Mark Kleiman has some good thoughts on immigration that are all well worth reading. In particular, he’s probably right that severe penalties on employers that hire and exploit undocumented immigrants, along with verifiable national ID cards for all citizens and non-duplicable electronic worker identification documents, would probably do much to halt the flow of illegal immigration by reducing demand. (Robert Reich lays out a similar proposal in the American Prospect.) This will never happen in practice—businesses will oppose it, because it would mean paying more in wages—but it would certainly work better than current policies at stemming illegal immigration.
On the other hand, the downsides to this sort of regime are easy to see: Both the government and businesses would have an increased ability to gather information about individuals, and undocumented workers would have increasingly fewer job opportunities—which would, in turn, reduce remittances to sending countries. (Remittances from immigrants in the United States to developing countries totaled $90 billion last year.) In a perfect world, we wouldn’t have to pit the interests of low-wage American workers against the interests of even lower-wage workers in developing countries, but that’s what the current debate often boils down to.