A market-based visa (MBV) approach would allow background-checked migrants from Mexico and the Northern Triangle countries to purchase a work visa at a market rate and enter and work in the United States on demand.
Program Goals
Such a program would seek to:
Close the unsecured southwest border to illegal immigration
End the black market in undocumented Hispanic labor without mass deportations
Create an orderly guest worker program and achieve market-level compensation for the U.S. government for providing labor market access, thereby generating both public confidence and visa revenues in excess of related migrant social costs, in turn laying the foundations for a more constructive dialogue on immigration policy
Recognize and accommodate conservative concerns with respect to migrant numbers, status and comportment.
Create tolerance and dignity by ending the impact of black markets – the lawlessness, victimization, racism and simmering ideological civil war – on employers, migrants, the policy community, and the U.S. public
The Black Market in Migrant Labor
Black markets arise when the government attempts to prohibit willing buyers and sellers from consummating a transaction. For conservatives, this arises for issues of perceived morality, social nuisance, or threats to the group. Typical prohibited items have included alcohol, marijuana, hard drugs, gambling, prostitution – and migrant labor.
Black markets are characterized by a predictable set of pathologies. These can be addressed with either enforcement or, alternatively, legalization coupled with taxation. Enforcement in turn can be applied to the supply – in this case, the migrants – or to demand, their employers. Almost without exception, enforcement against supply is the default option for handling black markets. This inevitably fails, as it did with Prohibition for alcohol (1920-1933) and the other vices before and since. The war on drugs, for example, has been raging for fifty years, and we are no closer to winning than we were during the Nixon administration.
The United States has, by contrast, experienced repeated success with liberalizations, notably with Repeal in 1933, gambling legalization outside Nevada from the 1970s, and marijuana legalization in the last decade. Indeed, marijuana legalization has led the quantity of marijuana smuggled over the unsecured U.S. southwest border to fall by an astounding 81 percent just during the Trump administration, and 93 percent since its peak in 2009.
Market-Based Visas
Market-based visas are a type of legalize-and-tax approach to ending the prohibition in migrant labor. Rather than regulating the market using quotas or quantitative restrictions, a market-based approach seeks to regulate the market by either setting visa prices and allowing visa volumes to adjust accordingly, or setting the number of visas to be issued and allowing the market to set the price.
As noted above, a market-based visa (MBV) approach would allow background-checked migrants from Mexico and the Northern Triangle countries to purchase a work visa at a market rate and enter and work in the United States on demand.
In terms of mechanics, the system might work as follows: A Mexican decides he would like to work in the United States. He visits the local U.S. consulate and fills out the associated paperwork, much as for an H2 visas, but leaning more heavily on biometrics.
The United States would conduct the usual screenings. If the migrant passes the background check, he would only receive the right to purchase a work visa (here dubbed the H2-M) at a market rate.
He would then seek to obtain a work offer, or barring that, plan to enter the United States speculatively and look for work. He could, for example, go to the Spirit Airlines website, buy an air ticket and a U.S. work visa at the same time for the duration of his choosing to the maximum permissible. With that, he could hop a flight from, say, Guadalajara and enter the United States at his discretion, with his visa tab running at an estimated $20 / day. When he exits the United States, the meter would stop.
In this system, we substitute ‘cheap’ for ‘easy’. In the current system, it is not too expensive to enter the United States, but it is not easy. In the proposed system, it is easy, but in no way cheap. We are, in effective, monetizing the cost of crossing the border and working illegally.
The H2-M would grant the rights of a standard H2 visa: ability to open bank accounts, obtain driver’s licenses, and rent property, among others. It would not allow participation in any Federal welfare programs, and health insurance would be mandatory.
The H2-M visa would not – and cannot – provide a pathway to permanent residency. As the visa would be purchased at a market price, any future benefits deriving from the visa would be reflected in its market value. Permanent residency in the United States is an extraordinarily valuable right, by our calculation, worth more than $4 / work hour even if promised for 15 years in the future. Were the option of permanent residency included in the H2-M program, participants would be reduced to penury by facing the trade-off between eating today and becoming citizens years hence, and the program would fail politically.
