An Auctions Approach to Immigration Policy
An Auctions Approach to Immigration Policy

February 20, 2020

Project Summary

Recent proposals to reform immigration policy argue either for drastic cuts in immigration or for a transition to a more merit-based system instead of the current family-based system. Also figuring prominently in recent proposals is a government-run point system that would select which immigrants to admit. The question motivating these proposals is how best to determine who gets to enter the US.

After reviewing the existing research on points-based immigration systems, the authors of this policy paper conclude that reform proposals for either a points-based or other merit-based immigration system have serious drawbacks. A points-based system assigns immigrants points based on pre-determined standards and admits those with the highest point totals. Instead of a point system, policymakers should adopt an auction system to allocate employment- or skill-based visas. Auctions for visas give employers a larger role in selecting the employees that they want to hire, which better promotes the success of US companies.

In their paper, immigration scholars Pia Orrenius and Madeline Zavodny first discuss points-based and merit-based immigration reform proposals before detailing their limitations. Then the authors discuss a variety of auction systems and finally propose their own auction system.

The system proposed by the authors would involve two auctions where employers can buy visas for workers. The authors propose one auction for employers in low-skilled occupations such as manual laborers. Then the authors propose a second and separate auction for employers hiring high-skilled workers such as tech-industry workers.

The main benefit of an auction approach over points-based systems is the distinction between credentials and skills. Many immigrant applicants may look good on paper but do not have the skills that employers actually require. A points-based system also does not reward unobservable “soft skills” that employers value, such as perseverance and empathy. Finally, point systems must be regularly updated because of changes in labor market needs. For example, when a change in technology or demand affects the need for certain skills. Auction systems successfully overcome these concerns by letting employers select the workers that they view as most likely to help them succeed.

Auctions are the most effective tool for setting entry levels. Because auctions allow employers to bring in workers that they value, immigration systems based around auctions are superior to alternatives like points-based systems. An effective auction system like the one envisioned by the authors will benefit the US economy and US citizens by promoting economic growth and prosperity.

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