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Managing Political Risk in International Business

Conservative estimates indicate that as of 2009 there were at least 12 million illegal immigrants living in the United States (Moses, 2009).  For the most part, illegal immigrants take on unskilled jobs, particularly in domestic and agricultural industries that Americans are unwilling to take.  However, as a result of their illegal status, they are denied the protection that legal workers are guaranteed and thus are often exploited and underpaid (Moses, 2009).  The current immigration policy and laws in the U.S. focus on border control and enforcement as opposed to taking an approach that would legalize immigrants and thus improve wages offered to low-skilled workers (Hinojosa-Ojeda, 2012).

Given the number of undocumented immigrants living and working in the US, the demonstrative need for immigrants in terms of taking jobs that Americans are unwilling to take, and the fact that current immigration policies are unresponsive to these realities, it is argued that there is a pressing need for immigration reform in the U.S.  It will be argued that immigration reform is intricately tied to economic reform. As Moses (2009) argues, the U.S. has always premised its economic policies on the free movement of goods and capital.  In this regard, the free movement of services and people via immigration reform cannot be distinguished from the free movement of goods and capital (Moses, 2009).  It will therefore be argued that, it is in the economic interests of the U.S. to reform immigration policies in a way that focuses on opening paths to immigration, particularly for those who have been living in the U.S. for at least 5 years.  It might also be worthwhile immigration policies that focus on the repatriation of immigrants who have been living in the U.S. for less than five years with an opportunity to re-enter the country legally.  In order to substantiate this argument, both sides of the immigration reform issue will be analysed.  This paper will also demonstrate the need for economic reform by tracing the history and current developments in immigration policies and laws and their consequences for the U.S. economy and the lives of illegal immigrants.  Important insights relative to the issues surrounding immigration reform are also provided via an interview with Tamar Jacoby, the president and CEO of Immigration Works USA, and an immigration policy columnist for the LA Times. Essentially, this research paper hypothesizes and demonstrates that comprehensive immigration reform can both satisfy the American economy’s need for workers – especially in sectors like agriculture, construction, and the service industry – and at the same time establish a legal framework to regulate the inflow of migrants to the U.S.

The importance of immigration reform to the U.S. is highlighted by Jacoby in a semi-structured interview with the researcher.  In her capacity as an immigration policy columnist and the president and CEO of Immigration Works USA, Jacoby notes that immigration is a very important issue for the U.S., particularly now with the 2012 presidential election fast approaching.  Moreover, other countries have been making significant progress integrating immigrants in a way that promotes multiculturalism and, in doing so, have integrated immigrants more acceptably into the national workforce with the results that immigrants in other countries are increasingly becoming productive members of the community. In this regard, according to Jacoby, the U.S. has a lot of room for improvement and growth in terms of immigration reform and its socio-economic improvement. Jacoby’s observation of the significance of immigration reform in the U.S., and the room for improvement, is supported by the background facts.

With the 2012 presidential elections approaching, the focus on the dire state of the U.S. economy takes center stage.  Both sides are more fixated on short-term solutions such as tax reductions, improving infrastructure, reducing government regulations and improving education.  While these kinds of reforms may be good for the short-term, immigration reform is necessary for a constructing a long-term “coherent economic strategy” (Hanson, 2012, p. 25).  Immigration policies can impact the “pace of innovation in the U.S. economy,” and “the supply of labor by high-skilled workers,” the capacity of “regional economies to adjust to business cycle fluctuation,” as well as the “integrity of local, state, and federal government finances,” (Hanson, 2012, pp.25- 26).

Stolz (2011) informs that despite persistent efforts for immigration reform by the Reform Immigration for America Campaign, legislative responses have been entirely futile.  Although President Barak Obama primarily ran on an immigration reform ticket in 2008, once he took office other matters engaged his attention. For instance, Obama’s attention was immediately directed towards the budget and the stimulus package, which was quickly followed by health care (Stolz, 2011).  In the meantime, immigration continued to remain unsatisfactory and in dire need of reform.

