At the start of this year I wrote about a recently published paper from Harvard Business School bemoaning the strangling effect of the American political system on economic growth and prosperity.

“Though America has squandered the recovery, we need not squander the future,” the authors say. “America retains great strengths, and many of the basic policy directions required to enhance U.S. competitiveness and boost shared prosperity are well understood and widely supported.”

One of the defining features of the paper surrounded the partisan squabbling over immigration, where the business community are largely unified in the challenges they face in attracting the highly-skilled talent they need from overseas.  Despite the consensus that change is required, however, the lack of political cooperation on the matter results in little real progress being made.

Professor William R. Kerr, author of The Gift of Global Talent, makes the case for a substantial change to the immigration system that so often denies organizations access to the talent they need to remain competitive.  The report highlights how 68% of HBS alumni feel their companies would be significantly less productive if they were denied access to skilled workers from overseas, with the majority blaming the immigration system for causing delays to accessing this talent.

Economic recovery

Suffice to say, the paper was written in a pre-covid age, but as with so much in life since the covid-19 virus gripped the world, the factors that were crucial to us before covid, have become extenuated by the pandemic.  New research from the University of California San Diego reminds us that the concerns of the Harvard Business School team before the pandemic struck should not be allowed to dissipate, even in a post-covid world in which internationalism seems ever more ephemeral.

The backdrop of the paper is one in which the Trump administration is expected to set clear limits on the number of international students allowed to work in the United States once they graduate while remaining on a student visa.  The belief is that by restricting the Optional Practical Training (OPT) program, it will help American graduates in the job market that will be highly competitive post-covid.

The research reminds us that immigrant rights boost the lives of native-born workers, and that legal protection for immigrants does not negatively impact domestic workers, whether in terms of their income, their ability to innovate, or indeed on societal measures such as tax receipts and crime levels.

“This time the political restrictions seem to be on high-skill foreign-born, like students, OPTs and those with H1B visas,” the researchers explain. “Many high-skill workers have lost their jobs, which means many will have to leave the country soon. When the U.S. crisis abates, there may be a scarcity of high-skill professionals, which could stall a robust recovery.”

Clear benefits

The paper highlights the well documented economic benefits immigrants bring.  Indeed, recent research from Rice University reminds us that even undocumented migrants bring far more economic benefits than costs.

It suggests that the economic gains from illegal immigration far outweigh the costs of the public services utilized.  Indeed, for Texas alone, the state collects $1.21 in revenue for every $1 spent on providing public services to undocumented immigrants.

“Undocumented residents have a positive influence and impact on the economy, since they pay taxes and fees and constitute an important part of the labor market,” the researchers say. “Even if we consider the costs of undocumented immigrants to the state of Texas, the benefits outweigh the costs.”

Suffice to say, the benefits of the kind of migrants that come in on H-1B visas are often even greater.  For instance, in previous research undertaken by the team, they found that U.S.-born workers had gained around $431 million in 2010 alone as a result of the H-1B visas.  It’s a benefit that new regulations seem hell bent on reducing, however.

“Unless immigrants are certain they will be allowed to remain within a country, they may not invest in developing a business in that country,” the researchers say. “This highlights a problem faced by many migrants who have ambitions to start businesses but will not because they know they may not be able to stay in the country for long.”

The researchers also found that the various protections afforded to migrant workers also benefit their native counterparts, not least because a lack of legal protection often goes hand in hand with lower wages, which is detrimental to native workers.

Reduced fears

What’s more, there is not really any evidence that people still want immigration to be significantly reduced.  This was a principle goal of the leave campaign during the Brexit referendum, yet new research from the University of Birmingham shows that concern about immigration has reduced since the referendum, and this trend has been exacerbated since the pandemic struck.

The authors believe this softening has two contributing factors, the first of which is that those with anti-immigrant attitudes feel they have more control over migration, and have therefore softened their stance, whilst the second is that the growth in xenophobia and racism has prompted some to pull back from their stance.

“Many people have noted the softening of attitudes since the EU Referendum, but no one could explain why attitudes changed for Remainers and Leavers,” the researchers say. “The idea that Leavers were reassured by the government ‘taking back control’ just doesn’t explain the wider trend. Our findings does. The fact that people wish to distance themselves from accusations of xenophobia and racism is not only reassuring but suggests a more general phenomenon of society seeking to protect itself. Which is just as relevant in a time of COVID, border closures, and fears of a ‘foreign’ virus as it is to Brexit.”

This sentiment has been further supported by the coronavirus pandemic, with new research from Oxford University’s Centre on Migration, Policy and Society revealing that sentiment towards immigrants has warmed during a pandemic in which many migrant workers were operating on the front lines.

The study reveals that over 18% of healthcare staff and 16% of those in social work and residential care are from overseas.  These people have been celebrated for their contribution to the pandemic in recent months, and this has contributed to a shift in attitude towards migrants.

“It is not clear that the pandemic fundamentally changes what we know about the economic consequences of migration,” the researchers say.  “It may thus be that the political impacts of the crisis—how it affects attitudes towards migrant workers and their contributions to society and the economy—will in the long run be more important than any change to policymakers’ understanding of how the crisis affects the economics of migration.”

There is inevitably going to be a desire among some to use the forced shut down of travel and borders as a result of the pandemic to make more permanent and sweeping changes to immigration policies.  Not only would that be highly damaging to the economy, but it would quite probably not be something that many people actually want.  As the Harvard team at the start of this article highlighted, we need policy makers to make the right choices to ensure the economy recovers from this unprecedented crisis, and nowhere is it more important that these choices are right than in matters of human capital.