Fill out the brief form below for access to the free report.

Becker and Lazear on Market-Based Immigration Reform

Article by Matthew Denhart March 13, 2013 //   6 minute read

How do we decide which immigrants should be allowed to enter our country?

That’s the question Americans across the country are pondering and policymakers in Washington are actively debating. To the esteemed economists Gary Becker and Edward Lazear, the answer is simple: Let the market decide.

Writing in the Wall Street Journal, Becker and Lazear argue that “…the U.S. should sell the right to become a citizen.” They suggest a price tag of $50,000 for the right to citizenship, and argue that this market approach to immigration reform would help grow the economy through innovation, business creation, increased employment, and higher wages.

This plan represents a dramatic departure from the current practice used to award visas and green cards to would-be immigrants. While the Becker/Lazear plan may sound provocative at first pass, the idea is backed up by much economic logic. In situations where demand for a resource greatly exceeds the supply of it, utilizing the price system is an efficient way to allocate the scarce resource. By selling the resource, those who value it the most highly will be willing to pay a high price, and those who value the resource less highly will not. This ensures that the resource in question goes to where it is most valued, which is the efficient outcome. And the efficient outcome is the desired outcome, at least in the field of economics, because increased efficiency drives economic growth.

 In the case of immigration, the scarce resource is the limited number of visas and green cards made available by the U.S. government. Under current immigration laws, these scarce immigration slots are allocated according to a number of criteria, most importantly whether a would-be immigrant already has family members living in the U.S. While family reunification may be a reasonable goal, it does not guarantee that the limited immigration slots are made available to those who value them most highly.

By contrast, the Becker/Lazear plan would ensure that immigration slots went to those who value them the most. It is likely that under this plan the majority of immigration slots would be purchased by highly-skilled immigrants since immigrants who have skills that command high incomes in the U.S. will pay a high price for the ability to enter the country and work. This system does not preclude family members of current immigrants from gaining citizenship. Becker and Lazear point out that current citizens who greatly desire that their family members be granted access to the U.S. could provide loans or pay their fee. This would ensure that limited immigration slots go to the family members that matter most to current citizens, a system which Becker and Lazear say is the “best kind of family reunification.”  

But what about low-skilled workers? Our economy needs these kinds of workers too, but it is unlikely that a would-be low-skilled immigrant would ever pay $50,000 for citizenship. After all, that fee is many times greater than the earning advantage the immigrant would reasonably expect from coming to the U.S. in the first place. The Becker/Lazear plan is mindful of this too. It proposes allowing immigrants to enter the country on a temporary basis by paying an annual fee rather than purchasing outright citizenship at the high cost. A guest worker program could fit into this temporary migrant category, allowing low-skill immigrants who do not have the means (or desire) to pay $50,000 for citizenship to still enter the country and work. This would be good for immigrants, and good for the U.S. economy.

The Becker/Lazear plan contains another highly practical element: It would raise a significant amount of new revenue for the federal government. Currently, around one million immigrants enter the U.S. each year. Thus, by Becker and Lazear’s estimate, selling individual rights to citizenship for $50,000 each would generate $50 billion in new tax revenues per year. What’s not to love about that?

A number of reasonable counter-arguments to Becker and Lazear’s plan exist (Becker has addressed many of them in the past on his personal blog here). And a workable immigration system requires thinking through many specific details that Becker and Lazear do not have space to address in their short Op-Ed (readers wanting to learn more about how a market-based immigration system could work in practice should check out the book “Beside the Golden Door,” by Pia Orrenius and Madeline Zavodny). But suffice it to say that Becker and Lazear have challenged us all to step outside the box, and their kind of big thinking is what our country needs more of to achieve 4% growth.