Selling the Right to Immigrate

By Gary Becker
March 2011 

Rich nations are facing enormous pressure to increase the number of immigrants. This pressure stems in major part from the very large gap between the earnings of workers at all skill levels in the USA, Western Europe and Japan compared with the rest of the world. In addition, low birth rates in the developed world create excellent opportunities for young persons from poorer nations and travel between nations has become much cheaper.

The USA uses quotas that give preference to family members of persons already here legally; to applicants with greater skills; to persons who applied earlier; and also uses some other criteria. Since I am a free-trader, readers might expect my preferred alternative to the present system to be nineteenth-century-style unlimited immigration. I would support that if we lived in the nineteenth-century world where government spending was tiny. But governments now spend huge amounts on medical care, retirement, education and other benefits and entitlements. Experience demonstrates that, in our political system, it is impossible to prevent immigrants gaining access to these benefits.

Given these realities of free immigration, the best alternative to the present system is an ancient way of allocating a scarce and popular good: namely, charging a price that clears the market. That is why I believe countries should sell the right to immigrate. To illustrate how a price system would work, suppose the USA charges $50,000 for the right to immigrate, and agrees to accept all applicants willing to pay that price (with exceptions for those with criminal records and so on).

Immigrants who are willing to pay a sizeable entrance fee would automatically have various characteristics that countries seek in their entrants. They would be younger since young adults would gain more from migrating because they would receive higher earnings over a relatively long time period. Skilled persons would generally be more willing to pay high entrance fees since they would increase their earnings more than unskilled immigrants would. More ambitious and hard-working individuals would also be more eager to pay. Payment by immigrants themselves would be a far more effective way of discovering those immigrants who would benefit most – and who would benefit the country most – than centralised government bureaucracies determining where there were skill shortages and giving out permits.

The pay-back period for most immigrants of a $50,000 entrance fee would generally be short: less than the usual pay-back period of a typical university education. For example, if skilled individuals could earn $10 an hour in a country such as India or China, and $40 an hour in the USA, by moving they would gain $60,000 a year before taxes. The higher earnings from immigrating would cover a fee of $50,000 in about a year!

Many potential immigrants may have great difficulty paying a fee from their own resources. One way to overcome this difficulty would be to adopt a loan programme that followed the present policy towards student loans for tuition fees in higher education.

Countries that charge a sizeable fee would have an incentive to raise the number of immigrants accepted because they would bring in revenue that cuts the tax burden on natives. For example, one million immigrants per year who each paid $50,000 would contribute government revenue of $50 billion per year. Moreover, immigrants who would enter under a fee system would generally make little use of welfare or unemployment benefits, would pay taxes on their earnings and would tend to be young and healthy. So the overall direct economic benefits from larger numbers of immigrants would be much greater than under the present admission system. This would help reduce anti-immigration rhetoric and induce countries to take more immigrants.

In addition, since anyone willing to pay the entry price could then legally immigrate, this approach should also cut the number who enter illegally – a particular problem in the USA. Some persons will continue to try to enter illegally. However, illegal immigrants who were willing and able to work would be able to – and would have strong incentives to – regularise their status.

In summary, charging a fee to immigrate would raise tax revenue, increase the number of immigrants accepted and also raise the quality of those accepted. It is a win–win situation for countries accepting immigrants, and for the vast majority of persons who would like to immigrate.

Gary Becker won the Nobel Prize in Economics in 1992 and is Professor of Economics at Chicago University