Updating the U.S.-Mexico Labor Mobility Framework: A Unique Opportunity
"US / Mexico Border Crossing" by Ben Amstutz is licensed under CC BY-NC 2.0.
By Diego Marroquín Bitar
Tania,
Esto y cualquier logro personal son por y para ti. Gracias por regalarme los mejores 20 años de mi vida.
Improving the bilateral immigration status quo is one of the unfulfilled promises of the U.S.-Mexico rapprochement that came about in 1994 with the implementation of the North American Free Trade Agreement (NAFTA, now USMCA). While U.S.-Mexico trade increased ninefold in the intervening years, the two countries have made no systematic effort to upgrade the bilateral immigration framework.[1]
One criticism of NAFTA was that it failed to create a comprehensive scheme to regulate labor mobility after fully liberalizing the flow of goods, services, and capital between Canada, Mexico, and the United States. In that sense, NAFTA stands in contrast to the experience of the European Union, which created almost full labor mobility between its members. With those two factors as background, in 2000, Presidents Vicente Fox and George W. Bush undertook the last major attempt to regulate labor mobility from Mexico into the United States. However, the 9/11 terrorist attacks completely changed the bilateral agenda and U.S. foreign and domestic policy priorities, making it impossible to achieve significant results after 2001. Nonetheless, given the social and economic complementarity of the United States and Mexico, the time is ripe for changes to help both countries better face the immigration challenges of the present and future.
In this article, I argue that geographical proximity, compatible demographic profiles, and interconnected labor markets create a unique dynamic that favors closer cooperation on the rules that govern how workers on both sides of the Rio Bravo (Grande) contribute to the two countries’ economies and communities. The development of a joint, dynamic labor force is not only attainable, but a highly advantageous outcome for both Mexico and the United States. This article highlights three reasons why changes are urgently needed to facilitate labor mobility and get both countries back to work.
The Case for Labor Mobility
1) Geography plays an increasingly prominent role in U.S.-Mexico immigration dynamics.
Geography alone cannot determine destiny, but it does have a significant effect on it. The United States shares only two borders with the rest of the world: 8,891 kilometers with Canada (5,525 miles) and 3,145 kilometers with Mexico (1,954 miles). Political borders and walls may seem to separate the three countries, but the reality is that deep economic, social, and family ties bind them and their fortunes together. Indeed, as a result of deeply interconnected communities, integrated supply chains, and a robust trilateral institutional network, the uninterrupted flow of workers has been an essential component of North American relations. The more closely integrated USMCA member nations are, the more pressing the demands for coordinated, safe, and seamless border crossings for workers and their families.
Unlike other countries in the region with similar macroeconomic indicators, political regimes, and regulatory environments, Mexico has a unique dynamic with the United States through its shared border. The U.S. State Department estimates that the border region represents a combined population of approximately 15 million people, and a combined gross domestic product (of all nine U.S. and Mexican border states) equivalent to the output of the world’s third or fourth largest economy.[2] In 2016, there were more than 11 million Mexican-born U.S. residents, the largest immigrant population in the United States.[3] Given this unparalleled geographical connection, an updated bilateral immigration framework is essential to better address the needs of labor markets throughout North America.
2) The U.S. and Mexico have complementary demographics, but not forever.
Just as with geography, Mexican and U.S. demographics are complementary and favor increased labor mobility. On the one hand, the United States’ 328 million strong population is rapidly aging. The U.S. Census Bureau estimates that by 2034, adults aged 65 and older will outnumber children under 18 for the first time in the country’s history.[4] Similarly, the Urban Institute forecasts that by 2040, 20 percent of the U.S. population (80 million people) will be sixty-five or older, up from about 12 percent in 2000. The number of people aged eight-five and older, the group with the highest medical and social expenses, will almost quadruple, increasing pressure on an already strained social insurance system.[5]
The graying of the U.S. population also means that there will be fewer workers to pay taxes and support U.S. social insurance programs. The U.S. Social Security Administration (SSA) projects that by 2040, there will be 2.1 workers per Social Security beneficiary, down from 3.7 in 1970, and 5.1 in 1960.[6] In a 2006 Social Security Bulletin article, SSA researchers Reznik et al. estimated that for social security tax revenue to equal payments—that is, to operate as a pay-as-you-go system—the U.S. Social Security System needs at least a 2.8 worker to beneficiary ratio.[7] Their projections also suggest that due to demographic changes, the U.S. Social Security Trust Fund will be exhausted by 2040. Without immigration, aging and its associated effects would require a painful rethinking of U.S. government spending priorities.
