Lack of Immigration Reform Hurts Economic Competitiveness

Current limits for high-skills jobs put U.S. at a disadvantage

Lack of Immigration Reform Hurts Economic Competitiveness

With Washington often appearing hopelessly gridlocked, there’s one issue critical to the nation’s economic health that both parties seem to agree on: the need to fix the nation’s broken immigration system. In particular, the US needs to take advantage of the global high-skilled labor supply to meet demand as our global competitors step up their game to attract the best and brightest talent.

There’s agreement among government officials and industry leaders that America should be the world’s number one destination for highly-skilled workers. The H-1B visa program was created to connect those individuals with U.S. employers who can’t find domestic workers with the right skill sets. Without the H-1B program, many companies would be unable to find workers with the science, technology, engineering and mathematics skills (STEM) they need to innovate and grow.

The federal government only makes 65,000 of these highly coveted visas available each year. Applications become available on April 1st, and like a hot concert ticket are gone within days. According to the US Citizenship and Immigration Services, they received 124,000 H-1B petitions during the last filing period, including those filed for a special advanced degree exemption. Clearly, demand for these workers is staggering and continues to grow every year. The U.S. Senate and House both rightly recognize that the current arbitrary visa cap must be raised.
But there are critical differences between the House and Senate when it comes to highly-skilled worker visas that are not well-known.

Last summer, the House Judiciary Committee passed the “Skills Visa Act,” which would increase the number of H-1B visas and make the visa selection process fairer. Most importantly, the bill drops the discriminatory “outplacement” language present in the Senate bill that would bar IT services firms from sending specialists to work on-site at client facilities if more than 15% of the IT firm’s U.S. workforce consists of visa workers.

This is an arbitrary, protectionist (most of the IT services firms meeting the criteria are based in India) labor-backed amendment that has nothing to do with safeguarding American jobs. The temporary visa allocations will simply shift to other, larger corporations that manage to skate under the 15% cap due to their legacy U.S. labor force. In fact, so-called “H-1B dependent” firms targeted by the Senate bill would be forced to pay higher wages to their existing visa workers than they would have to pay to U.S.-born workers. Do the unions truly believe that it makes sense for the government to require businesses to pay foreign workers more than Americans?

What’s more, these “H-1B dependent” companies would be hit with new restrictions on the number of visa workers and filing fees that are in some cases nearly quintuple what other companies would pay. If these onerous provisions were to become law, U.S. jobs would most likely be outsourced or eliminated all together. And this is to say nothing of the impact on U.S. businesses that have established long-standing relationships with their IT services providers, particularly in the financial sector, if they are forced to disrupt these relationships by government fiat.

In general, those who claim increasing the number of skilled foreign workers costs American jobs are simply wrong on the facts. Economist Giovanni Peri of the University of California, Davis wrote in a report published by the Federal Reserve Bank of San Francisco: “Data show that, on net, immigrants expand the U.S. economy’s productive capacity, stimulate investment, and promote specialization that in the long run boosts productivity…there is no evidence that these effects take place at the expense of jobs for workers born in the United States.”

In a study published last year, Peri and his fellow researchers found that foreign scientists and engineers with H-1B visas contributed to 10%-20% of the annual productivity growth in the US from 1990 to 2010.This immigrant-driven growth boosted GDP per capita by 4%, and increased the size of the economy by $615 billion in 2010. Peri and his colleagues also reported that H-1B holders had no negative impact on U.S.- born workers with similar skills and actually increased the compensation and overall employment of American-born scientists and engineers. Clearly, allowing more talented and entrepreneurial individuals into the country will lead to more jobs for all Americans, greater productivity growth and increased economic benefits.

Sustaining a robust pipeline for highly-skilled workers and keeping America competitive are two sides of the same coin. Consider the alternative: if these highly trained engineers, scientists, mathematicians and programmers are not allowed to stay and work in the U.S., they’ll simply end up helping one of our global competitors grow their own economy.

Similarly, college graduates with STEM degrees that are not allowed to stay and work in the U.S. will leave.

This undermines U.S. competitiveness and the ability of businesses to hire the talented workers they need. As President Obama said last year, “There are brilliant students from all over the world sitting in classrooms at our top universities. We’re giving them all the skills they need to figure that out. But then we’re going to turn around and tell them to start that business and create those jobs in China or India or Mexico…That’s not how you grow new industries in America.”

Another way to look at foreign born entrepreneurs’ impact on economic growth is in startup formation. A study conducted by Duke professor Vivek Wadhwa, who was cited last year by Time Magazine as one of the Top 40 Most Influential Minds in Tech, showed that a quarter of technology-based companies started between 1995 and 2005 had a foreign-born CEO or chief technologist. These new companies posted revenue of $52 billion and employed a staggering 450,000 people.

Furthermore, a report by the Kauffman Foundation held that “…immigrants were more than twice as likely to start businesses each month than were the native-born in 2010.” According to the Brookings Institution, “…among people with advanced degrees, immigrants are three times more likely to file patents than US-born citizens. Such investments in new businesses and in research may provide spillover benefits to US-born workers by enhancing job creation and by increasing innovation among their US-born peers.”

Simply put, the current limits for highly-skilled individuals to work in this country put the U.S. at a competitive disadvantage in the global marketplace. These limits must be lifted while maintaining a level playing field for all those who need to tap that global talent pool to succeed – and without discriminatory carve-outs for special interests that will simply drive jobs offshore.

Fixing our immigration system is crucial as our country faces increasingly competitive challenges in the years ahead. Washington needs to take “yes” as an answer for once and take action on an issue that members of both parties say is long past due.


Article printed from InvestorPlace Media, http://investorplace.com/2014/02/lack-immigration-reform-hurts-economic-competitiveness/.

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