The Importance of On-Demand Entry
On-demand entry to work in the United States at the discretion of the migrant is a cornerstone of the market-based approach. Today, migrants come across the border illegally because they cannot enter legally. To close the unsecured border to illegal immigration, therefore, the most direct solution is to allow migrants to enter at will.
But how then to limit the quantities? A fully open border would see millions cross in short order. Fortunately, the market provides a solution in the form of a price, the same mechanism used by every business the world over. A market price rations access without discrimination or preference.
In this system, the U.S. government does not choose who enters the United States to work, it only qualifies a pool of potential workers via a background check. Having passed that, however, the migrant is in full charge of the decision to enter, subject to the visa fee. A price-based system ensures that visas are readily available on demand at any time, leaving the migrant in full control over his options. For the migrant, the key to working in the United States – as it is for Americans themselves – is finding a good job, getting good references, and staying in good standing with the U.S. authorities. This is the means to close the U.S. southwest border: allow migrants to enter legally at will.
Status for Undocumented Hispanic Residents
A guest worker program like the proposed H2-M is, of course, not ideal for undocumented migrants who are for practical purposes permanent residents. Nevertheless, since negotiations regarding the status of DACA and Dreamer participants seem at an impasse, market-based visas (MBVs) can serve as a substitute, even if an imperfect one.
Providing market-based visas just for incoming migrants is less than ideal. Even assuming the border can be sealed with this approach, incoming migrants will end up working alongside undocumented immigrants. In such an event, either the value of the visa may remain low or a migrant who entered on H2-M visa may allow it to lapse and join the black market to improve his personal economics. Moreover, the American public will remain unsatisfied if 90+ percent of the migrant market remains illegal.
As a consequence, extending the H2-M program to undocumented migrants already resident in the country makes sense. This would materially wipe out the black market in labor over time and ensure the unsecured southwest border remains closed to undocumented economic migrants.
The process of issuing and purchasing visas could be identical for undocumented residents as it is for incoming migrants. Both could purchase visas online, although the pools would likely be segregated (an H2-MR visa for residents).
If the government intends to provide status to undocumented migrants in the country, it will have to accommodate administrative violations of U.S. law in order to ensure widespread adoption of the program. This, of course, does not apply to those known to have committed serious crimes representing a tangible danger to the community. Indeed, the entire point of leniency for administrative crimes is to ensure a high level of program adoption and compliance while isolating hardcore criminals and depriving them of social support and work opportunities.
The Number of Visas
Migrants from just four countries – Mexico, Guatemala, El Salvador and Honduras – constitute 96 percent of attempted crossings at the U.S. southwest border. The citizens of these four countries (‘the MCA countries’), therefore, must be included in any program seeking to close the border. The remaining 4 percent, from a variety of countries, would be excluded simply as a matter of practicality.
The number of visas would be set by the price which reduces apprehensions at the U.S. southwest border to approximately 150 / day, compared to the current level of 2,000 / day. This represents a reduction of approximately 93 percent, which is a fairly typical reduction in pathology associated with the repeal of prohibitions.
The end of a given prohibition has historically led to an increase in demand for the now legalized good or service by 10-15 percent. Assuming 5.0 million undocumented Hispanics work in the United States, legalization would increase demand for migrant labor by 500,000 – 750,000 persons, on approximately two million open jobs in the category, per our analysis of JOLTS data from the Bureau of Labor Statistics.
Over the longer term, demand might increase with GDP, or perhaps an additional 100,000 – 150,000 incremental visas per year. The point, however, is to demonstrate that the system can function acceptably over a relatively short horizon of perhaps 3-4 years. Within that time, either the virtues of the system will become apparent, or it will fail.
Visas must also be granted to resident undocumented aliens in the country. Of the 10.5 million undocumented immigrants estimated by the Pew Research Center to be living in the United States in 2017, 7.0 million (67 percent) originate from the MCA countries. Non-MCA countries would be excluded from this program in its pilot phase as a matter of practicality.
Setting the Visa Price
In the MBV plan, the price of the visa is set by the market. This is a central component of the Plan and critical to its success for many reasons.
First, while we estimate the visa value at $3.50 / work hour, the market value could be higher or lower and could change materially over time, with seasonality and with the business cycle.
