What we haven’t talked about here is the differentiation between 

a time like today when we are at very high employment and a time 

when in the future we will have a recession and we will have high 

unemployment. And let me stipulate for a moment, even though 

there is a little bit of argument about mechanization, and so on, 

that in the lettuce fields of Yuma County, it has always been hard 

to get Americans to do that work. It has been traditionally work 

done, by the way, by people who live in Mexico and come across 

everyday and go back home by and large, although there are some 

that stay longer. 

In Arizona, we can’t find enough people to build houses today. 

Under the bill that Senator Cornyn and I have, we would be 

issuing lots of temporary visas right now. But we have also seen 

many economic downturns when you can’t get a job in construction, 

no matter how skilled an American citizen you are. In that case, 

under our bill we wouldn’t be issuing temporary visas. We would 

let the ones that are here expire; we wouldn’t issue any more. 

I am troubled by the fact that all of you seem to be so skeptical 

that people would return. One concept was that, well, when there 

is not work, they will return. But isn’t it just as likely that what 

they will do is under-bid Americans for those same jobs? 

I have gone through enough political times when we were in that 

high employment situation where Americans were looking for 

work. It is not a pleasant thing. So I am concerned about a program that lets people come in under today’s circumstances, but 

who may not have a job, or at least there won’t be enough jobs for 

everybody in tomorrow’s circumstances. 

22

Given that fact, doesn’t it make sense to consider the economic 

realities in how many permits you issue, and especially if you are 

saying folks won’t go home, to be very careful about the number 

of visas that you issue for these low-skilled workers because you 

have to consider tomorrow’s lack of employment opportunity as 

well as today’s full employment opportunity? 

I have sort of posited several different thoughts and questions inferred there. If you could just each give me your general take on 

what I have said. 

Mr. FREEMAN. You gave this model for the optimal determination 

of how many of these to give. What you are really suggesting—and 

I think it makes good sense—is that if you are giving these temporary worker permits or whatever, you don’t want to do them to 

the amount you need at the boom. What you may want to do is figure out how many you would have at a recession. You can up that 

a certain amount, but that would be the more conservative, careful 

mechanism. 

As long as Mexico is right next door to us and their economy is 

not doing well, we are just going to continually face this pressure. 

One of the reasons they are not doing well is that we have had 

China and India come into the global economy and take up some 

of the businesses that we would have hoped the NAFTA was going 

to encourage in Mexico. 

Senator KYL. Excuse me for interrupting, but let me give each 

of the panelists time to respond. 

Mr. SICILIANO. Let me throw in one item, as well, to clarify. For 

all we know about business cycles, we still don’t know a lot. One 

of the things, I think, to observe is that as we go into a down business cycle, we make macro adjustments to the cost of capital as a 

way of spurring the economy potentially and creating jobs and creating businesses through capital formation. 

It is worth thinking about—and I don’t think it is a conclusive 

answer for you, but it is worth thinking about the fact that available labor supplies during a downturn is its own form of self-corrective mechanism. And I would fear second-guessing at a micro level 

the small and medium-size businesses who might be reformulating 

strategies to alter their response to global competition and need the 

liquidity that is provided by available work force. And we do suffer 

through a terrible time which is short and hence has changed, but 

it might be akin to cost of capital. 

Labor is one of the critical inputs to all of economic development 

and we tinker with it at a micro level, we might inadvertently prevent ourselves from emerging as quickly as we might otherwise 

have from a recession. 

Senator KYL. But it is also true that for the laborer who is without a job for a year and the taxpayer subsidizing that individual’s 

life, this represents a real cost both to them individually and to the 

government side of things even though for the economy in the long 

run—but as you know, in the long run we are all dead. 

Let me get each of the— 

Mr. CHISWICK. I have two reactions to the questions that you 

pose. 

Senator KYL. Was it Galbreath, Professor Siciliano, that said in 

the long run we are all dead? 

23

Mr. CHISWICK. Keynes, John Maynard Keynes. 

Mr. SICILIANO. Yes. 

