The Effect of Immigration on Productivity

Immigration during the 1990s and the 2000s significantly increased the presence of foreign-born workers in the United States, but the increase was very unequal across states. In The Effect of Immigration on Productivity: Evidence from US States (NBER Working Paper No. 15507), NBER Research Associate Giovanni Peri analyzes state-by-state data to determine the impact of immigration on a variety of labor market outcomes, including employment, average hours worked, and average skill intensity, and on productivity and income per worker.

Peri reports a number of distinct findings. First, immigrants do not crowd-out employment of (or hours worked by) natives; they add to total employment and reduce the share of highly educated workers, because of their larger share of islow-skilled relative to native workers. Second, immigrants increase total factor productivity. These productivity gains may arise because of the more efficient allocation of skills to tasks, as immigrants are allocated to manual-intensive jobs, promoting competition and pushing natives to perform communication-intensive tasks more efficiently. Indeed, a measure of task-specialization of native workers induced by immigrants explains half to two thirds of the positive effect on productivity.

Third, Peri finds that inflows of immigrants decrease capital intensity and the skill-bias of production technologies. The decrease in capital intensity comes from an increase in total factor productivity; the capital-to-labor ratio remains unchanged because investment rises coincident with the inflow of immigrants. The reduction in the skill-intensity of production occurs as immigrants influence the choice of production techniques toward those that more efficiently use less educated workers and are less capital intensive.

Finally, Peri finds that for less educated natives, higher immigration has very little effect on wages, while for highly educated natives, the wage effect of higher immigration is positive. In summary, he finds that a one percent increase in employment in a US state, attributable only to immigration, is associated with a 0.4 to 0.5 percent increase in income per worker in that state.

A central challenge in establishing a causal link between immigration and economic outcomes is the fact that immigrants may be disproportionately attracted to states with strong economic performance. Peri recognizes this problem, and uses information on state characteristics, such as the location of a state relative to the Mexican border, the number of ports of entry, as well as the existence of communities of immigrants there before 1960 to predict immigrant inflows. He then studies how these predicted inflows, rather than actual inflows, are related to labor market outcomes. He argues that the state characteristics that underlie his predictions are not likely to be associated with either labor market outcomes or productivity. He also controls for several other determinants of productivity that may vary with geography such as R and D spending, computer adoption, international competition in the form of exports, and sector composition.

New I-9 Form Available

US Citizenship and Immigration Services (USCIS) has announced that the new I-9 employment eligibility verification form must be used as of April 3.

Click here to read the U.S. Citizenship and Immigration Services (USCIS) press release.

Click here to download the new I-9 form.

Canada welcomes U.S. H-1B skilled workers

According to Tennessee immigration lawyer Greg Siskind, "While our Congress buries its head in the sand and refuses to update our antiquated skilled immigration system, our neighbors to the north are seeking to take advantage of the paralysis. This is just embarrassing."

Alberta, Canada is now actively recruiting dissatisfied high-skilled H-1B workers in the U.S. (discouraged by sometimes waiting 7 or 8 years for a green card), by promising expedited "Permanent Residency in Canada.

Be prepared!

On Wednesday, at the educational sessions of the Southwest Growers Conference, Dr. Marco Palma gave an excellent presentation on "hiring a legal workforce" for nursery and greenhouse operators. Conference attendees were also presented with their very own copy of the newly revised Immigration and Labor Handbook that is hot off the press (click here).

As part of the discussion, it was was pointed out that increased I-9 and immigration compliance audits of businesses are expected. To prepare, ANLA has revised their employer audit guide (click here). ANLA also reports an increase in DOL wage and hour investigations targeting nursery employers using the H-2A agricultural guest worker program. Auditors are closely scrutinizing job descriptions and performance of non-agricultural work that can result in the loss of the agricultural overtime exemption.

No-Match Saga Continues

In August 2007, a long awaited "no-match letter" regulation from US Immigration and Customs Enforcement was released. It quickly was challenged in court and the rule was barred from taking effect by a federal district court. Yesterday, DHS released a proposed rule that makes very few actual changes to the previously released rule and instead attempts to address procedural questions raised by the court in its preliminary injunction.