According to Briggs (1977) U.S. immigration policies have passed through three periods: pre-1888, no restrictions; 1888-1965, restrictions that corresponded with discrimination on the basis of ethnicity; post- 1965 and non-discriminatory restrictions.  The post-1965 era of U.S. immigration policies was founded on the premise of the Immigration Act 1965.  By virtue of the 1965, annual allowances were approximately 400, 000 immigrants, which doubled previous allowances.   Despite the more liberal policies under the 1965 legislation, illegal entry was the most frequent method by which immigrants entered the U.S. For example, in 1975, the Immigration and Naturalization Service detained 766,600 illegal immigrants, an increase of 700 per cent over previous apprehensions (Briggs, 1977).

With illegal immigration growing under the 1965 Act, immigration reform was needed. As a result, Congress enacted the Immigration Reform and Control Act 1986.  The 1986 legislation was intended to address the persistent trends in illegal entry to the U.S. and was predicated on the perception that a sovereign nation is required to “control its borders” (Rosenberg & Mamer, 1987, p. 30).  The policy hinged on the belief that the U.S. was thus far failing to effectively protect its borders and immigrants were entering the country illegally for the purpose of obtaining gainful employment. Thus, the 1986 Act was aimed at reducing the opportunities for illegal immigrants to find gainful employment by making it unlawful for employers to hire illegal immigrants (Rosenberg & Mamer, 1987).

The 1986 Act also provided three methods by which persons that were either living or working in the U.S. illegally could legalize their alien status.  One method was linked to “recent performance of agricultural work” and the other two methods were associated with a prolonged and “continuous residence,” (Rosenberg & Mamer, 1987, p. 30). Although 3 million illegal aliens were legalized by virtue of the 1986 Act, a number of questions remained (McClure, 2012). For instance, was it realistic to expect that all or a significant number of eligible illegal aliens would expose their status by applying for legal status? What would those aliens that were not eligible do?  (Rosenberg & Mamer, 1987). Moreover, since the 1986 Act did not apply to foreigners not within the U.S., would the 1986 Act encourage immigration to the U.S.?

The answers to those questions have been answered.  Despite the offer of amnesty, by 2005, illegal immigrants were estimated to be more than 10 million.  More than 90 present of illegal male immigrants are unlawfully employed in the U.S.  Moreover, the INS continues to cope with a backlog of immigration applications (Cooper & O’Neil, 2005).  Hoefer, Rytina and Baker (2012) report that, as of 2011 there were an estimated 11.5 million illegal immigrants living in the U.S. compared to an estimated 11.6 in 2010.  However, the slight reduction in illegal immigration is attributed to the downturn in the economic conditions in the U.S. and the improvement in Mexico’s economy.  Improvements in Mexico’s economy are important since more than half of the illegal immigrants in the U.S. are from Mexico (Hoefer, et. al., 2012).

The Negative Effects of Illegal Immigration

More recent immigration reforms were implemented under Obama’s administration.  According to Obama, the U.S.’s immigration problems could not be resolved by continuing with a central focus on enforcement.  According to Obama, the solution to the immigration problem was to focus on a system that responded to the U.S.’s “economic and national security imperatives” and one that “upholds America’s proud tradition as a nation of laws and a nation of immigrants,” (Obama, n.d.).

In June 2012, Obama announced his immigration initiative the Deferred Action for Childhood Arrivals, which came into effect on August 15, 2012.  Although it was compared to the 1986 Act and criticized as a form of “backdoor amnesty,” the initiative is “more limited” and more “tightly regulated” than the 1986 Act (McClure, 2012).  It can be compared to the DREAM Act previously proposed by the Democratic party, as it permits immigrants who have been in the U.S. illegally since the age of 16 and who are not older than 30 to apply for work permits and to remain in the U.S. (McClure, 2012).  What this means is that when illegal immigrants obtain legal status, they will be permitted to formally enter the labor force and this translates into “more jobs, higher salaries and better opportunities for advancement” (McClure, 2012).

The economic impact of an essentially ineffective immigration policy system was highlighted at the Becker Forum on Empire Sate Fruit and Vegetable Expo in Syracuse, New York, on January 25th.  At the forum, speakers representing agriculture, dairy, banking and service providers noted their concerns.  Representatives of the farming industry noted that immigration reform was entirely necessary as immigrant workers were needed to harvest produce.  The vacuum was being filled by importing produce and thus unfairly puts domestic producers out of the market (Smith, 2011).

