Jobs and Visas

During the 1990s, more than one million Soviet emigrants arrived in Israel, most of them highly educated. Given Israel’s size, this amounted to an unprecedented increase in human capital. Although the impact on local manufacturing was disappointing, the high-tech sector experienced a significant jump in productivity and innovation. The same pattern emerges in other cases of mass migration of skilled individuals. On July 1, 1997, Great Britain handed over Hong Kong to China. Concerned about living under Chinese rule, thousands of Hong Kong residents, many of them wealthy and well educated, moved to Vancouver in the years preceding the handover. While there were some inevitable cultural tensions early on and not all the Chinese remained, in the end the city gained from this inflow in terms of both human and financial capital. The immigrants brought their savings, and the local economy received hundreds of millions of dollars in new investment. Many immigrants settled in towering condos reminiscent of the high-density high-rises back home, thus dramatically accelerating the revitalization of downtown. These changes helped turn Vancouver into a culturally diverse global metropolis.

Japan has had the opposite experience. Japanese high-tech companies dominated global markets in the 1980s, but they have lost much of their edge in the past twenty years, especially in software and Internet-related businesses. There are many explanations for this stunning reversal of fortunes, but a leading factor is that Japanese firms have access to a substantially smaller pool of software engineers than American firms, largely because of a lack of immigrants. While the United States is a magnet for the most talented foreign-born software engineers, legal, cultural, and linguistic barriers limit the inflow of global human capital into Japan and have effectively cost Japan its leadership in some of the most dynamic parts of the high-tech sector. As we saw earlier, the thickness of the labor market for specialized occupations is a crucial factor in determining the success of the innovation sector.

 Today the contentious debate on immigration in America misses a key point: a visa issued to a highly skilled immigrant does not necessarily mean one less job for an American citizen. On the contrary, it could mean many more jobs for American citizens. While foreign-born workers account for 15 percent of America’s labor force, they account for a third of all engineers and half of all those with doctorates. Without immigrants, the United States would not dominate the sciences the way it does now. For one thing, it would have many fewer Nobel Prizes. Foreign-born scientists working in the United States are more than twice as likely to win a Nobel Prize as their American-born colleagues, and they are also overrepresented among members of the National Academy of Sciences and the National Academy of Engineering. But it is not only about scientific awards and academic titles. Even more important for American workers, immigrants are almost 30 percent more likely than nonimmigrants to start a business, and they account for one-quarter of all venture-backed public companies since 1990 and one-quarter of new high-tech firms with over $1 million in sales. Steve Jobs (whose Syrian father came to the United States for his doctoral studies), Jerry Yang (the Taiwanese-born cofounder of Yahoo), and Sergey Brin (the Russian-born cofounder of Google) are just a few examples of immigrants or their children who created businesses that have gone on to provide thousands of new jobs for American natives.

 Viewed this way, the current debate on immigration looks misguided. It has devolved into an ideological fight between those who want tougher rules and those who want softer rules. But the key question is not how many immigrants but what kind of immigrants to let in. It is probably the case that unskilled immigrants tend to depress the salaries of unskilled natives and therefore exacerbate inequality, although the exact magnitude of that effect is still the subject of lively debate among economists. But the effect of highly skilled immigrants is apt to be positive, especially for low-skilled Americans.

There are three reasons for this. First, high-skilled immigrants do not compete directly with low-skilled Americans. In fact, the two complement each other, which means that an increase in the former group is likely to raise the productivity of the latter group. Second, firms are apt to respond to an inflow of highly skilled immigrants by investing more, and this new investment may further raise the productivity of low-skilled workers. Third, skilled immigrants generate important spillovers at the local level, since an increase in the number of highly educated individuals in a city tends to strengthen the local economy, thus generating local jobs and raising natives’ wages.

In principle, it is possible that the effect is positive even for skilled Americans. Obviously, highly skilled immigrants compete with their American counterparts, and this would tend to depress Americans’ wages. But the other two effects would tend to push the skilled natives’ wages in the other direction, potentially offsetting the negative effect. Regardless, a substantial increase in the number of skilled immigrants could play an important role in reducing wage inequality. Overall, limiting the number of unskilled immigrants is unlikely to have major negative effects for natives, but limiting the number of skilled immigrants could have significant negative effects, especially for our low-skilled workers.

 Recent research by Jennifer Hunt identifies which kind of highly skilled immigrant is most likely to bring benefits to American natives. Using a detailed sample of college-educated immigrants, she found that those who arrived as postdoctoral fellows and medical residents have been most successful in generating original research and patents and vastly outperform natives. By contrast, immigrants who arrived thanks to a family member who was already in the United States perform at the same level as natives.

It is in America’s self-interest to radically reform its immigration policy to favor immigrants with college degrees, master’s degrees, and PhDs. Right now, 60 percent of the students in American engineering schools are foreign-born, but when these individuals graduate, they often find it difficult to stay in the United States. Several human resource managers of high-tech companies have told me that the current U.S. policy acts as a constraint on their ability to expand. One HR manager in Silicon Valley was very explicit: she called the current policy “ridiculous.” It is costly and time-consuming for these companies to hire qualified high-tech employees who are born abroad, even if those individuals have a master’s degree and graduated at the top of their class from Stanford or MIT. The number of visas for skilled workers, called H1B visas, is too low given the needs of high-tech companies, and during normal years such visas run out shortly after they are made available. An employee at Intel recently told me that the company, one of the largest users of H1B visas in the nation, often hires a law firm that in turn hires a paralegal to spend the night in front of the federal building where applications are submitted so that Intel’s applications are among the first to be turned in. (Because of the weak labor market, the years 2009–2011 have been a significant exception, with many more slots than visa petitions.) A friend of mine (who obviously wants to remain anonymous) has an MBA from Berkeley and received a job offer from a leading high-tech firm but had to marry her American partner just to avoid visa delays and secure her job. We should try to do everything in our power to keep this kind of person, and instead we do everything we can to discourage her from staying. Our ability to absorb the world’s talent is a crucial advantage no other culture can match. But it is constrained by an immigration policy that goes against our own economic interests.