Zap Branigan wrote:
We need a realistic guest worker program.
I think this is key. It needs to be more tempting than crossing the border as well. This could be a tax break on a certain percentage of their income with the intent of it being sent to families or any other series of options that allow the US to monitor non-citizens but allows for foreigners to have a chance.
This won’t deter all of the illegal immigration, but it may limit it
Well, first of all I’d like to say that I do understand where you and Zap are coming from, and I do agree that part of the solution of the problem is to make legal immigration a little less complicated, slow and expensive.
However, in regards to the tax breaks and sending money home, as an economist (for those who don’t know me already, I’m an Economy professor at the GSB at Stanford), I have had a long hard look at those, and it’s actually a very bad idea.
I’ve also mentioned before I lived in Amsterdam for a few years. One of the reasons I was there was for one of the projects the Dutch government consulted me on (European governments regularly hire foreign professors from well-known Universities as consultants).
Holland has a law that allows 30% of your gross income to be tax free if you’re a qualified foreign worker, in your first 10 years there. They call those 30% “Extra-territorial Expenses” and they’re completely free of taxation – you can do whatever you want with them, which usually ends up being sending it back to your home country.
Now this works out well for European Union citizens, because, most like the US, each state in the EU does a lot of commerce with other states, most countries have the same currency (the Euro) and money moves around a lot. Basically if I was, say, a Portuguese citizen working in Holland and I sent 30% of my Euros back home, that money would probably find its way back to Holland, or Germany, or one of the other countries from which Portugal buys a LOT of stuff from.
Now, with, say, the large Turkish or Moroccan communities there, it didn’t work that well. The money just disappeared into those countries and usually ends up being used to either pay for plane tickets for their whole family to come in too, or to buy properties there and inflate the house prices in an already poor country. So it ends up in the greedy paws of some airline or real estate mogul and not only never comes back to Holland, it doesn’t improve the economic state of the poor country.
Because of the close proximity, and for the Holland study, I also went to Germany and checked the patterns there with the massive Turkish immigrant community. Even after 40 years of sending money back to Turkey, it didn’t really improve things there. Turkey has improved on its own, thanks to a very successful tourism industry, and dramatic improvements to their manufacturing industry. What sending money abroad did was make it harder for them to improve – created a feedback loop to increase the Turkish community in Germany exponentially and increased house prices in Turkey at rates rivaling the ones in developed countries – basically what I expected.
In fact, several models show that the thing that works at improving everybody’s economic situation is to try to avoid the money from getting out of the country at all cost, by having big taxes on sending money outside the EU and tax breaks on keeping it in, through IRA and 401k-like programs, plus low-interest mortgages specifically for foreign citizens – along with a strong integration program of those citizens into the local society, through compulsory language training, and cultural education.
By keeping the money in, and assimilating them, the foreign workers become part of the economic system, and add value to it, rather than taking from it. That is not only effective at keeping the money inside the country?s economy, it’s effective at keeping out people that just want to come in to earn a quick buck.
How does that help the “poor” country? By leaving them without a country to flee to, but giving them a “carrot” to aspire to (which, in the case of Turkey, is joining the EU) they try to fix things at home. Both Turkey and Morocco are slowly doing better, and becoming less reliant on money coming from abroad. They have no other choice, and they have a lot to gain – if they get their act together on their own, eventually Turkey will be able to join the EU, which is their Holy Grail, and Morocco will eventually be able to get their goods into the EU with lower or no duty taxes.
That’s basically the summary of my 200-something pages report and, in fact, Holland has been tightening up the 30% program and increasing the cultural education stuff as a result of the recommendations they got from me and my peers around the world that basically said very similar things. And it’s working – I have been receiving very good feedback that it is producing the desired results.
Now, I do understand Mexico has some subtle differences; however I do believe at this point we need to send them a clear message that this is not going in the right direction. Basically we should have made the carrots (like the FTA, or investment by US companies) dependant on certain policy changes from the Mexican Government. George W. has been waaaaaay too kind to them. If they want our help, they need to first show they’re responsible. It?s never too late to take those benefits back until they get their act together.
Good stuff. Thanks. It is nice to hear from people that have actually studied it.
BTW I totally agree with getting rid of the illegals that are also real criminals.
I am much more sympathetic with the majority that came here to work.