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Guest Worker Programs: What Needs Fixing and Why

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Guest Worker Programs: What Needs Fixing and Why

February 26, 2018

While immigration proposals face uncertainty in the Senate, any comprehensive reform discussion should include expanding and simplifying guest worker programs for both the high-skill and low-skill labor pool. Broader guest worker programs would help businesses that depend on seasonal workers and would contribute to our long-term economic health.

A recent National Bureau of Economic Research working paper by the economic team of Ana Maria Mayda of Georgetown University, Francesc Ortega of Queens College CUNY, Giovanni Peri of the University of California-Davis, Kevin Shih of Rensselaer Polytechnic Institute, and Chad Sparber of Colgate University, concluded that placing quotas on H-1B visas has not led to more U.S. workers being hired. Instead, it has skewed the number of foreign workers towards a certain type of industry, namely computer science.

The lack of diversity in the foreign worker pool suggests a lack of competition in the guest worker program that is made possible by numerical restrictions. The system needs to be reformed to allow firms to better determine the allocation of labor.

Several economists, including Dallas Federal Reserve economist Pia Orrenius, University of California-Davis economist Giovanni Peri, and University of North Florida economist Madeline Zavodny, have proposed creating an auction system where a fixed number of visas are sold and adjusted depending on the demand for foreign workers. The demand would be determined in a secondary market where employers can resell visas to other employers and prices would signal whether more visas should be sold in future auctions. Rising prices in the resale market would signal a higher demand for visas, indicating to the governing agency that it should offer more of them.

This is one of many solutions that involve fees from employers to determine how many workers should be hired and in what industry. Employers in the domestic labor market should be able to pay fees to hire foreign workers. Similarly, in the guest worker program, the employer should be the one deciding which high-skill and low-skill employees to hire. In an auction or visa fee system, willingness to pay determines how many foreign workers are employed—with revenues going to the Treasury. The revenues received by the government for the visas could fund programs in states with higher immigration.

The current process for employers to obtain guest worker visas is extremely cumbersome, particularly when it comes to H-2A visas for temporary agricultural workers. Farmers use seasonal workers to help them prepare for harvest season. The domestic workforce may not be interested in this kind of labor, either because of the manual component to the job or the seasonal component to it. Regardless of the reasons, the domestic labor force has not been filling these jobs.

There are no quota restrictions on H-2A visas. Burdensome regulations are responsible for preventing the guest worker program from working in favor of farmers. Under a streamlined H-2A regulatory process, farmers would no longer have to worry about having sufficient labor for harvest time. 

The H-2B visa program for temporary non-agricultural workers faces hurdles of its own. As with H-1B visas, its problem is not excessive regulation, but quota restrictions. This can make it difficult for industries, such as construction and landscaping, which also depend on migrant workers to fill jobs. With the number of visas capped, it is no wonder some employers turn to hiring an illegal labor force.

This is not to say that the number of visas should be completely uncapped. However, that number should be well above the current number for H-1B (currently at 85,000) or H-2B (currently at 66,000). With non-farm payroll employment close to 148 million, tripling these visa quotas would still leave visa holders at less than half of one percent of non-farm payroll employment.

When business owners expand operations, they create jobs for both foreign and native-born workers. In the long-run, productivity gains and higher wages for native-born workers may increase with a mixed-skill, immigration policy that leans towards high-skill foreign workers.

Businesses need seasonal workers to continue to employ native-born Americans. Looking towards the future, both the economy and American workers stand to benefit from the low-skill and high-skill workforce from guest worker programs.  

Isai Chavez is a contributor to Economics 21.

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