On immigration policy, we've got it backward
By Geoffrey Colvin

(FORTUNE Magazine) – AS GLOBALIZING LABOR MARKETS REVOLUTIONIZE THE work lives of millions, we Americans have to face some uncomfortable new realities. Could it be that we're actually not worth what we're paid? Is it possible that our schools just aren't good enough? Next up for rethinking: our nutty immigration policy.

Consider two groups of people who want to enter the U.S. and work. Group one observes the rules meticulously. When they get here, they pay taxes, sometimes in quite large amounts. By law, they're here only because no American is available to do the work they're doing, and that work is so valuable that it helps U.S. companies create more jobs for Americans--an average of three to five jobs for every one of these workers. Our official stance toward them? We severely restrict the number we admit and very effectively keep out any beyond the legal limit.

Group two is just the opposite. Many of them violate the rules, not only in entering the U.S. but by using forged documents once they're here. Many of them also evade taxes, and some of them, by working illegally at below-market wages, take jobs from U.S. citizens who follow the rules. Our stance toward these workers? Officially we don't allow them in, but in practice we let hundreds of thousands enter the country every year.

Group one comprises highly skilled workers who come to the U.S. on H1-B visas. Group two is made up of the illegal immigrants who do lawn care, meat processing, house painting, and other low-skilled U.S. jobs. And while it sounds as if group one is desirable and group two isn't, that's not quite right. In fact, they're more similar than different.

The U.S. labor force has long had shortages at the very top and the very bottom. Most people are trained and suited for the broad middle, leaving them overqualified for the lowest- level jobs and underqualified for the highest. Yes, our flexible labor markets should solve that problem, but for whatever reason, they don't. So we turn to foreign workers to fill some of the gaps.

The result is group one and group two, both of which we need. The reason one looks good and the other bad is that by the nature of their work we're able to thwart market demand and keep one group out, but not the other. A highly skilled computer engineer doesn't need to risk his life crossing the border illegally, and a big firm like Intel or Microsoft wouldn't employ him if he did, so illegal-immigrant chip designers are just not an issue. But a Mexican farmworker may find the risk worthwhile, and the farmers who will employ him don't care how he got here. So we can stop foreigners from working in Silicon Valley but not in the Central Valley. Yet both places need them.

The situation is going to heat up politically in the next few months. Resentment toward illegal immigrants is building among working-class Americans, who already feel threatened by outsourcing and by the rise of China and India. Voicing the anger of those voters are a number of politicians, notably Representative Tom Tancredo (R-Colorado), who says he'll run for President on an anti-immigration platform. At the same time, as America loses its technology edge, high-tech employers are pleading more loudly for a higher cap on H1-B visas so that they can bring the best foreign workers here rather than let them stay home and work for the competition. Look for Congress to begin hard work on some kind of comprehensive immigration bill this fall.

What should it say? The best solution for group one is simple: Eliminate the cap on H1-B visas, currently just 65,000 a year. That is hardly a radical notion. For nearly 40 years, until 1990, there was no cap. Now is the worst time to be turning away some of the world's most capable, value-creating workers. The solution for group two is more complicated, but the outline is clear. Forget about deporting them. It's impossible, and any attempt would just waste billions of dollars. Instead, make it worth their while to become tax-paying, on-the-books workers for at least a few years. Many would do it happily in return for one cost-free privilege: the right to travel freely between the U.S. and home.

Neither of those solutions will become law, but Congress will probably go some distance toward each one. Just how far it goes will be a measure of how comfortable America has become with the reality of today's labor markets.

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