The rule describes the obligations of employers when they receive no-match letters from the Social Security Administration or receive a letter regarding employment verification forms from the Department of Homeland Security. The rule also provides "safe harbors" employers can follow to avoid a finding the employer had constructive knowledge that the employee referred to in the letter was an alien not authorized to work in the US. Employers with knowledge that an immigrant worker is unauthorized to accept employment are liable for both civil and criminal penalties.

The rule finalized a proposed rule released on June 14, 2006. The Department of Homeland Security, ICE’s parent department, received nearly 5,000 comments on the rule from a variety of interested parties including employers, unions, lawyers and advocacy groups. According to DHS, the opinions were highly varied with both strong opposition and support being enunciated. DHS also held a meeting with business and trade associations to discuss the proposed rule.

Why did the court block the rule from taking effect?
The rule was challenged in court prior to it taking effect in September 2007 and a judge issued a preliminary injunction on three grounds:

(1) DHS failed to supply a reasoned analysis justifying what the court thought was a change in DHS’ position - that a no-match letter may be sufficient, by itself, to put an employer on notice that its employees may not be work authorized;

(2) DHS exceeded its authority (and encroached on the authority of the Department of Justice) by interpreting anti-discrimination provisions in the Immigration Reform and Control Act (IRCA); and

(3) DHS violated the Regulatory Flexibility Act by not conducting a regulatory flexibility analysis.

How has DHS attempted to address the court’s objections?
On March 21, 2008, DHS released a supplemental proposed rule designed to address the court’s concerns. DHS is hoping that the court will overturn the preliminary injunction and allow the agency to implement the proposed rule. The agency is also continuing to appeal the court’s order. The agency is providing 30 days for comments.

In the proposed rule, DHS first addressed the court’s concern that that agency had failed to provide a detailed analysis explaining the agency’s new position that no match letters are an indicator of unauthorized status.

DHS first cites a number of sources indicating that Social Security numbers are being used to gain employment authorization by people unauthorized to work. It included quotes from the 1997 report of the US Commission on Immigration Reform and also cites reports issued by the Government Accountability Office and the Inspector General of the Social Security Administration.

It also notes that the industries most affected by the rule have admitted that much of their workforce is unauthorized and millions of employees have used false numbers. Finally, the agency cites to public and private studies confirming that a sizeable portion of employees identified by no-match letters are working illegally in the United States.

DHS cites two other justifications for the law. First, many employers fail to respond to no-match letters because they fear being accused of violating anti-discrimination rules if they react inappropriately to them. The no-match rule would provide protection from such liability if the employer follows the requirements of the regulation.

Second, many US citizens and aliens would benefit by being notified of problems in the Social Security database and being able to get proper credit for their earnings. US citizens would also benefit, according to DHS, by seeing an expansion of employment opportunities as a result of unauthorized employees being terminated for not providing a valid Social Security number.

DHS then describes in the rule a series of rulings and opinions by the agency that it believes show the agency has had a consistent position on no-match letters. But the agency states that even if it concedes that it is taking a new position, it meets the requirement to show a reasoned analysis justifying the chance in policy.

In this case, it states that the “most basic justification for issuance of this rule – and for the “change” in policy found by the district court – is to eliminate ambiguity regarding an employer’s responsibilities upon receipt of a no match letter. Absent this rule, employers have been taking very different positions based on DHS’ ambiguous statements.

DHS also defends the rule by pointing out that only employers with more than 10 employees identified with no-matches get SSA no-match letters and only if the percentage of no-matches exceeds .5% of the employer’s work force.

With regard to the question of usurping the Justice Department’s anti-discrimination enforcement authority, DHS insists that its rule does not interfere with “the authority of DOJ to enforce anti-discrimination provisions of the INA or adjudicate notices of intent to fine employers.”

It also specifically rescinded statements from the August 2007 rule’s preamble describing employers’ obligations under anti-discrimination law or discussing the potential for anti-discrimination liability. That includes the statement “employers who follow the safe harbor procedures…will not be found to have violated unlawful discrimination.”

With respect to the regulatory flexibility analysis, DHS takes the position that the rule is a voluntary safe harbor rather than a mandate. Hence, the rule does not require a showing that employers will not be significantly impacted economically.