At the same time, Mexico’s demographic structure presents a clear complement to that of the U.S. Among Mexico’s 126 million strong population, the number of people aged 25 to 49 (those most likely to look for work in Mexico and abroad) will continue to grow for the next 25 years.[8] In the last ten years, Mexico’s population has increased 12.2 percent with a current average age of twenty-nine years, almost ten years younger than the latest average in the United States, where the size of the twenty-five to forty-nine age bracket hit its maximum a quarter of a century ago.[9]
In other words, Mexico’s demographic structure inversely mirrors that of the United States, with at least two more decades in which the working-age population in Mexico will outnumber non-working age groups. In this context, a bilateral immigration framework that facilitates the free flow of workers between countries could help the United States fill its current labor gaps, better face the immediate financial challenges to its social security system, and offer increased opportunities for working-age Mexicans that want to contribute to a growing and prosperous North America. Given the current U.S.-Mexico demographic dynamic, as economies recover from the pandemic and firms start to look for talent, Mexican workers should be seen as complementing U.S. workers.
3) U.S. demand for immigrant workers is becoming more acute.
Besides demographics, labor markets are a common cause for concern. Firms and employees worldwide face a series of disrupting developments that impact national competitiveness vis-à-vis the rest of the world. In the case of the United States, labor shortages have been a source of vexation because of their potential long and short-term implications for inflation and government spending.
The health of the U.S. economy and its potential for growth are strongly correlated with the quantity and quality of its workers. When worker shortages are not resolved, the economy suffers.[10] A modernized bilateral immigration framework can prevent this and help firms increase their operations without having to let U.S. workers go or move overseas.
The United States faces a labor impasse. Currently, the United States has a record ten million job openings; yet more than 8.4 million workers are unemployed and looking for a job.[11] If the mismatch between labor supply and demand continues, the shortage of workers could unleash an inflationary spiral, paralyze the country's infrastructure projects, further discourage private investment, and, consequently, end all hopes for a swift economic recovery, in the United States as well as in Mexico.
A 2021 survey commissioned by the U.S. Chamber of Commerce found that, compared to the average of the past two decades, there are half as many available workers in the United States for every open position.[12] The same survey showed that 91 percent of state and local chambers of commerce reported that worker shortages were “holding back their economies.” COVID-19 has aggravated this trend.
Before the pandemic hit, the U.S. economy had expanded for 126 consecutive months, the longest growth spell on record[13]. Similarly, the unemployment rate stood at 3.5 percent, the lowest level since 1969. However, in less than two years of pandemic recession, the unemployed population increased by 2.6 million. At the same time, the number of unfilled jobs remained stubbornly high. In 2021, total vacancies reached their highest levels in 20 years and despite robust wage growth, at least 1.7 million workers retired early.[14]
The fundamental problem behind the lack of workers in the United States is an imbalance between the industries that have the most openings and the number of unemployed people who worked in those industries before the pandemic. Data from the U.S. Labor Department show that sectors such as education, health, business, manufacturing, and professional services, among others, have more openings in 2021 than job seekers (See Figure 1). Additionally, a 2021 survey by the Pew Research Center found that 66 percent of the unemployed have “seriously considered” changing their occupation or field of work, a much higher percentage than that experienced during the Great Depression of the 1930s.[15] Many have already indicated they do not want to return to their old jobs.
