Underneath California’s Economy : Immigration policy needs to catch up with the marketplace, or both labor and the economy will continue to suffer.

The recent fanfare over the “illegal” hiring practices of attorney general candidates Zoe Baird and Kimba Wood strikes a sore point for American workers concerned with maintaining jobs and working conditions. Long after the talk-show hosts exhaust their audiences with xenophobes who blame “illegals” for the failure of the American economy and deterioration of “American culture,” the issue of the underground economy--the cash transaction economy that both legal and undocumented workers participate in--will remain. On Thursday in Sacramento, Assemblyman Richard Polanco (D-Los Angeles) will open hearings on “Immigrants, Immigration and the California Economy,” in which legislators will address the impact of this underground economy.

The market for domestic services and child care is but a small segment of a labor market so interwoven into the fabric of Southern California that its tapestry blankets the masses. Despite the economic significance of these workers, during recessionary times the workers become the lightning rod for public discourse about the inequities of our market system. But markets, including labor markets, do not respond to frustrated malcontents. Rather, they respond to incentives that induce transactions to occur. In a global economy in which wage differentials are so great, people will immigrate. Immigration from Mexico to the United States, or from Romania to Poland or the Philippines to Canada is inevitable.

Unfortunately, immigration law has not caught up with this dynamic flow. Unlike the glamorous North American Free Trade Agreement that attempts to enhance the competitiveness of Canadian, Mexican and U.S. firms in global markets, the 1986 U.S. immigration law attempts, albeit unsuccessfully, to curtail the international flow of labor. With the ratification of NAFTA, Americans will soon accept the migratory flow of capital. Is it not time that we begin to explore these same possibilities for labor?

Agriculture, a critical sector of the California economy, has for decades acknowledged the need for available and low-wage labor to maintain its competitive position in the domestic and global economy. In every round of immigration reform, agricultural interests have codified their labor market needs through various guest-worker programs.

As few American workers in the past 40 years have been involved in agricultural production, the successes and failures of these guest-worker programs have remained largely unnoticed, relegated to the expertise of a select number of labor organizers, scholars and political activists. These programs often were faulted for undermining the emergence of a strongly unionized seasonal labor market and undermining harvest workers’ wages and working conditions.

Despite the limitations of past guest worker programs in agriculture, however, they provide a legal framework in which labor-market transactions can occur, elevating underground jobs to a level where public discourse and public policy can truly have an impact on working conditions, wages and employer-employee tax liabilities. For example, guest-worker programs for domestics and child-care providers in Canada provide a legal mechanism for women from the Third World to enter the country, enter the labor market under known conditions and ultimately become citizens.

Guest-worker programs acknowledge that a nation is not an island and that a country’s labor needs might not be met by the domestic labor market, despite the well-meaning intentions of those who would like to place the unemployed into guest-worker jobs. Simply increasing wages will not result in a flood of native-born Americans to serve our child-care and other low-wage service-sector needs. Neither will the availability of jobs induce individuals to seek employment where occupational mobility is low. Curtailing immigration by weak attempts to monitor labor markets through employer sanctions and employee verification procedures will not expand the domestic labor market; it will merely increase its distance from the underground economy.

A first step in addressing immigration reform should be to create a policy that places immigrant workers within a legal guest-worker framework in which employers and employees can negotiate wages and working conditions and government’s role is to mediate disputes and monitor unfair practices. Second, a bilateral working group representing U.S. and Mexican interests should formulate guidelines for guest-worker programs. Third, U.S. Latinos must add their expertise to the reforms. Finally, labor unions such as the International Ladies Garment Workers and the United Farm Workers--which have targeted undocumented workers in their organizing drives--must work with employers on a collective-bargaining framework.

Controlling the flow of illegal-immigrant labor is possible only if there are practical alternatives. Otherwise the underground economy will not only undermine our myopic immigration law, but weaken U.S. labor as the natural forces of a global market operate in the urban core and agricultural fields.