Senator KYL. Of course. I am sorry. 

Mr. CHISWICK. Both economists. 

Cyclical targeting in terms of labor markets is very, very difficult 

to do. In the post-war period, our downturns have been relatively 

short. So cyclical targeting would probably mean that it would be 

counterproductive because by the time the bureaucracy changes the 

number of visas, you will be in a different phase of the business 

cycle. 

I am glad you brought up the Arizona lettuce farms because actually ‘‘Nightline’’ earlier this month devoted a segment to that 

very issue and the same county that you made reference to. I was 

struck that the farmer said that if he didn’t have these low-skilled 

workers who were picking lettuce by hand, he would mechanize; 

that there are mechanical lettuce pickers and that the only reason 

he is not mechanizing and employing more highly skilled American 

workers is the availability of such low-wage labor. So in a very real 

sense, the use of low-skilled immigrant labor is retarding further 

mechanization of agriculture. 

Mr. HOLZER. I share the view that the cyclical use of the guest 

worker program sounds great in theory and it is hard to implement. I think about the long-run costs. Take your construction contractors in Arizona. Even when they hire these immigrants, there 

is some expectation that this employment relationship is going to 

last a while. There are costs of training them even for the low-end 

jobs to be dry-wallers and things like that. 

Once those investments have been made, I hesitate to force those 

employees to leave for a temporary downturn that might last who 

knows how long and then might come back. I think given these 

long-term employment relationships, we ought to focus more on the 

long-term issues involved in immigration and maybe less on the 

short-term fluctuation. 

Senator KYL. I appreciate that. In view of the fact that there is 

only one more to question, might I just offer a comment? All of that 

is fine in economic theory. As I said, I have had to stand in town 

hall meetings with 3 or 400 Americans that don’t have jobs. 

I appreciate what each of you are saying, but I do think we have 

got to be sensitive to the fact that there are costs to taking care 

of Americans who don’t have jobs temporarily because there are 

folks here who will under-bid them in those jobs because we 

haven’t been willing to restrict their entry here. It is a problem I 

would like each of you to think about for the next round. 

Chairman SPECTER. Thank you very much, Senator Kyl. 

We have developed quite a number of people standing in the 

back. There are a few chairs up front. You are welcome to come 

and sit there. 

Senator Sessions. 

Senator SESSIONS. Thank you, Mr. Chairman, for having this 

hearing. I think it is important that the American people engage 

in the debate. I think there are a number of strawman arguments 

out there that we need to dispense with. 

The first is that there is any support in Congress for stopping 

immigration. There is no support in Congress for that, and this 

24

Congress will act sooner or later to deal fairly and generously with 

people who have come here illegally. The 11, 12 million, 20 million, 

whatever is here—they are going to be treated fairly and justly. 

But I do think it is important for us to ask ourselves what is the 

limit to our immigration, what is the right number, and it ought 

to be in our National interest, not whether somebody would like to 

be here. 

I had the great pleasure of traveling with Senator Specter last 

week to South America, and in State Department clips was a poll 

from Nicaragua that said that 60 percent of the people would emigrate to the United States if they could. That was a stunning poll. 

I mentioned it to the Ambassador in peru and he said, well, they 

just had a poll here 2 months ago that 70 percent of the people in 

Peru would emigrate to the United States. Well, I am not sure how 

accurate those polls are, but it just points out that the numbers on 

an open border system do not make good sense to me. We obviously 

need to ask ourselves who and what numbers are relevant. 

I am not sure who to ask this question to, but if anybody would 

speak up and give me a thought on it, I would appreciate it. Is 

there a difference economically in the effect of a temporary or a 

permanent worker? Does anybody have any thought about that? 

Mr. SICILIANO. Senator Sessions, I will address one small part so 

that others can comment, and that is I think we know intuitively 

that renters and owners treat their properties differently. Renting 

to own may be a compromise, but I would say that we have recent 

evidence citing Giovanni Peri’s paper out of UC-Davis in November 

that we know that the entrepreneurial behavior of those immigrants who feel that they have some possibility of being here in the 

long term is increased because they are more likely to invest their 

capital here in the United States to engage in skill-building that 

resonates better in the United States and they get better returns 

on. 

