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Why America Needs More Immigrants, Not Less

President-elect Joe Biden is going to have his hands full in convincing Congress to pass immigration reform legislation. Over the last decade Republicans developed an aversion to immigration, both legal and illegal. They defeated comprehensive immigration reform during both the Bush and Obama administrations and refuse to offer a pathway to citizenship for the 10.5 million or so undocumented immigrants living and working in the US, or the 700,000 individuals who were brought to the country as children protected by the Obama administration's Deferred Action for Childhood Arrivals (DACA) program.

Less publicized, but perhaps more damaging to America, many conservatives also want to limit the number of legal immigrants entering the country, arguing that they take jobs from Americans and don't assimilate well into our culture. In August of 2017 Republican Senators Tom Cotton of Arkansas and David Perdue of Georgia sponsored a bill that would have reduced legal immigration by half over 10 years and former President Donald Trump endorsed it. The bill would have also eliminated the Diversity Visa Program which allows people from countries with low immigration rates to enter via a lottery for permanent residency.

Oddly, Trump and the sponsors of the bill claimed that they wanted to institute a merit-based system but the bill really only reduced family based immigration without expanding legal residency for highly skilled workers. Moreover, it was based on the false assumption that immigrants who come to America via the diversity lottery or through family-based preferences don't bring needed skills. That's simply not true according to recent research conducted by the libertarian-leaning Cato institute.

Cato: "But this generalization about diversity and family-sponsored immigrants is wildly inaccurate. Not only are many of them educated, they are generally much better educated than U.S.-born Americans are. Nearly half of all diversity and family-sponsored immigrants who arrived in 2015 had college degrees. Diversity and family-sponsored immigrants were 62 percent more likely than U.S.-born natives to have graduated college. At the same time, they are no more likely to have dropped out of high school than natives."

America also benefits from the influx of lower skilled workers that arrive via these immigration preferences. We explained why in several pieces last year and even conservative Republican Senator Lindsey Graham understands their importance to our economy.

Graham quoted by the New York Times: “If this [The Cotton, Trump] proposal were to become law, it would be devastating to our state’s [South Carolina's] economy, which relies on this immigrant work force,” he said. “Hotels, restaurants, golf courses and farmers,” he added, “will tell you this proposal to cut legal immigration in half would put their business in peril.”

The Trump administration also targeted highly skilled workers who obtain legal residence through the H-1B visa program, and cut H-4 work authorizations for the spouses of current visa-holders. Such policies made it difficult for businesses to find the staff they needed to keep America competitive in a global market.

New York Times: "The government is denying more work visas, asking applicants to provide additional information and delaying approvals more frequently than just a year earlier. Hospitals, hotels, technology companies and other businesses say they are now struggling to fill jobs with the foreign workers they need."
"With foreign hires missing, the employees who remain are being forced to pick up the slack. Seasonal industries like hotels and landscaping are having to turn down customers or provide fewer services. Corporate executives worry about the long-term impact of losing talented engineers and programmers to countries like Canada that are laying out the welcome mat for skilled foreigners."

All of these initiatives were meant to appeal to President Trump's base and in many ways Trump repackaged the Republican Party as the "Know Nothings" of the 21st Century, appealing to a nativist streak in American culture that surfaces from time to time and negatively influences our political discourse. It's exacerbated today because we are undergoing a demographic shift fueling fears among some white Americans that their culture and standing are threatened. The Know Nothings feared Catholics, Asians, Irish, and Jews, while nativists today are apprehensive about Hispanics and Muslims; same arguments [religion, culture, jobs], different century.

Unfortunately, we are having our current outbreak of xenophobia at the worst possible time and it threatens our future prosperity. Immigrants are absolutely necessary to our economy and spearhead growth and entrepreneurship in America. Far from being a burden, they represent our future.

The arguments for expanding immigration fall into two categories, population/taxes, and skills/entrepreneurship.

Population & Taxes:

As we have documented before, America's birthrate has declined dramatically over the last few decades and it's now below replacement level.

Illuminate: "The fertility rate, which measures how many babies women are having, also indicates if the population is replacing itself. A rate of 2.1 is seen by demographers to mean that the population is stable. In 2017 the rate fell to 1.76 births per woman, down 3% from the rate of 1.82 in 2016. According to a report released yesterday by the National Centre for Health Statistics, that is “the lowest fertility rate since 1978. The birthrate also fell in 2017 to a 30-year low. The 3.85 million US births in 2017 were the fewest since 1987."

And this decline in birthrate will have consequences for America's growth and prosperity unless we start addressing the issue today with policies that welcome young, productive immigrants. Already, some demographers in the United States see an impending crisis in this trend because it means that there will be a smaller number of educated young people entering the workforce, less entrepreneurship, and fewer workers to support Social Security and Medicare for our aging population.

Professor Jack Goldstone, Reason: "If we want our economy to grow, what America needs more than anything is workers. Domestic fertility rates are plummeting even as the boomers are rushing into retirement. The U.S. birth rate hit an all-time low in 2017: 1.7 children per woman, well below the "replacement rate" of 2.1. At the same time, the number of immigrants entering the country has slowed considerably, thanks in part to the Great Recession of 2007–09. Not only do these trends put enormous pressure on the country's entitlement system, they are already causing a drag on the economy. And this problem will only get more serious in the decades to come. Unless the U.S. finds a way to welcome more foreigners, and quickly, it is headed for a demographic crisis."