One way to meet the demand for labor in the United States and move more quickly toward economic recovery is labor mobility, including mobility of high-skilled workers. For example, a 2020 report by the National Foundation for American Policy (NFAP) showed that higher shares of H-1B visas for high-skilled immigrant workers in a given occupation were correlated with decreases in the U.S. unemployment rate and faster earnings growth among college graduates in the United States.[16] That is, an increase in approved H-1B visas is associated with improved labor market conditions for U.S. workers. Simply put, the program helps employers fill labor gaps that cannot be filled domestically. Currently, the yearly H-1B cap stands at 65,000 visas, representing a little over 1.6 percent of the annual number of U.S. non-immigrant visas. Among other policy interventions, increasing the H-1B cap would provide more incentives to fill vacancies in the United States.
Furthermore, research indicates that higher shares of H-1B visas are correlated with increases in innovation (patents), venture capital funding, productivity, firm size, and profits for employers, respectively.[17] In other words, highly skilled immigrant workers can help the U.S. economy reemerge more quickly from a pandemic-induced economic downturn. Additional immigration restrictions would, of course, have the opposite effect.
Any future proposal for a bilateral guest worker program should start with the question of whether a solution should take the form of a “stand-alone” program with a new visa category, or rely on the available set of work visas—of which a significant portion already is assigned to Mexico. Considering that bilateral negotiations in 2001 and 2002 to establish an immigration agreement and “stand-alone” programs failed—due to obstructive factors like partisan polarization on immigration—, this article centers on how both countries can take further advantage of the existing legal framework[18].
The Way Forward
Mexico and the United States have strived to regulate and facilitate bilateral labor mobility but have faced a series of regulatory and political hurdles. The result is a complex and dynamic irregular labor market between both countries. Moreover, during the past years, attention from both governments has mainly focused on migration from Central American countries at the expense of the U.S.-Mexico bilateral labor mobility agenda.
Over the last 20 years, there have been intermittent discussions and proposals to create a U.S.-Mexico guest worker program. The context of such discussions remains difficult. Nevertheless, careful consideration of the present context of the bilateral relationship suggests a unique opportunity to advance U.S.-Mexico labor mobility.
Increased unauthorized migration has resulted in a correspondingly increased enforcement effort. Without sufficient legal avenues for labor mobility, this effort has, in the view of many specialists, broken the circular pattern of migration that previously existed between Mexico and the United States, especially for people living close to the border. Circularity in migration implied that guest workers stayed and worked in the United States for short periods of time, confident that they could return to the country and work again relatively easily. However, with stricter enforcement and fewer legal pathways, immigrant circularity has stopped.[19]
One key factor stands out when plans for a U.S.-Mexico guest worker program are discussed: as of 2020, Mexico accounted for 62 percent of the primary categories of non-immigrant working visas (H-1B, H-2A, H-2B, and TN visas) issued by the U.S. State Department. With that in mind, future proposals should focus on improving the existing framework rather than creating a “stand-alone” program with a new visa category.
Three recommendations follow from the discussion above:
1. Sign a bilateral Memorandum of Understanding on labor mobility. Mexico should make clear its objective to work with the United States in better regulating labor mobility between the countries through temporary work visas for Mexican nationals. Mexico should urge the United States to establish and institutionalize a dialogue to set objectives and parameters through a Memorandum of Understanding (MOU). Since 1984, Canada and Mexico have benefited from such an arrangement through the Mexican Seasonal Agricultural Work Program (SWAP). An MOU could integrate a permanent interagency work-group with authorities from both governments to improve labor mobility, with a focus on the main existing non-immigrant work visa categories (H-1B, H-2A, H-2B, and TN).
2. Create a bilateral information system to match supply and demand for workers. Labor mobility and the efficiency of U.S. non-immigrant visa programs can be improved by better matching private sector labor demand with available and willing workers in Mexico. Both countries should consider establishing a bilateral information system to publicize temporary worker options and to facilitate matching the demand and supply of temporary workers.