However, the agency claims it is going to comply with the judge’s ruling by providing an initial regulatory flexibility analysis (IRFA). They have provided a very cursory summary of the analysis in the proposed regulation, but DHS says it will provide a full analysis in the docket of the rulemaking.

DHS claims that it has been stymied to some extent in providing a highly specific analysis because the Social Security Administration has denied its request for the names and addresses of the companies already identified by SSA in its preparation to release no-match letters pursuant to the August 2007 regulation.

SSA reminded DHS that this disclosure would actually be illegal under taxpayer privacy laws. SSA did, however, provide more general information including a table showing the distribution of employers slated to receive no match letters in 2006. DHS estimates it will cost employers anywhere from $3,009 to $33,759 depending on the size of the employer and the percentage of current no-match employees assumed to be unauthorized. DHS does not believe these costs constitute a “significant economic impact.”

DHS notes that the costs associated with losing an employee as a result of the rule are due to the Immigration and Nationality Act itself and not the new rule. However, the agency does not mention “false positives” where employees authorized to work are incorrectly identified in a no match letter.

The agency did not account for costs associated with losing employees not being able to resolve problems within 90 days, something that critics fear will become common as hundreds of thousands of people attempt to resolve problems at the same time under the new rule.

DHS did site the following costs: labor cost for human resource personnel, certain training costs, legal services and lost productivity.

Did DHS mention any changes to the August 2007 rule in its proposed rulemaking?
DHS only announced two relatively minor changes. First, DHS changed the rule require that employers “promptly” notify affected employees after they are unable to resolve a mismatch through internal checks. Employers would now be given five business days to notify employees.
Second, DHS makes clear that employees hired before November 1, 1986 are not covered by the no-match rule since these workers are not subject to IRCA.

Source: The Immigration Portal, www.ilc.com

Spanish Immersion Study Program a Success!

On February 24 - March 1, 2008, Texas AgriLife Extension hosted a unique educational program for commercial nursery floral producers. The FLORI-Culture & Marketing Spanish Immersion Study Program combined language instruction with daily tours focusing on labor and marketing. The event, led by Dr. Don C. Wilkerson, was conducted in Cuernavaca, Mexico. This international program with an emphasis on marketing and labor is an excellent example of how TAMU-Horticulture is addressing key GREEN industry issues.

I encourage you to read the summary of this innovative Extension educational activity (click here).

H-2A "patch" proposed

The H-2A program is the temporary agricultural worker program for growers and producers in most agricultural industries. In a joint media briefing by Secretary of Homeland Security Michael Chertoff, Secretary of Labor Elaine Chao, and Deputy Secretary of Agriculture Chuck Conner, two separate sets of regulations have been proposed for public comment: the Department of Labor's proposals to "modernize" the program and Homeland Security proposals on the hiring process itself.

The current H-2A program is unpopular with employers — only about two percent of agricultural workers come in under the H-2A program. Growers typically do not fully utilize the program because it is expensive, litigious and [quite frankly] bureaucratic. In the face of increased enforcement and a decreasing labor force, the inability to secure sufficient workers means that crops are rotting in the field in many industries and there is a less stable supply of workers available for growers in the Green Industry. One of the many problems with the current system is that the Department of Labor consistently fails to meet its own deadlines required by law, therefore farmers cannot depend on the program's promise to provide the correct number of workers at the correct time.

The new regulations being proposed would provide some relief, but in other areas raise serious concerns. On one hand the new rules include changing the process employers must go through to apply for workers, making it less burdensome. However, the proposal also would allow the Labor Department to start random audits of H-2A employers, and increase the fines from $1,000 to $15,000 for employers who have displaced American workers by hiring foreign ones. Other fines would increase for violating regulations from $1,000 to $5,000. In addition, under the proposed changes, wages would be based on "skill levels" and the wage formulas are changed.

Obviously, the proposal is long, complex and needs careful review, but it probably represents a good first step. However, since H-2A reform alone cannot address the breadth and depth of the agricultural labor crisis, there is still a desperate need for overarching immigration reform that will will provide the industry with a workable guestworker program. If Congress fails to act, employers will undoubtedly face a plethora of state and local laws, increased enforcement, and a new "No-Match" rule, which is expected shortly.