And increased legal immigration is an essential component in any plan to address the coming shortfall in funds to support Medicare and Social Security. As MarketWatch's Caroline Baum puts it, "immigration is ‘pure gravy’ for federal finances."

MarketWatch, Caroline Baum: Extrapolating from the assumptions in the [Social Security] trustees’ annual report, a 30% annual increase in immigration would eliminate 10% of the Social Security shortfall, according to Charles Blahous, who was a public trustee for Social Security and Medicare from 2010 through 2015 and is currently a senior research strategist at Mercatus.

Skills and entrepreneurship:

We have written several pieces on the importance of both legal and illegal immigrants in several low-skilled industries such as agriculture and construction. Immigrants also bring energy, creativity and much needed skills to America's high-tech workforce.

According to research published by the Kaufman Foundation, immigrants created 25 percent of all new high-technology companies over the period 2006 through 2012, accounting for $63 billion in sales. And almost half of the companies in America's Fortune 500 today were founded by immigrants or their children.

And immigrants that arrived via the H-1B visa program have helped reinvent American industry. Gaurav Khanna and Munseob Lee, both assistant professors of economics at the School of Global Policy and Strategy, published a study in July detailing how these talented immigrants impact industrial innovation in America.

Science Daily: "We found companies with higher rates of H-1B [immigrant] workers increased product reallocation -- the ability for companies to create new products and replace outdated ones, which in turn, grows revenue," said Khanna. "This discourse could have far reaching implications for U.S. policy, the profitability of firms, the welfare of workers, and the potential for innovation in the economy as a whole."

The United States is falling behind its competition in attracting this talent. The H-1B visa program helps companies entice foreign talent, but it's restrictions inhibit entrepreneurs.

CNN: "And while other countries, including France and Canada, have special visas intended to encourage entrepreneurs, the United States does not. People who come to the country and start companies have to navigate a complicated web of existing visas, like the H-1B. The H-1B requires individuals to work under the control of an employer, making it difficult to launch a company."
"In 2017, the Obama administration instituted the International Entrepreneurs Rule as a solution. Foreigners building "fast-growing businesses" could apply for "parole status" to work in the United States."...
"The rule was slated to go into effect July 17. But the Department of Homeland Security issued a memo one week prior that pushed the launch to March 14, 2018. In addition, Homeland Security said it would propose to rescind the rule entirely."

In the last months of the Trump administration, officials are still trying to jettison the International Entrepreneurs Rule and create even more roadblocks to legal immigration by highly trained foreign workers. That's a mistake.

Harvard Business School Professor William R. Kerr researched the economic effects of global migration for more than a decade and recently authored "The Gift of Global Talent: How Migration Shapes Business, Economy & Society." He makes the case that America needs immigrants to stay competitive and create jobs.

Kerr in Forbes: “Immigrants as a group can have a dynamic effect on an economy,” says Kerr, adding that the phenomenon cuts across industries, with lower-skilled immigrants opening up dry cleaning businesses, restaurants, and autobody shops, and higher-skilled immigrants launching tech firms."

Kerr also notes that immigrants provide creative, forward-looking solutions to the businesses that hire them.

Forbes: "... Kerr’s previous research shows that immigrants contribute to the innovation of larger companies, accounting for roughly a quarter of US patent filings. These contributions are reshaping US invention in dramatic ways."
“One out of every 11 patents developed in the United States today is either invented or co-invented by an individual of Chinese or Indian ethnicity living in the San Francisco Bay Area,” Kerr says."

Former Republican Senate Majority Leader, Trent Lott, recently argued that skilled immigrants aren't taking American jobs, they are creating them.

Lott reported by NBC: "According to a recent study by the Partnership for a New American Economy, skilled immigrants have raised wages for American works and significantly increased the number of U.S. jobs being created in STEM. That belies the argument of some immigration opponents, who have claimed that H1-B workers displace American workers."

Partnership for a New American Economy: "The data comparing employment among the fifty states and the District of Columbia show that from 2000 to 2007, an additional 100 foreign-born workers in STEM fields with advanced degrees from US universities is associated with an additional 262 jobs among US natives. While the effect is biggest for US-educated immigrants working in STEM, immigrants with advanced degrees in general raised employment among US natives during 2000–2007"...

Businesses in the US are scrambling to find the workers they need and Republican policies have exacerbated the problem.

Labor economist Giovanni Peri, head of the economics department at the University of California, Davis explained that Trump's immigration policies were "almost completely separated from the economic needs of the U.S. economy" and argues for a more open legal immigration system to benefit all Americans.

Peri, interview: "...In the last 20 years, the largest inflow of immigrants has been in highly technical, highly professional jobs. These group of workers is really needed for companies to grow because they are the one to introduce innovation [and] technological progress. They allow a company and a firm to expand to be more productive. And when they are hired, the firm will need other type of workers as well: managers, sales persons [and] accountants. So constraining that part could put definitely a big constraint there and slow down the growth of companies and of the whole economy. Also those type of jobs create good income, which is then reflected into higher demand for consumption in the United States, which further stimulates the economy and job creation [and] labor creation."

There certainly is a political constituency for anti-immigrant policies right now, but it's difficult to argue that it's based on the long-term economic interests of average Americans. If we create policies to welcome hard working and talented immigrants we can enhance our economic opportunities, but if nativism persists, we condemn the nation to slower growth and a less competitive economy.

By: Don Lam & Curated Content [updated 12/29/20]

#immigration #research

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