3. Encourage retirement savings for guest workers through Mexico’s SAR. One way to incentivize circularity (the return of Mexican nationals that use non-immigrant work visas) is to make available a means for these workers to save in their own Mexican retirement accounts through the National System for Retirement (SAR, for its acronym in Spanish). The rapid development of financial technology has made it easier and less expensive to transfer money between accounts—even international accounts. It is now possible for a Mexican national working on a temporary basis in the United States to contribute to their retirement account by telephone and debit card. Through strong U.S.-Mexico cooperation in financial matters, the two countries could encourage circular dynamics of Mexican guest workers in the United States.
Conclusion
With USCMA well into its second year, a series of measures focused on facilitating bilateral labor mobility could help both countries capitalize from their unique geographical connection, complementary demographics, and current labor market dynamics. In both Mexico and the United States, today’s labor gaps and the jobs of the future require stakeholders on both sides of the Río Bravo (Grande) to come together to eliminate barriers to labor mobility. These measures, alongside the establishment of an institutionalized dialogue around the bilateral immigration framework, represent a unique opportunity to secure regional growth, competitiveness, and prosperity in North America.
About the Author
Diego is a recent MPP from Georgetown. He a fellow at the US-Mexico Foundation, and a Consultant for The Economist Impact. Originally from Mexico, Diego is passionate about political philosophy, public policy, and US-Mexico relations
This publication and the ideas distilled in it would not have materialized without the help and guidance of a true North Americanist. Gracias, Gerónimo Gutiérrez Fernández.
The author sends words of appreciation to Jeffrey Mayer for his timely commentary and insightful critique.
Endnotes
1. Gerónimo Gutiérrez, former Mexican Ambassador to the US, in discussion with the author, November 15, 2021; M Angeles Villarreal, “U.S.-Mexico Economic Relations: Trends, Issues, and Implications,” Congressional Research Service, June 25, 2020, p. 32.
2. United States Department of State, “U.S. Relations With Mexico,” United States Department of State (blog), accessed November 8, 2021, https://www.state.gov/u-s-relations-with-mexico/.;Center for Binational Institutions US-Mexico Foundation, “Opinion | Sub-State Diplomacy & Institutions in US-Mexico Relations,” Mexico Today Is Your Top Source for News about Mexico (blog), September 29, 2021, https://mexicotoday.com/2021/09/29/opinion-sub-state-diplomacy-institutions-in-us-mexico-relations/.
3. Abby Budiman, “Key Findings about U.S. Immigrants,” Pew Research Center, August 20, 2020, https://www.pewresearch.org/fact-tank/2020/08/20/key-findings-about-u-s-immigrants/.
4. US Census Bureau, “The U.S. Joins Other Countries With Large Aging Populations,” Census.gov, March 2018, https://www.census.gov/library/stories/2018/03/graying-america.html.
5. “The US Population Is Aging,” Urban Institute, December 16, 2014, https://www.urban.org/policy-centers/cross-center-initiatives/program-retirement-policy/projects/data-warehouse/what-future-holds/us-population-aging.
6. Gayle Reznik, Dave Shoffner, and Dave Weaver, “Coping with the Demographic Challenge: Fewer Children and Living Longer,” Social Security Administration Research, Statistics, and Policy Analysis 6, no. 4, 2005/2006, https://www.ssa.gov/policy/docs/ssb/v66n4/v66n4p37.html.
7. Ibid.
8. Consejo Nacional de Población, “La Situación Demográfica de México 2015,” Conapo, December 2015, http://www.conapo.gob.mx/work/models/CONAPO/Situacion_Demografica_De_Mexico/2015/HTML/files/assets/basic-html/page-1.html#.
9. Ibid.
10. Arthur Guarino, “Labor Shortage in the United States Becoming an Increasingly Dire Issue,” Global Risk Insights, September 1, 2017, https://globalriskinsights.com/2017/09/labor-shortage-united-states-dire-issue/; Darrell M. West, “The Paradox of Worker Shortages at a Time of High National Unemployment,” Brookings, November 30, 1AD, https://www.brookings.edu/research/the-paradox-of-worker-shortages-at-a-time-of-high-national-unemployment/.
11. Header Long, Alyssa Fowers, and Andrew Van Dam, “Why America Has 8.4 Million Unemployed When There Are 10 Million Job Openings,” Washington Post, December 4, 2021, https://www.washingtonpost.com/business/2021/09/04/ten-million-job-openings-labor-shortage/.
