How Amnesty Could Cost Mexico

[Confederate Kahanist]

http://www.nationaljournal.com/njonline/no_20100204_1970.php



Much of the debate surrounding comprehensive immigration reform revolves around its effect on the American economy. Will newly legalized workers drag down wages for Americans? Would they be a drag on social services and local budgets?

But the biggest loser, at least initially, could be Mexico. Data from the last mass amnesty more than 20 years ago suggests migrant workers who gain legal status send far less money home. This time around, a path to citizenship for undocumented immigrants could cost Mexico $2.2 billion a year in remittances, according to one estimate, dealing a staggering blow to parts of its economy.

Mexico has benefited considerably in the last decade from migrant workers' remittances. Its citizens in the U.S. sent $25.1 billion home in 2008, up from $8.9 billion in 2001. That figure has since dipped as the U.S. economy has struggled and construction (a primary job field for low-skill migrant labor) has slowed. But remittances still accounted for 2.3 percent of Mexico's GDP in 2008, according to the Multilateral Investment Fund at the Inter-American Development Bank. Many of Mexico's neighbors are more reliant on their diasporas, like El Salvador (17 percent of GDP) and Honduras (19 percent), but swaths of the Mexican economy are still hugely reliant on remittances, experts say.

At first glance, the comprehensive immigration bill introduced Dec. 15 by Rep. Luis Gutierrez, D-Ill., would appear to set up Mexico for even more remittances. The legislation would put the estimated 7 million undocumented Mexicans living in the U.S. on a path to legal residency, and studies repeatedly show that immigrants earn anywhere from 5 percent to 20 percent more when they gain legal status. Without fear of deportation, workers can apply for a wider range of jobs and are less likely to be exploited by unscrupulous employers. (That boost in wages, and its potential to increase remittances, was the primary driver behind granting roughly 200,000 Haitians living in the U.S. temporary green cards after the earthquake.)

But things didn't play out that way in the late 1980s, when the Immigration Reform and Control Act granted 2.7 million undocumented immigrants a quick path to legal status. Rather than send more, the roughly 2 million Mexicans with newfound legal status began wiring less money home, according to a 2009 report by Catalina Amuedo-Dorantes, an economics professor at San Diego State University, and Francesca Mazzolari, an economics professor at the University of California, Irvine. Mexicans who gained legal status were 5 percent less likely to remit, and those who did sent a staggering 26 percent less. (Interestingly, other Latin Americans who won legal status through IRCA kept remitting at the same pace.)

Why the drop? Amuedo-Dorantes argues that it was a combination of factors. Migrants who were sending money home to stay in the good graces of relatives, should they be deported and need their help, no longer needed that insurance policy. Others who had been sending funds to their families began bringing their spouses and children to the U.S. And others, who were investing in homes and businesses with a plan of returning home, may have decided to put down stakes in the U.S. once they obtained green cards.

If the millions of Mexicans working illegally in the U.S. follow the same pattern, Mexico would lose $2.2 billion a year in remittances, Amuedo-Dorantes estimates. By comparison, the State Department's fiscal 2011 budget request for aid to Mexico is about $347 million.

"That's not a small number," said Gordon Hanson, an economics professor at the University of California, San Diego. "When you take into account that those remittances are concentrated in parts of the country that send lots of migrants to the U.S., the impact is quite regionally concentrated."

There could even be a silver lining for the U.S., Hanson added, with that money now being spent stateside: "$2 billion in a $14 trillion economy is not much, but it's not nothing."

The easiest way for Mexico to offset those losses would be a guest-worker program that offered Mexicans (and anyone else) multiyear work permits in the U.S., argues Michael Clemens, an economist at the nonpartisan Center for Global Development. It would help the U.S. economy by funneling workers into American industries that need more labor, it would help workers who want better-paying jobs, and it would help Mexico's economy, since temporary workers send money home at high rates. Many economists have settled on 300,000 as the magic number of guest-worker visas required to keep the economy churning.

Gutierrez's bill does not create a guest-worker program, at least not initially. It would establish a commission to study the issue and dole out 100,000 work visas a year for three years until the commission made its recommendations. And anyway, a 10 percent unemployment rate and stiff union opposition could make guest-worker programs a tough sell.

"It's kicking the can down the road," Clemens said. "It's saying we're not going to settle this."