So my one comment would be we know we sometimes get very 

efficient and good behaviors for our National interest from immigrants of all skill levels if they think they may have a long-term 

role to play here both about themselves and their children. 

Senator SESSIONS. Would it be in our interest, therefore, to attempt to identify the people that bring the most skill sets and the 

most ability to the country when we allow whatever limited number we have to come here legally? 

Mr. SICILIANO. At both ends, yes. 

Mr. CHISWICK. Absolutely. What we want to do is attract those 

immigrants who would have the largest positive contribution to the 

American economy, and they will be highly skilled immigrants, immigrants with high skills in literacy, numeracy, scientific knowledge, technical training. Current immigration law pays very, very 

little attention to the skills that immigrants bring to the United 

States. 

Senator SESSIONS. Let me point out that when we visited the Dominican Republic, the person in charge of issuing the visas told us, 

I think, 95 percent of the visas are chain migration, family visas. 

So, obviously, we are asking no questions about what skill or capacity they bring to our country. It is just automatic based on your 

relative connection. 

25

Professor Freeman. 

Mr. FREEMAN. The Canadians and the Australians both use 

much more occupational qualifications, the Australians have a very 

interesting system which we could think about because they also 

get a lot of people who come as students to the universities. We 

have a huge international student flow. We are able to judge how 

good they are. Our companies will offer jobs to them. Our universities will offer them fellowships and scholarships, and so on. 

What the Australians do is give those people a leg up in getting 

citizenship, so on a point system they get extra points. We certainly 

could think of something like that to all of these foreign students 

who come here who are learning the latest and best technologies 

and who are generally among the best in the world. We tend to 

keep a lot of them in any case through whatever mechanism the 

firms do keep them here, but that could be regularized and made 

much more attractive. We are competing with these other countries 

for these very bright, young people. 

Mr. CHISWICK. The only aspect of public policy in the United 

States that I am aware of in which we encourage nepotism is in 

our immigration policy. 

Senator SESSIONS. Otherwise, we are a meritocracy. That is our 

American ideal. Is that not correct? 

Mr. CHISWICK. Yes. 

Mr. HOLZER. If I could add something to that, I think what we 

sometimes call nepotism in labor markets is really the efficient 

working of flows of information through informal networks. I think 

even for less educated workers—and we all share the view that it 

would be positive thing to increase the flow of skilled immigrants, 

scientists and engineers. 

I want to emphasize again that there are benefits to the American economy that even some of these less-educated immigrants 

provide, and I think what we are calling nepotism—really, in many 

cases employers, having hired one or two immigrants and being 

very, very pleased with their performance and their work ethic, 

then encourage them to bring in their relatives, their friends, their 

cousins because they are so pleased. In many cases, that is an efficient way for many of these lower-wage labor markets to operate. 

Senator SESSIONS. Well, let me just make one thing clear to anybody who is listening. Essentially, the so-called compromise legislation that is on the floor—nothing about it is temporary or guest 

workers. They all get to come here and they all get to stay as long 

as they want to and on a path to citizenship, virtually every one 

of them. That is what it does. 

The cap on green cards goes from 140,000 to 450,000, and family 

members don’t count against the cap. Almost one million workers 

a year come in and they can apply for the green card, their employer can, the first day they arrive in the country. So these are 

not temporary workers. We need to get straight about the language 

of this legislation when people discuss that. 

I would note for the record a study by the Center for Immigration Studies. There is a deficit today of more than $10 billion a 

year based on the calculated benefit in taxes paid, plus the cost on 

the social system of our economy today for the average immigrant. 

I don’t think that matter is real clear. 

26

Mr. Chairman, my time has expired. I am sorry to run over. 

Mr. FREEMAN. Can I make a comment on the— 

Chairman SPECTER. Go ahead, Professor Freeman. 

