Here We Go Again
April 20, 2015
As countries continue struggling to accelerate economic growth, few could dispute the gains of greater skills. Yet some countries continue to forgo these gains. Sadly for America, but gladly for the world, April 1 was again the first day that U.S. Citizenship and Immigration Services accepted new petitions for H-1B visas for the next fiscal year. Each H-1B visa allows a company to create a U.S. job for a highly educated foreigner for at least three years. This program, which accounts for nearly all of America’s skilled immigration, imposes an annual cap of 85,000 new visas: 65,000 with at least a bachelor’s degree and 20,000 with at least a master’s degree.
In many recent years, demand for H-1B visas has far exceeded supply. Last year the government received 172,500 applications in less than a week, before closing the application window and then allocating via lottery the 85,000 new visas. How about this year? Even worse. In five business days, 233,000 visa applications were received for fiscal year 2016. The window again slammed shut, and another lottery will be held—with nearly two in every three applications being rejected, instantly precluding the U.S. economy from creating at least 148,000 new jobs.
Voices regularly raise concerns that America’s H-1B policies hurt American workers more than they help. Yes, U.S. immigration laws should always be vigorously enforced to minimize unfair violations. Viewing more immigrants only as greater competition for a fixed number of jobs, however, misses how they help create more jobs and higher incomes through innovation and resulting economic growth.
Consider our industry of higher education. The U.S. academic labor market has long been heavily supplied by talented immigrants. Fifty percent of the graduate-school cohort of one of us was foreign-born. Today about one-third of our fellow Tuck School of Business faculty are foreign-born. Are all these foreign-born scholars a bad thing?
Answer this question by imagining the Employ American Academics Act that deported all foreign-born academics. Would U.S.-born professors gain from this law? Today, sure: U.S. schools scrambling to fill existing teaching needs with U.S. citizens would boost their salaries. But tomorrow? No. Without the dynamism of foreign-born colleagues who enhance research and teaching, their productivity would suffer. Tuck and American higher education overall would suffer too. Students would endure a poorer classroom environment; they and others would endure less creation of new knowledge. All of this would reduce the number of applicants—and, ultimately, the number of jobs and levels of wages—industrywide.
Talented immigrants similarly spark dynamism in all sorts of industries. A recent study of 219 U.S. metropolitan areas from 1990 to 2010 found that growth of immigrant STEM workers by one percentage point of a metro area’s total employment boosted the wages of its native-born college graduates by seven to eight percentage points—and of its native-born non-college-educated workers by three to four percentage points.
What drives these wage gains are innovations that drive productivity growth. One quarter of U.S. high-technology firms established since 1995 have had at least one foreign-born founder. Immigrants or their children founded 40 percent of today’s Fortune 500 companies, including firms behind seven of the 10 most valuable global brands. STEM immigration, according to the study above, caused between 30 and 50 percent of U.S.-wide productivity growth in that generation.
A new report on immigration by one of us, “IT Services, Immigration, and American Economic Strength,” makes two points about high-skilled-immigration policy. First, any policy reforms should not just expand H-1B visa caps but should also reflect the dynamic operations of today’s companies in America. Reforms that unduly constrain how companies hire, pay, and deploy skilled immigrants could cause substantial harm despite higher visa caps. The last Congress considered—and, in some cases, passed—bills that would ban many companies from locating H-1B hires on-site at the workplace of clients. Restrictions like these would encroach on the basic business practices of countless U.S. companies that today best serve their business customers by collaborating with them on their own premises.
Second, the costs of America’s too-restrictive immigration policy loom large against today’s new wave of information-technology innovations. The “Internet of things,” big data, mobile and cloud computing: a decade from now, these and other IT innovations could create economic value worth as much as 30 percent of U.S. GDP, according to one recent study—trillions of dollars manifested in new jobs, new products, and rising incomes. But achieving such gains is by no means guaranteed. This same study estimated that already today America lacks over 1.5 million skilled workers who can make productive use of big data and related emerging IT innovations.
In what part of the world this latest IT revolution flourishes will have much to do with which countries attract and retain talented people. The global distribution of talent is not an immutable law of physics. America turns away the world’s best and brightest, often after educating them at its schools, to the undeniable benefit of other countries. Thus, for example, recent Silicon Valley billboards that invite to Canada those facing H-1B problems. America has brought forth the likes of Apple, Microsoft, Google, and Facebook. How many future such companies will be created elsewhere—or not at all—by those unwitting losers of its H-1B lottery?
Another year, another cycle of unnecessarily damaging U.S. immigration policy that inexorably reshapes the global economy. Here we go again.
Articles © 2015 Matthew Slaughter and Matthew Rees. All rights reserved.
Publication © 2015 Trustees of Dartmouth College. All rights reserved.