If Mexicans and other Central Americans are allowed to set the price in an open market, then they will essentially convert the value of legality into the visa price. On average, therefore, the undocumented migrant should be no worse off than they are today, and economics ensures that a producer surplus will exist for all participants.
The Visa Issuing Authority
Unlike price-based approaches, a market-based approach does not allow unlimited quantities of migrants to enter the United States. To achieve that goal, price / quantity pairs must be actively managed, unlike a fixed price system.
This in turn requires a management capability, in this case, a visa issuing authority which has flexibility to respond to market and social conditions. We refer to this as the Visa Oversight and Management Committee, the VOMC, not coincidentally similar to the Federal Open Market Committee (FOMC) which conducts U.S. monetary policy.
Like the FOMC, the VOMC would have a mandate to manage prices and volumes, notably to
Issue the number of visas which closes the unsecured southwest to illegal immigration and ensures material visa coverage of all non-violent, undocumented Hispanics in the country with the goal of reducing ‘no match’ Social Security numbers by perhaps 80%
Limit incoming migrants under an agreed cap (for example, no more than 400,000 additional visas in Year 1, and no more than 200,000 additional visas in any subsequent year)
Adjust visa price, terms and conditions to ensure compliance with payments and other requirements
Monitor, report and make recommendations to Congress on
Key program performance indicators (visas issued, retired, outstanding; border apprehensions)
Financial indicators (revenues; expenses; direct and indirect social costs; net revenues)
Migrant employment, wage, remittance and societal indicator trends (incarceration, use of social services, health and well-being indicators, etc.)
Employer conditions and compliance (new hires, wages paid, job titles; Social Security ‘no match’ rate, employment rates, etc.)
Services utilization and compliance (healthcare, education, etc.)\
Impact of visa policies on U.S. unskilled wages and employment
Societal impact (public opinion on migrant numbers, comportment; protests, etc.)
Put another way, the VOMC would be responsible to manage a government profit center generating $30 billion of net revenues per year, making it an economic entity with an impact comparable to Facebook or Amazon in dollar terms. The VOMC would be mandated to ensure key stakeholder objectives are met, including those of migrants, employers and the public, and in particular, conservatives.
Political Considerations
The key political challenge is persuading conservatives to consider a price-based approach.
Conservatives, and perhaps most Americans, feel most comfortable with controlling the country’s borders with quantitative restrictions, boundaries to be protected with force using Border Patrol or Customs. The intent is to keep foreigners apart from citizens, ‘them’ from ‘us’, unless permission is specifically granted.
Nevertheless, quantity-based restrictions, whether at the border or in policies like affordable housing, always bring markedly suboptimal outcomes and promote corruption and cronyism. They are to be avoided, as a matter of policy, whenever practicable.
The alternative is a price-based regime. Rationing by price is highly efficient, paradoxically much fairer than quantity restrictions, and does not require force.
That said, switching from a conservative to liberal mindset is inherently unnerving, because items perceived to exist outside monetary value are suddenly monetized, where ‘everything has a price, but nothing has value.’ Letting go risks a venture into the unknown.
Nevertheless, it is also true that black markets are phenomenally destructive, and condoning them is not conservative, but anarchic. And prohibitions inevitably fail.
Therefore, the hope is to persuade conservatives to accept a price-based approach, while acknowledging key conservative values. First and foremost is a limit on incoming migrants, and we achieve this by providing a management capability which allows conservatives to retain control over visa issuance within a price-based framework, hence ‘market-based’ visas.
Conclusion
An MBV program does not constitute ‘comprehensive immigration reform’, nor does it address other immigration programs which may have merit in their own right. It is, in essence, not even an immigration program, but rather the repeal of a prohibition on migrant labor. This is its strength. Black markets are easy to fix. Both the theory and practice of market liberalization are well understood, and therefore, so is the expected outcome. Illegal immigration is a problem we can solve in a manner which both meets the needs of incoming migrants and undocumented Hispanics, and addresses and respects the legitimate goals of Americans as a whole, and conservatives in particular, to control our borders and ensure a safe, orderly and economically viable migrant policy.