Mr. FREEMAN. I was on the special academy panel that looked at 

immigration on particularly fiscal cost things and what we found 

was that is incredibly variable over time. And as long as we are 

running a huge deficit, the immigrants are going to be negativecontributing. 

If we began to run a surplus, suddenly they would be contributing more taxes and would therefore be reducing our deficit. So 

it is less what they are doing than what our overall fiscal stance 

is. If we had a more balanced budget and we ran a surplus, they 

would be paying more in taxes. 

Senator SESSIONS. Why is that? I don’t want to interrupt. 

Chairman SPECTER. Go ahead. 

Senator SESSIONS. Why would it make a difference? First, project 

for me when we are going to have a surplus. Second, why does it 

make a difference? 

Mr. FREEMAN. I will do the surplus first because at the time we 

did our calculations, no one dreamed there would be a surplus. I 

do believe we had one four or 5 years ago, so these come through 

magic, if I can phrase it right, sudden economic boom. 

When we are running a surplus, the government is taking in 

more taxes than the money they are putting out. And just assume 

that an immigrant is also paying more taxes than he or she is consuming in government funds. Therefore, in that situation, having 

another worker come in who pays more in taxes than they are taking out means we can reduce our National debt. So it is just very 

dependent upon what the overall fiscal stance is. 

Mr. SICILIANO. Mr. Chairman, I am familiar with the study. I 

can answer the specific question, if I may. 

Chairman SPECTER. Go ahead, Professor Siciliano. 

Mr. SICILIANO. Thank you. That particular study has two types 

of expenditures—direct payments to immigrants and immigrant 

households, so it includes sometimes U.S. citizen children, and indirect attributive costs which are the general expenses by the government divided by the number of households in the United States. 

The study is actually dominated by the general government expenditures component of those costs. So, in other words, you take 

the government expenditures, you divide it by the number of 

households, and then you take that number. And that number is 

a large number right now because we have high levels of expenditures relative to tax collections. 

That is why it is driven by our fiscal state as a Federal Government, as opposed to simply the behavior of the immigrants. The direct payments are an important component, but they are actually 

dominated by and outweighed by the general expenditures share, 

which is interesting, but I think it overstates the interest of that 

particular number that you have cited. It is not irrelevant. 

Mr. CHISWICK. But those statements are based on the average 

immigrant, and if you do the analysis separately for high-skilled 

and low-skilled immigrants, what you would find is that even in a 

period of surplus, low-skilled immigrants would be paying less in 

27

taxes than the burdens that they would be putting on the government expenditures. 

Mr. SICILIANO. Just like low-skilled U.S. workers. 

Mr. CHISWICK. Just like low-skilled natives, yes. 

Mr. SICILIANO. Yes, in no different way than low-skilled U.S. 

workers. 

Mr. CHISWICK. But low-skilled natives are here and low-skilled 

immigrants—do we want them in the country or not? 

Senator SESSIONS. Thank you. 

Chairman SPECTER. Thank you very much, Senator Sessions. 

Senator Sessions and I just made a trip to South America and 

had a good deal of conversations with officials about a variety of 

aspects on immigration. In both Colombia and the Dominican Republic, we were told of governmental programs there which sought 

to keep track of guest workers. President Uribe, a very impressive 

man, told us that they had arrangements with both Spain and 

Canada, so that when their workers went there, they were kept 

track of by the Colombian officials, and their ability to go back depended on complying with the legalism of returning when their 

stay was up. 

Professor Freeman, do you think that is a realistic way to bring 

them back? 

Mr. FREEMAN. It is easier if they are far away. So if you are 

going to Colombian to Spain where you have airplane trips, I think 

it would be more difficult to do this with a border with Mexico. 

Chairman SPECTER. The President of the Dominican Republic 

was very interested in the money coming back to the Dominican 

Republic. The estimates are the immigrants in the United States 

send home about $39 billion a year in remittances. So on one hand, 

there is a concern about what that does to our economy. That purchasing power is not being used in the United States. 