The immigration system in the U.S. can best be described as “broken” (Kallick, 2009, p. 1).  As it now stands, the U.S.’s immigration system drives workers underground and forces them to take low-paying jobs and to work in largely sub-standard conditions.  As a result, immigration policies and practices result in bringing “down wage and benefit standards that unions” have tried to “establish and maintain” and “jeopardizes economic security for millions of workers who are already struggling to make ends meet” (Kallick, 2009, p. 1).

Kallick (2009) also argues that immigration is intricately tied to the economy.  For example, immigrants have made significant contributions to the U.S. economy.  In the “25 largest metropolitan areas” in the U.S., immigrants comprise 20 per cent of the population and contribute “20 per cent of economic output” (Kallick, 2009, p. 1).  Collectively, the 25 largest metropolitan areas in the U.S. hold 42 per cent of the entire population of the U.S. and 66 per cent of all immigrants, and contribute to more than half of the Gross Domestic Product (Kallick, 2009).

Moses (2009) argues that contrary to political assertions, illegal immigrants do not drain the host country’s resources.  The reality is illegal immigrants who work in the U.S. or elsewhere actually pay taxes either locally or by virtue of wage attached taxes or both.  However, as a result of their unlawful status, they very rarely seek returns in terms of welfare services funded by taxes (Moses, 2009).
Regardless, the fact that the U.S. went from experiencing “a period of exceptional economic growth” to a period of “severe recession of uncertain duration,” the concerns over “border security,” “worksite enforcement,” together with the high rate of illegal immigrants and illegal immigrant workers, have left the nation deeply divided on the issue of immigration reform (Galston, 2009, p. 2). According to Swain, (2007) however, the public is more inclined to accept “either more restrictive immigration policies” or “no further expansion of immigration” (p. 17).  On the other hand, lawyers, particularly immigration lawyers and the American Bar Association, argue for expansion (Swain, 2007).

This is obviously the wedge in the immigration issue that Jacoby spoke of in her telephone interview with the researcher.  It is therefore hardly surprising that Congress has been slow to make the necessary reforms, despite the obvious urgent need for doing so. However, as Swain (2007) argues, it is not always wise for leadership to go with the public’s passions.  For instance, it is conceivable that if the public were to vote in a referendum for the Bill of Rights today, they might very likely vote against a majority of its provisions (Swain, 2007). This is why George Washington called for democratic institutions that were capable of mediating between that which was in the public’s best interest and what the public’s “spasmodic public passions” wanted (Swain, 2007, p. 19).  Jacoby hinted in our interview that this kind of mediating leadership was particularly missing in regards to both democratic and republican parties’ approach to immigration and would “come back to haunt them,” especially the republicans.

Nevertheless, the millions of illegal immigrants in the U.S. live in an underground existence and are constantly expecting to be deported to countries to which they have little, if any, connection or familiarity with.  There is a constant fear that should this happen they would lose all that they have earned.  With this uncertainty of the future, illegal immigrants also live with the fear that they could be separated from their family and loved-ones without notice.  In addition, their illegal statuses ensures that they are socially and politically occluded.  They also suffer varying degrees of discrimination and marginalization (Ballines, 2010).  The social and political consequences for illegal immigrants have even been noted by the Church.  Cardinal Mahoney, the archbishop of Los Angeles noted that the current broken immigration system is in dire need of reform, particularly for improving the lives of illegal immigrants (Cabrini College, 2012).

Unfortunately, state initiatives such as the laws passed in Georgia, Alabama and South Carolina in response to Congress’s “delay in reforming immigration, have functioned to perpetuate the restriction of immigrant’s rights and represents a through back to discriminatory practices by inviting opportunities for racial profiling.  The highly popularized Arizona S.B. 1070 is the most common example of this throwback to pre-1965 immigration policies (Hinojosa-Ojeda, 2012).

Problems will certainly arise with these conclusions, however. According to Galston, (2009) the U.S. approves an average of 1 million applications for legal permanent residents annually.  Moreover, over the past twenty years, approximately half a million persons arrive in the U.S. to reside without legal permission.  While illegal immigration is gradually declining, so is legal immigration, as many are considering alternatives in the “global economy,” (Galston, 2009, p. 2).