12. “The America Works Report: Quantifying the Nation’s Workforce Crisis,” U.S. Chamber of Commerce, June 1, 2021, https://www.uschamber.com/workforce/education/the-america-works-report-quantifying-the-nations-workforce-crisis.
13. Edwards M Roxanna; Smith,Sean, “Job Market Remains Tight in 2019, as the Unemployment Rate Falls to Its Lowest Level since 1969,” U.S. Bureau of Labor Statistics,” April 2020, https://www.bls.gov/opub/mlr/2020/article/job-market-remains-tight-in-2019-as-the-unemployment-rate-falls-to-its-lowest-level-since-1969.htm.
14. Owen Davis et al., “The Pandemic Retirement Surge Increased Retirement Inequality,” The New School: Schwartz Center for Economic Policy Analysis, June 1, 2020 https://www.economicpolicyresearch.org/jobs-report/the-pandemic-retirement-surge-increased-retirement-inequality.
15. Kim Parker, Ruth Igielnik, and Rakesh Kochhar, “Unemployed Americans Are Feeling the Emotional Strain of Job Loss; Most Have Considered Changing Occupations,” Pew Research Center, February 10, 2021, https://www.pewresearch.org/fact-tank/2021/02/10/unemployed-americans-are-feeling-the-emotional-strain-of-job-loss-most-have-considered-changing-occupations/.
16. Madeline Zavodny, “The Impact of H-1B Visa Holders on the US Economy,” National Foundation for American Policy NFAP Policy Brief, May 2020, 2–21.
17. William R. Kerr and William F. Lincoln, “The Supply Side of Innovation: H-1B Visa Reforms and U.S. Ethnic Invention,” National Bureau of Economic Research, February 2010, https://doi.org/10.3386/w15768; Stephen G. Dimmock, Jiekun Huang, and Scott J. Weisbenner, “Give Me Your Tired, Your Poor, Your High-Skilled Labor: H-1B Lottery Outcomes and Entrepreneurial Success,” National Bureau of Economic Research, October 2019, https://doi.org/10.3386/w26392; Ghosh Anirban, Anna Maria Mayda, and Francesc Ortega, “The Impact of Skilled Foreign Workers on Firms: An Investigation of Publicly Traded U.S. Firms,” IZA Institute of Labor Economics, November 2014, https://www.iza.org/publications/dp/8684/the-impact-of-skilled-foreign-workers-on-firms-an-investigation-of-publicly-traded-us-firms.
18. In general, H-1B (specialty occupations), H2-A (temporary agricultural workers), and H2-B (temporary non-agricultural temporary workers) are considered guest worker programs. TN visas, sometimes referred to as NAFTA visas for professional workers, are restricted to Mexican and Canadian nationals. Yet, they are included in this calculation since they resemble the criteria used for H-1B visas, of which Mexico obtains a minimal number. TN visas, however, do not allow the holder to apply for permanent residence.
19. For example, a 2021 national Gallup poll suggested that 75% of U.S. adults consider immigration a good thing relative to 21% that think it is bad. The same poll showed that 68% of U.S. adults think immigration should be kept at present levels or increased –against 31% that believe otherwise– and two-thirds worry about illegal immigration. However, views on specific immigration reforms have become more clearly aligned with partisan divisions, making it harder to reach an agreement on either immigration reform or guest worker programs; “Immigration,” Gallup.com, July 10, 2007, https://news.gallup.com/poll/1660/Immigration.aspx; National Immigration Forum. “Polling Update: American Attitudes on Immigration Steady, but Showing More Partisan Divides, National Immigration Forum, April 17, 2019, https://immigrationforum.org/article/american-attitudes-on-immigration-steady-but-showing-more-partisan-divides/.
20. Douglas S. Massey, Jorge Durand, and Karen A. Pren, “Why Border Enforcement Backfired,” American Journal of Sociology 121, no. 5 (March 1, 2016): 1557–1600, https://doi.org/10.1086/684200.