Capitalism works when capital in pursuit of profit must find ways to expand output with the labor present, and when it must share the rising proceeds with that labor. Lax immigration policy and enforcement have provided employers with a safety valve in the form of foreign workers who, especially at the low-wage end of the labor market, relieve pressure to raise wages and invest in productivity. The COVID-19 pandemic’s aftermath has fostered tight labor market conditions, leading employers to complain of “labor shortages” and demand relief in the form of increased immigration. But these conditions are precisely the ones necessary for lower-wage workers to enjoy the kinds of gains that higher-wage workers and investors have enjoyed in recent decades. Rather than provide relief, policymakers should increase the pressure.

The composition of legal immigration is the main economic issue. Immigration can increase worker power for lower-wage workers when that immigration is into higher-wage segments of the labor market. Thus, the need for a skills-based immigration system. Maintaining the current legal immigration level but skewing its composition toward workers who will compete in the labor market’s high-wage segments, will tend to strengthen worker power in the market’s low-wage segments even more quickly than would restricting immigration broadly. It will increase demand for what is today low-wage labor, create strong incentives to invest in improving the quality of those jobs, and have distributional effects that shift income back toward the working and middle classes.

Mandatory E-Verify is a vital cornerstone for this approach, which can work only if labor supply is effectively limited to legal residents. Policymakers already have a system, called “E-Verify,” that validates the legal status of American workers. What is lacking is the political will to ensure its consistent use. Employers should have no choice and should face penalties for employing illegal workers even inadvertently. Penalties for intentional and repeated offenses should be catastrophic and include criminal prosecution. The law should recognize that the employer who opts for illegal and exploitable labor is harming Americans’ material wellbeing, endorsing criminal activity, and undermining the national interest for profit. Aggressive deterrence of employer malfeasance eliminates the job opportunities, reducing much of the incentive for illegal immigration.