Immigration permit auction touted as reform that would aid economy

America's decades-old immigration system should be replaced with an auction of work permits, says a UC Davis economist who is attracting attention on Capitol Hill.

His market-based reform, which was unveiled Tuesday, would have U.S. companies compete in a quarterly electronic auction to buy permits to hire foreign workers.

In essence, U.S. firms' willingness to pay for work-based visas would become more important than family connections and fixed quotas in determining who gets to move to the United States.

"This would be quite a new system," said Giovanni Peri, a professor who studies labor economics, explaining how it would replace today's first-come, first-served waiting list and random lottery that dictate who gets work visas.

Each auctioned permit would be tied to a temporary visa. Visa-holders would be free to move from one job to another, making it harder for hiring companies to exploit them. Those who remain employed could later apply for permanent residency.

Work permit bids would start at a minimum $7,000 for high-skilled workers and $1,000 for lower-skilled seasonal jobs. Higher demand for workers could push employers' bid prices higher, compelling Congress to make more visas available.

Revenue from the auction would be channeled to the federal government and to state and local agencies that provide public education and other services to immigrant families.

"Giovanni has a very ambitious proposal that would fundamentally reshape the immigration system," said Michael Greenstone, director of The Hamilton Project and an economist at the Massachusetts Institute of Technology.

Greenstone's group commissioned Peri to create the three-phase immigration overhaul. The project is affiliated with the Brookings Institution, a nonpartisan think tank, and named after Alexander Hamilton, the nation's first secretary of the Treasury.

"All it's doing is taking this very opaque, lawyer-heavy approach to who gets employment visas and (replacing it with) a very transparent approach," Greenstone said.

Gone would be the long and arbitrary waits that for some would-be immigrants can last a decade. The auction would also make inviting a foreign worker more costly to employers than hiring an available local worker, undercutting concerns that low-paid immigrants are taking American jobs.

A leading advocate for reducing immigration levels said he was "open to the idea of auctions" as a fairer immigration path than the current bureaucracy, but he worried Peri's plan placed too few limits on businesses.

"The question is, is this just a vehicle for more employment-based immigration? That's something that is clearly a mistake," said Mark Krikorian, director of the Center for Immigration Studies. "What they seem to be trying to do is sneak in big increases in immigration under the cover of making the process more efficient and streamlining."

The new approach is informed by Peri's economic research, which has found that immigration rarely hurts and often helps native-born workers in the United States by raising overall productivity.

"Immigration creates a large economic surplus for the American economy," Peri said. "Immigrants move from their country and become much more productive in the U.S., generating more income and wealth."

Peri puts his plan into a divisive national debate over illegal immigration and job competition that many economists believe is divorced from economic realities. Shifting to a labor-driven system would make the need for immigrants more apparent, he said.

"It would certainly generate more awareness and clarity on the economic value of immigrants and immigration," Peri said.

After a pilot program for temporary work visas, Peri would expand the auction model to most of the immigration system and restrict family-based immigration to immediate relatives.

That would shift American immigration away from the family focus that has guided policy since 1965. However, Peri believes the expansion of auctioned work permits would open doors for many Latin American immigrants for whom extended family connections is the only legal immigration option today.

Peri said his funders wanted him to create a proposal that "had a real chance of being implemented, accounting for the possible roadblocks and criticisms."

No country has tried such an auction before, he said. Canada and Australia have a points-based system that favors high-skilled immigrants, but the government, not the labor market, determines the rankings.

The professor presented his 30-page proposal Tuesday morning at a forum attended by a White House domestic policy adviser and a bipartisan group of political and business leaders.

Peri said the new system would help solve the problem of unmet business demand for low-skilled labor that drives illegal immigration, but lawmakers would still need to do something about the roughly 11.5 million undocumented immigrants already here.

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