The last time Congress tried to fix the U.S. immigration system, an overly stringent guest-worker program led to the legislation’s demise. Labor unions, fearing a wave of unskilled foreign workers who might depress wages and take jobs from Americans, backed the measure. Business groups, worried they wouldn’t be able to find qualified engineers or low-skilled janitors, opposed it. The coalition needed to pass a bill splintered.

This time, President Barack Obama, who as a senator in 2007 voted for the stingy guest-worker provision, is pushing labor and business leaders to compromise. A deal so far eludes them. Unions are more open to guest-worker programs than in 2007, yet they still want to protect the jobs of Americans first. And if there are to be low-skilled guest workers, their stay must be long enough that they have an incentive to join a union.

The AFL-CIO favors a plan proposed by Ray Marshall, the labor secretary under President Jimmy Carter, in which an independent commission would decide how many visas to award ― and to which types of companies. A panel of business, government and labor experts would set caps based on regional job-market and consumer-demand data.

The U.S. Chamber of Commerce, on the other hand, says a commission wouldn’t have timely enough data to judge what companies need. Nor would it be insulated from union pressures to lowball the need for immigrant workers. It would be better, the Chamber says, if companies made those decisions.

Push the posturing aside and it’s clear what’s needed: a legal immigration program that expands and contracts with the economy and provides visas that last multiple years.

Fortunately, a plan for an incremental, market-based guest- worker system exists. Designed by Giovanni Peri, an economics professor at the University of California at Davis, the program would begin with quarterly auctions of temporary permits to employers. Congress would set a maximum number of permits for which companies could bid, based on their own readings of market demand ― not a commission’s ― for the goods and services they sell and the workers they need to meet that demand.

Each permit would correspond to a temporary visa, which would go to a foreign worker (and the worker’s immediate family). Based on what employers have told him, Peri figures they would pay annually between $5,000 and $10,000 for high- skilled visas (now called H-1Bs). Low-skilled permits (now called H-2s) would go for $1,000 to $2,000. The fees would be an incentive to hire American workers. The revenue ― as much as $1.4 billion annually ― could be used to reimburse state and local governments for schools and other services provided to immigrants or to retrain U.S. workers.

The Peri plan would create an internal labor market among companies with permits and employees with visas. If a company’s labor needs change, it could sell or trade its permits. Foreign-born workers with visas could move freely among permit-holding employers and could eventually buy back their permits for maximum job flexibility.

Temporary workers would earn at least minimum wage and pay taxes, but they wouldn’t be eligible for health-care, retirement or other federal benefits. After three years (six for low- skilled workers), those with a good work history and no criminal record could apply for permanent status.

The new system would be more responsive to the economy than the current one, in which visas are awarded first-come, first- served. Bottlenecks are legion; many immigrants wait decades for visas.

The biggest problem, though, is that workers with temporary visas often must return home because of a 7 percent cap on permanent-residence visas from any one country. Some of the U.S.’s best-educated and most-innovative workers are lost after a few years. Under the Peri plan, immigrants with the most to offer the U.S. economy would get preference.

Some permits could be set aside for small businesses. Enforcement would be simpler ― only employers with permits could hire temporary workers with matching visas. Paired with an electronic verification system, employers would be able to quickly determine if an applicant is legal. And if the needs of businesses determine how wide the immigration gates open, the ranks of the undocumented should shrink.

Peri’s plan would proceed in phases, reducing the risk of an experiment run amok. If the auction system works, the program would advance to the next step, in which temporary visas become permanent-resident visas. In the final stage, the existing system of country-specific and family-based quotas would largely give way to employment-based quotas.

There are downsides, not least that the U.S.’s current family-based immigration system, in which siblings and adult children of residents have preference, would be undermined. Some lawmakers might not like the idea of a visa system that is so, well, mercenary. And labor will probably need convincing, though putting an estimated 11 million undocumented immigrants on the path to citizenship (and potential union membership) seems pretty enticing.

The economic reality is that immigrants will go wherever economic opportunity exists, even if it’s illegal. The Peri plan, more so than the Marshall plan, offers the U.S. a way to take advantage of this imperative, rather than being overwhelmed by it. In a nation desperate for innovative approaches to immigration, it’s an experiment worth pursuing.

(Bloomberg)