Why Business and Labor Can't Agree on an Immigrant Worker Program

March 29, 2013— -- Leaders from business and labor are closer to making a deal on a new visa that would create a legal pathway to the U.S. for some lesser-skilled immigrant workers. An agreement would shape how an immigration reform bill being drafted in the Senate deals with the so-called "future flow" of workers.

One of the final sticking points has been how to determine the pay for workers coming to the country on the new visa.

See Also:What Happens If Reform Ignores Future Workers?

Other areas of reform, like a path to citizenship and increased border security, have enjoyed some degree of bipartisan support among the senators working on a bill. But senators are looking to the AFL-CIO and the U.S. Chamber of Commerce -- representing labor and business, respectively -- to give their stamp of approval to language on how to determine the future flow of lesser-skilled immigrants.

The Senate working group included future flows in their framework for reform, marking it as an essential part of the deal. A failure to reach an agreement could potentially put the entire package in peril.

So why are the two sides so hung up on wages for these new immigrant workers?

From the union perspective:: Labor unions don't want new workers to undercut the salaries of existing U.S. workers.

From the business perspective: The salary should still be reasonable enough that it's economically feasible and worth the effort of bringing in foreign workers (my take, not their official stance).

Both camps say they are considering using some of the regulations from an existing guest-worker program to mold the guidelines for the new visa.

The gist:Employers using the visa program would have to pay new workers at least as much as the average wage for that occupation. That number would be based on data from the Bureau of Labor Statistics.

The AFL-CIO said that the new visa should not use a tiered wage structure that's been used in the past for guest worker programs. In the past, the tiered system has allowed employers to pay less than the average wage for an occupation by classifying incoming workers according to their skill level.

This time, the AFL-CIO wants the new visa to require employers to pay the average wage for the occupation as a whole, not divided by skill levels. In other words, new workers coming in through the program would start at the average salary for that job.

The Chamber of Commerce does not agree with that approach, according to spokesperson Blair Latoff Holmes.

"The Chamber position is that the wage level for a particular foreign worker relates to the experience, training and supervision required for a particular job, not a single level per occupation," Latoff Holmes said in an email.

Here's the upside to the union approach: workers in sectors like retail, landscaping and meatpacking will have assurances that their immigrant colleagues won't be dragging down wages.

Here's the downside (and it's a big downside): an employer may be less likely to hire an entry-level worker at the same salary they're paying a mid-level worker.

Daniel Costa, an immigration policy analyst at the Economic Policy Institute, supplied us with some numbers that explain things a bit. As we mentioned before, in the past, guest worker programs have used a tiered system that divides workers according to four different earning levels. Level one would be the lowest, comprised of the 17th percentile of earners, and level four would be the highest earners, the 67th percentile.

Using that data, we can get an idea of what might happen if the new visa makes employers pay new immigrant workers an average salary.

Let's look at landscapers in Modesto, California. Workers earning the lowest tier of salary make $4.11 less than the average landscaper's salary. So employers could be paying significantly more for an entry-level worker through this visa program than through regular employment means.

In some occupations, the salary difference isn't as dramatic. The 17th percentile of housekeepers in southern Mississippi earn $8.12 an hour, while the average is $8.48 an hour, according to Costa. So the program could make more sense for these types of industries.

In a less complex world, the solution would be straightforward: tell employers to raise salaries to attract U.S. workers, or deal with paying the average salary mandated by the immigrant-worker program.

But employers will have another option: hire undocumented workers.

Yes, the pool of workers will shrink if a legalization program is part of immigration reform. And a mandatory employment verification system could weed out some unauthorized immigrants in the labor market. But history shows that workers -- with or without papers -- tend to flock to employers willing to hire them. And so far, taller fences and talk about punishing employers hasn't changed that.