Despite a self-described “nation of immigrants,” the movement of immigrants to the U.S. has not been “smooth and steady,” (Galston, 2009, p. 1).  The U.S. has experienced “waves of immigration” that typically corresponds with “economic and legal changes,” (Galston, 2009, p. 1).  During the first 20 years of the 1900s, the U.S. allowed 8.2 million legal immigrants to immigrate to the U.S.  By the last ten years of the 1900s, the U.S. admitted 9.8 million legal immigrants.  From 2000 to 2008, the total number of immigrants was 9.2 million.  The number of foreigners born in the U.S. increased from 5 per cent in 1970 to approximately 13 per cent in 2009 (Galston, 2009). However as Galston (2009) notes:
One difference between past and current trends is the large number of immigrants who are living in the United States without legal status, including those who arrived with legal visas and overstayed and those who entered surreptitiously (p. 2).

The obvious implications are that the 1986 Act, though it meant to improve on the failures of the 1965 Act, only exacerbated matters.  Rather than improving the immigration system, it focused far too sharply on enforcement and did not take account of the economic factors that hinged upon facilitating the legalization of those who were already living in the U.S. and contributing to its economy, or who were unable to contribute to the U.S. economy. For example, Provenza (2008) argues that many illegal immigrants work for lower than minimum wages and are paid under the table and therefore forgo the requirement of paying income taxes.  Even so, these very same immigrants are likely incurring public expenses for the protection of borders and might be taking advantage of publicly funded welfare or other public programs and services. Provenza (2008) also estimates that illegal immigration resulted in government costs of $10. 4 billion in 2002 which represent approximately $2, 700 for each illegal “household.”  The cost is ultimately born by tax payers, particularly in border states (Provenza, 2008).

On the other side of the spectrum, however, farmers like Ralph and Cheryl  Broetje report that they depend on 1,000 “seasonal workers to grow and pack more than 6 million boxes of apples” annually (Serrano, 2012).  However, immigration laws have made it impossible for them to hire the number of workers that they require and as result of the labor shortage American farmers are losing approximately a billion dollars (Serrano, 2012).   Moreover, McClure (2012) argues that a Stanford economist estimates that immigration reform seeking to legalize those who are currently living and working in the U.S. should lead to increased rates of employment, which is correlated with reduced crime.As a solution, Black, Black and Pace (2008) recommends using the Internal Revenue Service (IRS) as a solution to the immigration problem.  The IRS has the authority to investigate, collect public revenue and prosecute offences.  With its access to a wealth of information, the IRS has the resources to gain access to information relevant to specific businesses and individuals via auditing processes and can therefore “enforce the ban on hiring illegal immigrants” (Black, et. al. 2008, p. 310). Black et. al.’s (2008) proposal is predicated on the belief that should enforcement against employers be tightened, their incentives to hire illegal immigrants would be reduced and as such, illegal immigrants would either be deterred or discouraged and would return to their home countries.

However, the approach recommended by Black et. al. (2008) conflicts with concerns expressed by employers that there is a lack of human capital in domestic markets and the demand for immigrant workers is high (Smith, 2012; Serrano, 2012).  It therefore follows that Black et. al. (2008) presents a solution that is counterproductive and wholly punitive to the illegal immigrant and at the same time harms the economy. If employers, particularly farmers, are suffering losses as a result of immigration, enforcement policies and laws, a tightening of those laws will only serve to further harm the economy not only for the farmers, but the U.S. consumers who depend on locally produced produce.

Should immigrants be deported if they commit a serious crime in Australia?

Provenza (2008) proposes a solution that would tighten border control.  Provenza (2008) draws attention to the reduction in illegal immigrants in the immediate aftermath of 9/11 when border controls were tightened.  However, Provenza (2008) fails to take into account the exponential absorption of resources in terms of cash and human capital in tightening border control to the extent that it was tightened in the immediate aftermath of 9/11. The expenditure of human and cash capital at the time was necessitated by a national emergency.  Incurring those kinds of expenses on a daily basis would be particularly problematic when employment, especially in the labor-intensive markets is in high demand and supplies are low since immigrants are either forced out or not allowed entry.  In this regard, the government loses out on a viable source of revenue in terms of income taxes, which could be committed to border control or any other government policy or program.