The other aspect is that our foreign relations are very complicated. We heard a great deal about the difficulties with Venezuela and President Chavez. A vote of the Andean countries on 

protecting property rights was three-to-two, with the United States 

winning. We have trade there to try to strengthen our foreign relations. We heard a lot of talk about their recognizing the leaders of 

the foreign governments, recognizing our rights to control our borders, but also looking for a humanitarian approach that we have. 

How big an impact is it, Professor Siciliano, if $39 billion is remitted from the United States to the home countries? 

Mr. SICILIANO. Well, as a component of the overall economy, I actually think it is a fairly small number, but it obviously has tremendous impact for the countries who receive the remittances. 

Two points. One, the transmission of that money actually generates substantial revenue and profits for U.S.-based business, primarily financial institutions who serve as the intermediaries to 

make that happen. I don’t think we want to forget that. 

The second issue is that the money lands in the hands of individuals who are nationals of obviously that country and some of it recycles as demand for our goods and services, hence jump-starting, 

we hope, the ongoing trade relations which may mitigate some of 

the foreign national risks you have identified. So I think it is a 

small piece in a big global economy and one that shouldn’t domiVerDate 0ct 09 2002 11:49 Aug 24, 2006 Jkt 028335 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\28335.TXT SJUD4 PsN: CMORC
28

nate the thinking about how we decide to move forward on the immigration debate. 

Chairman SPECTER. Professor Freeman, you have suggested a 

policy of considering auctioning immigrant visas and to use those 

excess funds to redistribute the gains. Do you think that is really 

a good idea to engage in an auction for people who want to come 

to this country and the highest bidder wins? 

Mr. FREEMAN. Let me give the place where it would make the 

most sense, which is the H–1B visas. Where companies are saying 

there is a shortage of people and they want to bring more people, 

we charge them some amount of money. 

Chairman SPECTER. So you are going to have Bill Gates pay for 

the auction price? 

Mr. FREEMAN. Exactly right. 

Senator SESSIONS. They pay now. 

Mr. FREEMAN. They pay something now. That is right. 

Senator SESSIONS. I don’t know what it is, but— 

Mr. FREEMAN. They pay $1,000—or $2,000, he says. 

Chairman SPECTER. Well, that puts it in a different light if Bill 

Gates is going to pay, as contrasted with the immigrant. 

Mr. FREEMAN. Yes. There, the notion of an auction just was the $2,000 got established for some unknown reason and this would establish a market mechanism that would say if we are going to give 

out 100,000 H–1B visas, the employers who want them the most 

would bid money for them, the same way we auction off the rights 

to pollution and things like that. I wouldn’t be putting this as a 

major cornerstone of our immigration policies. 

Chairman SPECTER. Professor Chiswick, you have made a suggestion in your writing about prioritizing immigrants based on the 

economic benefits they are likely to confer on the United States. 

That is an interesting concept. Would you do that at the expense 

of family unification? Would you exclude family unification and 

maintain that priority before taking up the issue of analyzing the 

economic benefit so that we look to specific immigrants who can 

add to our productivity? 

Mr. CHISWICK. I wouldn’t totally exclude family unification. I 

think in terms of the spouses and minor children and aged parents 

of U.S. citizens, I would permit that to exist as it does under current law. But I would recommend removing all of the other family 

categories and I would recommend three changes in allocating 

visas. 

One would be to move away from the current targeted employment policy and move toward a Canadian-Australian style point 

system for valuating skills. I would also move in the direction of 

the auctioning or large visa fee system that we have just spoken 

about, and this would be a way for family members, friends, to express their preference to bring over a particular individual. 

Chairman SPECTER. You would auction family reunification 

visas? 

Mr. CHISWICK. No. I would auction visas and people who want 

to bring their relatives here would have an incentive to contribute 

to the price of the visa that is auctioned off. So it doesn’t have to 

be Bill Gates who is paying for the visa. It could be the person’s 

brothers, sisters, cousins, aunts, uncles, nieces and nephews. 

29

Chairman SPECTER. It sounds like a pretty tough way to raise 

public funds to me. 

