Skilled Immigrants and Stimulus Posted by The Editors

From NSN intern Henry Burton:

The Washington Post reports that the stimulus bill restricts bailout recipients from hiring skilled immigrants:

As the U.S. economy slows, highly skilled foreign professionals seeking work under various visa programs are finding it harder to get jobs. President Obama's stimulus package stops U.S. companies, largely in banking and financial services, that take federal bailout money from hiring H-1B visa holders for two years if they have laid off American workers in the previous six months. The administration has vowed to tighten restrictions and step up oversight of all work visa applications.

The H-1B program brings in about 85,000 skilled foreign workers every year, ostensibly to fill jobs that U.S. workers cannot or will not do. But some companies in the science and technology fields, afraid of a backlash over hiring foreign professionals rather than American ones, are rescinding job offers. Analysts say it is part of a wave of mounting anger in the United States over work visas, especially at a time when more than half a million Americans are being laid off every month.

Obviously, there is some short-term logic in this.  By restricting work visas, we ensure that any jobs that are created in the US go to US citizens.  Since there are a lot of US citizens without jobs and the political system is struggling to put them to work, this helps achieve a (worthwhile) political goal.  Also, since citizens can vote and work-visa holders can't, it offers some opportunity for political grandstanding.

But the downside of this policy far outweighs the upside. 

For one, it's likely that some companies will, instead of filling jobs with American workers, simply not create those jobs.  For example, they might be applying for an H-1B visa because a particular immigrant has an exceptional and desirable set of skills.  If the company is denied the opportunity to hire the immigrant, they might find an American with the same skills or almost-as-good skills.  But in some cases, they may not find an American with comparable skills and instead they may just wait a year or two to fill that spot.  This means fewer jobs in the US economy, less overall spending, and a delayed recovery.  For the purpose of increasing American GDP, a job created is a job created--whether it goes to an immigrant or an American.  For the purpose of increasing the percentage of working-age Americans who are employed, a job offered to an immigrant is useless, of course.  But at least that employed immigrant would have a salary and spend some of it in the US, thereby boosting the welfare of Americans and indirectly increasing American employment.

Another possibility is that some companies will not fill these jobs because, as the article suggests, hiring Americans costs more than hiring immigrants.  If it costs $100,000 to hire an American engineer and only $50,000 or $75,000 to hire an Indian engineer, companies may not be able to afford to hire the American right now.  Preventing them from hiring the Indian doesn't help.  Again, one employed Indian in the US means more aggregate demand in the US, which means indirect benefits for Americans.  It also means a big gain for that particular Indian, which is worth taking into account (although perhaps not for politicians, since the Indian can't vote).  In a global recession, we need to put people of all nationalities to work.  It's good if India has fewer unemployed people.  That engineer will even send remittances back to India, thereby boosting the Indian economy.  And if the Indian economy recovers, that's good for our trade and for our economy.

Everything I've just said was about the short-term.  But the real problem here is that this policy is incredibly damaging in the long term.  Even if there is some short-term value in restricting immigration (and I doubt there is much), that gain is dwarfed by the long-term stupidity of this policy.

The Washington Post says that H-1B visas bring skilled immigrants to the US "ostensibly to fill jobs that U.S. workers cannot or will not do."  That's not true.  It's not even ostensibly true.  The purpose of the H-1B visa program is to promote economic growth in the United States.  We're talking about highly skilled workers--often people with doctoral degrees (applicants must have at least a bachelor’s degree to be eligible for an H-1B visa).  We want these people to live and work in the United States.  They might come up with technological breakthroughs (like a viable carbon sequestration technology or a cheap solar panel) or start the next Google-like innovative company.  They might work in a medical research lab and help cure cancer or diabetes.  Who knows what they'll invent, but it'll be better for Americans if it happens in the United States.

Among economists, the benefits of admitting high-skilled immigrants are not controversial.  The Post article quotes Vivek Wadhwa, who founded two software companies and is now an adjunct professor at Duke and research fellow in Harvard’s Labor and Worklife Program.  Wadhwa says the new restrictions on H-1B visas are “really unfortunate because we will lose an entire generation of wonderful minds as a by-product.  The next Google or Silicon Valley will be in Bangalore or Beijing…  My view is that we need to always bring in the best talent from everywhere -- more skilled and educated people end up creating jobs and making the pie bigger for everyone.” 

