The Senate immigration bill includes provisions that would
create a temporary guest worker program that would be a
bureaucratic nightmare for American employers. It would force
employers to navigate a complex bureaucracy and would entangle any
company that hired a guest worker in stifling labor regulations.
Rather than have the federal government micromanage employers'
hiring decisions, Congress should create a system of employer
sponsorship for guest workers and allow employers to bid to
purchase permits to hire guest workers. This would preserve the
flexibility that keeps the U.S. labor market vibrant, ensure that
guest workers have skills that are truly needed, and prevent guest
workers from undercutting the wages of American workers.
The Guest Worker Program
The Secure Borders, Economic Opportunity and Immigration Reform
Act of 2007 (S. 1639) would create a new temporary guest worker
program. The program is intended to alleviate the
labor shortage that a dramatic reduction in illegal immigration
would cause without encouraging more illegal immigration. Foreign
workers would be permitted to apply for a Y visa to work in the
United States for two years and could renew the visa twice, with at
least a year outside the United States between each renewal. In
theory, the program would allow foreign workers to legally enter
the U.S. to ease labor shortages and then return to their home
countries. Both America and the temporary guest
workers would benefit. However, Congress has loaded the bill with
provisions that would shackle employers and prevent the program
from fulfilling this goal.
A Bureaucratic Mess
As drafted, the temporary guest worker program would force
employers to jump through many hoops to actually hire a guest
worker. To hire a Y visa holder, a firm would have to:
- Pay federally mandated wages.
- Advertise for a domestic worker for at least 3
months in high circulation newspapers, trade publications,
and state job banks, without success. This would prevent companies
from hiring guest workers on short notice.
- Certify that hiring a guest worker did not cause a U.S.
worker to lose his or her job in the six-month period
starting 90 days before the petition was filed. In practice, this
would mean that employers could not lay off or fire a similarly
skilled U.S. worker during that period.
- Hire any American worker who applied for the position
and accepted the offered wages and benefits. This
would deprive employers of discretion in hiring new workers and
could expose them to lawsuits for not hiring workers who were
poorly suited for their workplace.
In addition, the guest worker program would be open only to
employers located in counties with unemployment rates below 7
percent, whether or not the local unemployed population matches the
skills that an employer needs.
The Senate bill would sunset the temporary guest worker program
after five years, unless renewed by Congress, leaving employers
uncertain about whether or not they could hire guest workers after
Labor Market Flexibility Benefits Workers
On paper, many of the proposed program's provisions appear sound,
if bureaucratic. Some Members of Congress fear that a temporary
guest worker program could depress the wages of American workers or
cost American workers their jobs, and these regulations are
intended to address that fear. In practice, however, they would tie
employers' hands by dramatically reducing their ability to hire the
best worker for the job when the job needs to be done.
There are many good reasons for a company to lay off or decline
to hire a particular worker. Many employee skills cannot be
quantified, and an employee who looks good on paper may be a poor
match for a particular job, despite having good qualifications. For
example, a worker might have personal conflicts with co-workers
that prevent him or her from being a team player.
The government should not force companies that have applied to
employ guest workers to hire or retain workers unsuited to their
job. The freedom to hire and fire workers at will is essential to
America's strong labor market. It puts workers in the jobs for
which they are best suited and encourages companies to take chances
by hiring workers on a trial basis. Ultimately, this benefits
workers by raising average wages and providing more job
opportunities. The French model of heavily regulated hiring and
firing has led to unemployment rates twice the U.S. average.
America should not shackle American employers as France moves to
free its labor markets.
Permit Auctions: A Better Solution
If Congress is concerned about guest workers undercutting American
wages, it can address the issue without micromanaging employment
decisions. The key to a temporary guest worker program is employer
sponsorship. Rather than force employers to navigate
the federal bureaucracy to prove that they need a guest worker, the
government could simply auction permits to hire guest workers.
Employers who need to hire a guest worker would bid for a permit,
and the winner would have the right to hire a Y-1 visa holder.
The market would set the price of the permits according to
demand, and only employers who actually need guest workers
would be willing to pay the price for a permit. This mechanism
would also dissuade employers from hiring guest workers for lower
wages than Americans would accept. If Indian engineers are willing
to work for $40,000 a year, for example, while American engineers
charge $70,000, then market forces would bid up the cost of a
temporary guest worker permit by as much as an additional $30,000 a
year. While the foreign engineer might work for less, the cost of
the permit would offset this wage advantage.
Permit auctions would accomplish everything Congress intends the
current regulations to do, but without micromanaging employers or
reducing labor market flexibility. Further, Congress could put the
money from permit auctions into the State Impact Assistance Account
that the bill creates to help states deal with any financial
burdens associated with the temporary guest workers.
The temporary guest worker program in the Senate's immigration
bill is flawed. It would force prospective employers to navigate a
complex bureaucracy to prove that they need guest workers and would
dramatically reduce the labor market flexibility of any company
using the program. Employing guest workers, even in industries
where they are needed, would be unnecessarily expensive, time
consuming, and even risky, due to the law's requirements. The
resulting loss in labor market flexibility would harm both
employers and employees, as demonstrated by inflexible France's
sky-high unemployment rate. Congress should scrap this technocratic
proposal and instead allow the government to auction permits to
hire guest workers.
James Sherk is
Bradley Fellow in Labor Policy in the Center for Data Analysis at
The Heritage Foundation.
Sections 401, 402, and 403.
Section 403 (a). For more on the problems with the prevailing wage
provision, see James Sherk, "Senate Immigration Bill Marred by
Prevailing Wage Provision," Heritage Foundation WebMemo
No. 1475, May 29, 2006, at www.heritage.org/Research/Immigration/wm1475.cfm.
Ibid. The legislation does allow employers to petition the
Secretary of Labor for a waiver of this provision, but nothing in
the legislation requires the Secretary to grant an exception in the
case of a skills shortage.
Horst Siebert, "Labor Market Rigidities: At the Root of
Unemployment in Europe," The Journal of Economic
Perspectives, Vol. 11, No. 3 (Summer 1997), pp. 37-54.