You are lucky, gentlemen, that we are about to vote. Otherwise, 

we would keep you here well into the afternoon. 

Mr. CHISWICK. We are enjoying this. 

Mr. SICILIANO. Absolutely. 

Chairman SPECTER. Senator Sessions, anything further? 

Senator SESSIONS. Well, it is a most fascinating subject. I asked 

that we do some hearings like this because we are just moving 

pieces of legislation through and we have hardly had any real discussion of the incredible size and scope of what we are doing and 

the impact it may have on us. 

I was just with the president of the University of AlabamaHuntsville. Kit Bond spoke and referred to his amendment that 

would allow a college graduate from a foreign country to stay in the 

country. Now, they have to leave the country. 

Professor Freeman, do you have any thoughts about—to my 

knowledge, there is nothing in this bill that fixes that, but do you 

think that is a good policy to change that rule? 

Mr. FREEMAN. Yes, and I think it is one of the silly things that 

we do is if you are a foreign student and you want to come to the 

U.S. to study, you have to tell the State Department person that 

you are not remotely thinking about working in the U.S. 

I talked to the State Department people and I said that do you 

know that for the Chinese 90 percent of them will stay here? So 

you realize, of course, they are lying to you when they say no. And 

the State Department person said we don’t pay attention to statistics; we just trust people. 

But making entry to the country of these kinds of people sort of 

a bit of a white lie at the beginning when everyone understands 

we want them and they want to come to work here—we should just 

be forthright about that the way the Australians and the Canadians are. 

Senator SESSIONS. Well, I was in Russia in the early 1990’s and 

we had a guide who spoke perfect English. She was a very attractive young lady and she wanted to have a visa to come to the 

United States, and they said, no, she would never get it. We said 

why? Well, she will probably get married, you know, and she probably won’t return. 

What kind of rule is that when we have people who say we have 

got to have somebody to put a piece of chocolate on your bed every 

night, and this lady could have contributed in any number of ways 

to the good of the United States? 

Let me just raise an issue. I just want to raise this because I 

know it is anecdotal, but I think it is worth talking about. Jared 

Bernstein of the liberal Economic Policy Institute said, ‘‘Of course, 

there are jobs that few Americans will take because wages and 

working conditions have been degraded by employers. But there is 

nothing about landscaping, food processing, meat-cutting or construction that would preclude someone from doing these jobs on the 

basis of their nativity. Nothing would keep anyone, immigrant or 

native-born, from doing them if they were paid better or had better 

conditions.’’ 

30

In my hometown of Mobile, there was a recent need after Hurricane Katrina, which is the classic thing I think you would need a 

temporary worker for. I mean, you have got roofs all over town that 

need to be replaced—a classic need for a temporary worker. So we 

had a lot of Hispanic workers. 

There was a recent article in the Washington Times entitled ‘‘Arrival of Aliens Ousts U.S. Workers,’’ and the article describes how 

70 laborers and construction workers were working for $10 an hour 

in the aftermath of Hurricane Katrina, but were told they were no 

longer needed when the Hispanic workers showed up. 

This is a quote from the article: ‘‘Linda Swope, who operates 

Complete Employment Services in Mobile, told the Washington 

Times last week that the workers, whom she described as U.S. citizens, residents of Alabama and predominantly black, had been urgently requested by contractors hired to rebuild and clear devastated areas of the State, but were told to leave three job sites 

when foreign workers showed up.’’ 

‘‘After Katrina, our company had 70 workers on the job the first 

day, but the companies decided they didn’t need them anymore because the Mexicans had arrived, Ms. Swope said. I assure that it 

is not true that Americans don’t want to work. We had been told 

that 270 jobs might be available and we could have filled every one 

of them with men from this area, most of whom lost jobs because 

of the hurricane. When we told the guys they would not be needed, 

they actually cried and we cried with them. This is a shame.’’ 

Does anyone want to comment on that? 

