Hoisted from comments, Brad deLong style. Reader Cascadian write:
The way to stop abuses of undocumented workers is to document them, bring them into the light, and demand that employers give them the same rights as everyone else. That’s done by granting work visas to any immigrants capable and willing to work, indefinitely renewable absent criminal acts or other actions worthy of deportation, and not tied to a single employer. (That is, if an immigrant loses his job but his current work visa is still active, he can seek another job until his visa runs out.)
Without the ability to exploit these workers with threats of deportation, many of the economic advantages to employers of using them disappear. That also increases the competitiveness of citizen workers, who have many advantages over immigrants in the absence of exploitative practices.
In the case of economic redevelopment by government contract, as with Katrina, the policy should be to hire local unemployed and underemployed citizens to do the work, so that the money stays in the community that is being helped. To deal with structural unemployment in some communities of citizens (such as the African American community), the government should invest in public works projects that favor hiring of people in these communities. I’m partial to reinvestment in the national rail network, with workers hired locally along each line.
If the government actually took a proactive stance on unemployment, it could expose the current false choice of immigrant workers vs. low-wage citizen workers. It’s possible to provide opportunities for both, while also helping the overall economy.