In a recent column in Business Week, Wadhwa writes:

As the debate over H-1B workers and skilled immigrants intensifies, we are losing sight of one important fact: The U.S. is no longer the only land of opportunity. If we don't want the immigrants who have fueled our innovation and economic growth, they now have options elsewhere. Immigrants are returning home in greater numbers. And new research shows they are returning to enjoy a better quality of life, better career prospects, and the comfort of being close to family and friends…

 

Why should we care? Because immigrants are critical to the country's long-term economic health. Despite the fact that they constitute only 12% of the U.S. population, immigrants have started 52% of Silicon Valley's technology companies and contributed to more than 25% of our global patents. They make up 24% of the U.S. science and engineering workforce holding bachelor's degrees and 47% of science and engineering workers who have PhDs. Immigrants have co-founded firms such as Google (GOOG), Intel (INTC), eBay (EBAY), and Yahoo! (YHOO).

Paul Krugman, while expressing doubts and uncertainty about the economic effects of low-skilled immigrants, says “The picture is much different for high-skill immigrants. By any criterion I can think of, the large numbers of South Asians — mostly engineers and other high-skill professions — buying houses in West Windsor, N.J., just down the road from me, are a net plus for America.”

Increasing the long-term growth rate of an economy is hard, and the factors that drive long-run growth are not yet fully understood.  Economics is a soft science.  Nonetheless, economists generally agree that a few things are important for promoting long-term growth:  the savings rate in an economy, public investment in infrastructure, and human capital.  As for human capital, you can either create it--which requires a major, sustained investment in primary, secondary and higher education--or you can import it.  Admitting highly-skilled workers is importing human capital.  Lots of it.  And we're getting it for free--these people want to come to the US.  It’s like instant education reform for free.

In short, every H-1B visa we issue represents a mutually beneficial transaction of enormous value.  The immigrant gets a job and probably substantially higher wages than he or she would earn elsewhere.  US economy benefits from their skills and innovativeness.  We should be issuing a lot more of these visas.

Right now, the primary concern of US economic policy makers should be generating a recovery.  But we shouldn't do things that damage our long-run growth prospects.  With the exception of averting global catastrophe from climate change and nuclear proliferation, nothing is more important to the future prosperity and national security of the United States than promoting long-run growth.

Comments

[Brittanicus]

Because the Obama administration has been relatively silent about the fomenting illegal immigration issue. Don't be absorbed into a state of tranquility--as if nothing is going to happen? We must--ALL--keep our surveillance well tuned on the halls of power. Something is quietly churning in the minds of the anti-sovereignty politicians. Everything is connected--the free movement of cheap labor--an agenda of the free traders, and their North American Union. AMNESTY! The DREAM ACT!

The 2010 census that is being organized through the White House with the radical ACORN counting heads. This includes 40 million illegal aliens estimated by the Heritage Foundation, that encompasses every state. This is a travesty of the Census, because then "Sanctuary States" will appropriate more federal funds, owing to the large populations of illegal immigrants and obtain more seats in Congress. Sanctuary States like California will have more influence where your tax money goes, and their Liberal state assembly will get a very large portion to pay for the overcrowded--None English speaking classrooms, the free allocation of Health care for all who steal into America.

The undisclosed list of free handouts, tapped into by illegal alien families--that do not exist--only in their own governments birth records. We have already seen intentional corruption in the Acorn ranks to fraudulently alter Voter registrations, so should not be allowed anywhere near the Census enumeration. ILLEGAL ALIENS SHOULD HAVE NO RIGHT TO ANYTHING--other than a deportation order from a Federal judge. E-verify has been compromised by certain Senate lawmakers, so 300.000 plus foreign labor can be hired by unscrupulous contractors in the construction industry. All anti-illegal immigration laws promoted by our reluctant legislators are either secretly killed before they see the light of day. So with the REAL ID act, E-Verify and even the 1986 immigration control act. It's your future, it's your money being appropriated for business welfare and illegal alien handouts. WE NEED ANOTHER TEA PARTY. Read their awful immigration grades at NUMBERSUSA. Call Washington to stop this travesty; 202-224-3121

[Zathras]

And that's what you're up against -- instant, angry reaction against immigration, period. The specific subject under discussion doesn't even get mentioned.

The constituency for liberal admission quotas for H-1B workers really needs to be well organized to cope with the reflexive hostility to the idea of immigration, or concessions to that hostility will keep showing up unbidden in all sorts of legislation, germane or not.

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The constituency for liberal admission quotas for H-1B workers really needs to be well organized to cope with the reflexive hostility to the idea of immigration, or concessions to that hostility will keep showing up unbidden in all sorts of legislation, germane or not.

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The constituency for liberal admission quotas for H-1B workers really needs to be well organized to cope with the reflexive hostility to the idea of immigration, or concessions to that hostility will keep showing up unbidden in all sorts of legislation, germane or not.

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