Mr. CHISWICK. I agree with that statement that there is a competition in the labor market and the large increase in low-skilled 

immigration that we have seen over the last 20 years has had a 

substantial negative effect on the employment and earning opportunities of low-skilled Americans. 

On the other end of the skill distribution, the high-skilled immigrants, we are in intense international competition not just with 

Canada and Australia, but now also with Western European countries that are all developing immigration policies to attract highskilled immigrants. And we are essentially subsidizing Canada and 

Australia by our immigration policies which make it that much 

more difficult for high-skilled immigrants to come to the United 

States permanently. 

Chairman SPECTER. The vote has just started, so you may comment, Professor Holzer, but if you would make it brief, Professor 

Siciliano wants to comment and I wouldn’t be surprised if Professor 

Freeman wants the last word. Just be brief. 

Mr. HOLZER. Senator, I don’t share the view that has been expressed that low-skilled immigrants have really dramatically depressed or reduced opportunities for native-born workers. I did say 

earlier that I thought construction was a sector where a lot of native-born workers would be interested. 

I think in this particular case of Katrina, this is an example 

where we could be doing more not necessarily to drive the immigrants out of America, but to level the playing field and increase 

the opportunities for native-born workers to improve the networks 

and the skills that they get. 

31

I think, for instance, if public funds are being expended on the 

rebuilding of Katrina, it would be fairly easy to generate some requirements that contractors look first and make some efforts to 

bring in native-born workers. I would favor those kinds of attempts 

to level the playing field and increasing the opportunities for the 

native-born workers. And in the case of Katrina, I think there is 

a strong case to be made. 

Chairman SPECTER. Professor Siciliano, do you have a brief comment? 

Mr. SICILIANO. Yes, two key points. I think anecdote in the hands 

of the economist is a dangerous weapon, so let me just give two 

kind of actual points of data. First, in the 1960’s we know that 

roughly half of the U.S. work force lacked a high school diploma, 

and now about 12 percent of the native-born work force lacks a 

high school diploma. 

This skill set difference is driving the comment that I think is 

true, which is it is not the case that immigrant labor is displacing 

by and large U.S. labor or depressing wages, and there are two key 

points to highlight that. Nevada and Kentucky, arguably similar in 

cost of living in many ways—7.5 percent of the population of Nevada right now is estimated to be undocumented. The average high 

school drop-out wage is $10 per hour. In Kentucky, less than 1 percent of the population is estimated to be undocumented, and yet 

the high school drop-out wage is $8.73 per hour. 

It can’t be simplified into simply saying immigrant labor shows 

up and it hurts U.S.-born labor. It is much more complex than 

that. I think, net, it clearly benefits U.S. labor. 

Chairman SPECTER. Professor Freeman, do you have a brief concluding comment? 

Mr. FREEMAN. I want to give a speech, but I guess I am not allowed to. The fact is that in no single occupation in this country, 

including the worst occupations that we can think of in terms of 

wages, are immigrants the majority. I think 30 to 40 percent is 

about the most we get in any occupation. 

So there are parts of the country where the jobs that we might 

think of now as for low-level immigrant workers—they are being 

filled in parts of the country where there aren’t immigrants by 

Americans. That means that Americans are willing to work at 

these jobs. They may not be willing to compete with an immigrant 

at very low wages, particularly when the immigrant may be getting 

paid illegally off the books, and so on. 

Chairman SPECTER. Gentlemen, thank you all very much for 

coming. If you would respond to my inquiry within 2 weeks, it 

would be greatly appreciated because we expect the immigration 

bill back on the floor shortly; that is, to give us your projection as 

to how you would structure a guest worker program, considering 

the economic factors of not taking or minimizing the taking of jobs, 

and not lowering or minimizing the lowering of wages. But recognizing that, as Professor Holzer says, these are very difficult issues 

and nobody knows the answers with precision, your projections 

would be enormously helpful to the Committee and to the Senate. 

32

Thank you all very much and that concludes our hearing. 

[Whereupon, at 11:17 a.m., the Committee was adjourned.] 

[Submissions for the record follow.] 

[Additional material is being retained in the Committee files.]

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