The big debate about immigration and the U.S. economy usually centers on whether more foreign workers might harm the pay or job prospects of Americans. However, in a new essay, Wharton management professor Britta Glennon argues that high-skilled immigration should be seen more positively.
Analyzing various studies on immigration and the U.S. economy, she finds that immigrants are not taking jobs from American-born skilled workers or competing with them. In fact, evidence shows that when employers face immigration restrictions, they react in other ways rather than hiring American-born workers.
Changing approach
They might change their business scope, shift jobs abroad, automate tasks, or form partnerships. Moreover, skilled immigrants often start businesses, creating jobs instead of taking them. One study in Glennon’s paper indicates that immigrants are about 80% more likely to establish businesses compared to U.S.-born citizens.
The article highlights that hiring skilled overseas workers can make large companies more productive and innovative. When businesses thrive and invest more due to high-skilled immigrants, they typically end up hiring more people, benefiting the economy.
Immigrants often bring new ideas and technologies, enhancing business efficiency and boosting overall wages. For example, research shows that 59% of artificial intelligence PhD graduates hired by U.S. companies are immigrants, indicating that the talent fueling America’s AI industry comes from around the globe. Additionally, they help multinational companies improve their performance in exporting products and services.
High bar
Given these benefits, many countries aim to attract and select the most talented immigrants to boost their economies. The U.S. is a primary destination for immigrants, with 18% of the world’s overseas workers heading there in 2020, according to one study.
The U.S. immigration system facilitates legal immigration through three main channels: family connections, humanitarian grounds, and employment ties. The family connection pathway is the most common, accounting for about two-thirds of legal immigration to the U.S., according to the Migration Policy Institute.
For skilled immigrants, the U.S. uses a demand-driven system where American companies play a crucial role. This contrasts with “supply-based” systems where immigration eligibility is determined by a points scale for factors like education and skills.
Demand exceeding supply
Here’s how it works: U.S. companies choose the skilled immigrants they want to hire, submit visa applications for them, and continue to sponsor them until they either leave the country or get permanent residency. But, as the author notes, the demand for skilled immigrants by U.S. companies exceeds the quotas and limits set by the government.
For example, the number of employment-based green card applications from countries like China, India, Mexico, and the Philippines surpasses the per-country limit, causing long delays. Indian citizens wanting to work in the U.S. face wait times of over 100 years.
The article points out that policies on skilled immigrants shape U.S. companies’ decisions. When the availability of skilled immigrants changes, companies may adjust their production methods, expand their operations, or move skilled workers overseas.
Changing strategy
“The reason why firms make such sometimes large adjustments to their strategy is because there is significant evidence that immigrants have large positive benefits for firm outcomes, particularly for startups,” the author explains.
In the U.S., American multinational corporations account for about one-third of H-1B visa applications for skilled workers, excluding those filed by foreign companies. It’s no surprise that these U.S. multinational firms conduct 80% of the country’s corporate research and development.
In a global economy, countries that limit the inflow of skilled immigrants may fall behind those with more open policies. She argues for more sophisticated immigration models that consider how businesses make decisions and adapt to changes in the availability of skilled immigrants.
It’s crucial to look beyond national borders. Immigration patterns and national policies have global effects; a change in one country’s skilled immigration policy can significantly impact innovation, investment, and employment worldwide.
“Countries that hamstring their own firms with restrictive skilled immigration policies may damage their own national competitiveness by shifting investment and innovation abroad,” the author concludes.