Moreover, increasing border controls will not stop the flow of illegal immigration.  Illegal immigrants have been known to seek more desperate and more dangerous methods of crossing the border (Provenza, 2008). Consequently, immigrants who have attempted the more desperate border crossing methods have been exposed to death by dehydration and complications related to exposure to the desert regions (Provenza, 2008).

In rebuttal, Serrano (2012) informs that immigrants satisfy an important job void in the U.S.: intensive labor markets, particularly the agriculture industries.  As Legrain and Myers (2007) argue, immigrants are vital to the economic growth and stability of many developed countries without which many of these countries’ economies would come to a “grinding halt.”Immigrants aid employers by providing them with labor at reduced rates, which should benefit the consumer with respect to reduced prices in services and goods produced with cheaper labor.  Moreover, farmers rely on immigrant labor to perform jobs that nationals refuse to do.  The same applies to other jobs such as cleaning and construction jobs.  Moreover, middle-class families and the elderly can afford to hire immigrants to help with household duties and childcare (Legrain & Myers, 2007).

Considering the contribution that illegal immigration makes to economic growth and stability, immigration reforms that offer an alternative to enforcement policies are necessary.  Amnesty or the creation of sanctuary cities appears to be the only viable solution given the sheer number of illegal immigrants already living and working in the U.S.  As Black, et. al. (2008) cautions, it would take far too much in terms of resources to gather up all of the illegal immigrants and to repatriate them.

It might therefore be worthwhile considering the grant of amnesty to illegal immigrants who have been in the U.S. for a continuous period of at least five years. At the very least, immigrants who have been living in the U.S. for at least five years should be provided the opportunity to legalize their statuses in the U.S.  The idea is to ensure that these workers continue to contribute to the U.S. economy and doing so in ways that are more meaningful and beneficial to the U.S. economy: proper taxation of wages and the standardization of wages and working conditions.

For illegal immigrants who have been in the US for less than five years and at least three years, they should be deported but have the opportunity to return to the U.S. as legal immigrant (Bhutani, 2007).  By taking this approach, immigration policies will be making a clear distinction between recent immigrants and immigrants who have been working and living in the U.S. for a prolonged period and have for all intents, and purposes made the U.S. their home and have been contributing to the economy.
In conclusion, having made the connection between immigration and the economy, immigration reform is entirely necessary.  The literature demonstrates that immigration policies in the U.S. have been aimed at enforcement in ways that have impeded the U.S. economy’s achieving its full potential in terms of growth.  Even so, enforcement laws and policies have also proven to be wholly inadequate for meeting their enforcement objectives.  In fact, the immigration laws enacted in 1965 and 1986 have both proven that the immigration reforms based on enforcement have only served to increase immigration flows and persistent illegal immigration numbers in the U.S.  These laws are demonstratively committed to enforcement of restrictions against illegal entry and deterring continued unlawful stay in the U.S.  These objectives are manifested by the punitive sanctions against employers who hire illegal immigrants.

The economic cost of repatriation is therefore outweighed by the low cost of legalizing or providing opportunities for legalizing illegal immigrants who have been in the U.S. for a relatively long period of time. Moreover, illegal immigrants who live and work in the U.S. would be forced to pay income taxes and as such, this would contribute to public revenues and stimulate the U.S. economy.
In addition, the economic benefits associated with immigrant workers would be maintained. These economic benefits are associated with the fact that immigrants are willing to take on jobs that Americans do not want.  This is particularly important to the agriculture industry, the construction industry, cleaning and domestic services.  It therefore follows that a cost-benefit analysis justifies providing an alternative immigration policy to enforcement.

