Mexican border daily to work in the United States. They found that in the border cities where commuters are working, wages were lower and unemployment rates higher than in the rest of the border areas and the country as a whole.

The Bracero experience illustrates some important points underlying the impact of immigrants. First, employers of alien labor do not want the migration curtailed as this tends to raise labor costs.

Second, the U.S. workers' "disinclination"

for jobs usually held by alien labor declines as there are improvements in wages and working conditions. Third, U.S. workers may exaggerate the adverse employment effect of alien workers by assuming that a job held by an alien necessarily means one less job for a citizen.

European Guest Workers

The countries of northern Europe have in the last decade made extensive use of imported labor for manufacturing and 44/ service jobs in a manner similar to our Bracero program. It is sometimes suggested that this may serve as a model for a U.S. guest worker program for nonfarm jobs. Although there is little hard data on the impact of the European guest workers, a review of the European experience may provide insights into the likely effects of a similar program for the United States.

44/ In Western Europe there are about 10 million foreign workers. The largest impact is in Switzerland where almost 1 million alien workers comprise one-quarter of the labor force.

The immigration to the more developed European countries was in response to the rising real incomes and wages that accompanied the economic growth in the post-World War II period. The rising wages for low skilled workers would have increased the cost of many goods and services, and provided an incentive to bring in lower wage workers to mitigate the low skill "labor shortage." Many believe that this contributed to Europe's economic growth in the 1960's.

With the slower rate

of economic growth in the 1970's and particularly the recession triggered by the 1973 oil crisis, the relative importance of guest workers has declined.

Opinions are shifting as to the long-term economic and political benefits and costs of the guest worker programs. Clearly, the workers migrate in response to jobs that would presumably otherwise not be done or would be done at a higher cost. When they first arrive, guest workers accept low wages, come without their families and place few demands on the social service structure. Thus wages for low skilled workers are held down and existing industrial capacity is used more productively than otherwise.

Many migrants initially perceived themselves as temporary, seeking to save some money and then return to their native land. They soon find that their goal to return home is overtaken by the desire for the "good life" in the host nation, the high living costs which make it more difficult to save than had

been anticipated, and by their acquiring skills that are productive in the host country. Although they are generally cultural and often ethnic strangers, many do not return after the first few years and are eventually joined by their families or marry into the local community. Once established, other relatives and fellow villagers tend to join them. As a result, the demands on housing and social services increase. And, as they acquire skills and knowledge of the country they become more competitive with native workers for jobs and housing.

As a result of a growing number of guest workers, rising ethnic (nationalistic) tensions, and the recent recession in the developed countries, policies toward guest workers have changed. However, the magnitude of the actual decline in the use of guest workers is difficult to quantify. In November 1973, Germany announced an end to new guest worker migration. In mid-1974, France followed. The Swiss have declared a ceiling of 600,000 guest workers, down from 1 million, and in Holland numbers are being cut severely despite economic advice which calls a steady supply a stimulus to economic growth. The Dutch government has articulated its stand in a comprehensive document which argues for stabilizing the present foreign population through family reunion but then ending migration, even at the expense of a diminution in growth. The European experience suggests that beyond some point it may

be politically and socially, if not economically, better to move capital and modern technology to unskilled labor in the poorer countries, instead of bringing unskilled labor (and the resulting social conflict) to the developed nations.

D. SUMMARY AND CONCLUSION

We would expect a large net inflow of illegal alien workers to have an important impact on the economic conditions of the U.S. resident population. The illegal migration appears to be in response to better job opportunities in the United States than in the country of origin, and an inability to acquire a legal status. With regard to the domestic economic impact, the important questions are the nature and magnitude of the effects on the total income received by the legal U.S. population and on the distribution of this income through changes in the occupational distribution, unemployment, relative wages, profits and relative prices. Although qualitative statements can be made, given our limited information on the size and characteristics of the illegal alien labor force, and on the supply and demand responses in the markets for factors of production and for goods and services, it is not possible at this time to quantify these impacts.

To the extent that illegal aliens are predominantly lower skilled workers, their presence tends to lower the wages and working conditions of U.S. workers in low skilled jobs. In

the adjustment process, domestic unemployment tends to increase. Over time, however, if the illegal aliens are able to mask their illegal status they can acquire skills and knowledge more

relevant to U.S. labor markets and their earnings would

increase. They then become more competitive with more skilled

U.S. workers.