Immigration reform is therefore imperative at this time as the number of illegal immigrants in the U.S. borders on unmanageable.  Since it is impossible to gather up the millions of immigrants and it would be economically and humanely unwise to deport immigrants who have made the U.S. their home, having been here for a considerable period of time, immigration reform is not only necessary, but imperative for stabilizing, if not improving the U.S. economy.  Reforms in this regard, would accord amnesty to those immigrants who have been living and working in the U.S. for at least five years, provided they are not threatening national security.  Those who have been living in the U.S. for at least three years would be subject to removal with an opportunity to re-enter the U.S. legally. Each citizen can play a part by encouraging their local governors to encourage immigration reform at the federal level. The reality is, the U.S. has reached a point in which immigration policies cannot remain as they are. As demonstrated by the literature, the U.S. economy not only benefits from immigrants, but can improve with immigration reform.

Ballines, A. “The Need for Immigration Reform: Why Immigration Reform Does Not Only
Benefit Immigrants.” (May 3, 2010). (Retrieved, 31 October, 2012).

Bhutani, S. “The Ethics of Immigration.” Santa Clara University, Markkula Center for
Applied Ethics. (January 2007). (Retrieved 31 October, 2012).

Black, K. D.; Black, S.T. and Pace, R. H. “Is the IRS The Solution to Illegal Immigration?”
William Mitchell Law Review, Vol. 35(1) (2008): 309-339.

Briggs, V. M. Jr. “The Problem of Illegal Immigration.” Texas Business Review, Vol. 51(8),
(1977): 171-175. (Retrieved 30 October, 2012).

Cabrini College. “Cardinal Mahony, Immigration – Reform Advocate, Speaks of Need for 
Reform.” (September 21, 2012). (Retrieved 31 October 2012).

Cooper, B. and O’Neil, K. “The Immigration Reform and Control Act of 1986.” Immigration 
Policy Institute Policy Brief, No. 3. (August 2005): 1-12.

(July 2009): 1-8.

Hanson, G. H. “Immigration and Economic Growth.” Cato Journal, Vol. 32(1) (Winter
2012): 25-34.

Hinojosa-Ojeda, R. “The Economic Benefits of Comprehensive Immigration Reform.” Cato 
Journal, Vol. 32(1) (Winter 2012): 175-199.

Hoefer, M.; Rytina, N. and Baker, B. “Estimates of the Unauthorized Immigrant Population 
Residing in the United States: January 2011.”  US Department of Homeland Security, Office of Immigration Statistics Policy Directorate, Population Estimates, (March 2012): 1-7.

Jacoby, T. Telephone Interview, 29 September 2012.

Kallick, D. D. “Immigrants and the Economy: Contributions of Immigrant Workers to the
Country’s 25 Largest Metropolitan Areas.” Fiscal Policy Institute Report, (2009): 1-42.

McClure, M. “Obama Administration’s Immigration Reform Initiative Could Reduce Crime,
Stanford Economist Finds.” Stanford News, Stanford Report, (August 29, 2012). 31 October, 2012).

Moses, J. W. “The Politics of Immigration: Introduction to a Special Issue on US 
Immigration.” European Journal of American Studies, Special Issue, (2009): 1-7.

Obama, Barack, President. “Fixing the Immigration System for America’s 21st Century
Economy.” The White House, Washington, D.C. (Retrieved 31 October, 2012).

Provenza, P. “Illegal Immigration: What You Really Need to Know.” Louisiana State
University, English 2000, (2008). (Retrieved 31 October, 2012).

Rosenberg, H. R. and Mamer, J. W. “The Impact of the New Immigration Reform Act: Many
Questions Remain Unanswered”. California Agriculture, (March-April 1987): 30-32.

Serrano, A. “Bitter Harvest: U.S. Farmers Blame Billion-Dollar Losses on Immigration
Law.” Time Business and Money, (September 21, 2012). (Retrieved 31 October, 2012).

Smith, M. “Agriculture Leaders Emphasize Need for Immigration Reform.” Cornell
University, Chronicle Online, (Feb. 1, 2011). (Retrieved 31 October, 2012).

Stolz, R. “Reflecting on the Campaign to Reform Immigration for America”. Social Policy
(Summer 2011): 21-26.

Swain, C. M. Debating Immigration. Cambridge: Cambridge University Press, 2007.

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By Hanna Robinson

Hanna has won numerous writing awards. She specializes in academic writing, copywriting, business plans and resumes. After graduating from the Comosun College's journalism program, she went on to work at community newspapers throughout Atlantic Canada, before embarking on her freelancing journey.

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