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Reforming Immigration for Economic Growth

February 13, 2013 5 minute Read by Matthew Denhart

The need for pro-growth immigration reform has been making headlines over the past week. The Schumpeter column in this week’s Economist magazine — reviewing the new book “Better Capitalism,” by 4% Growth Fellows Robert Litan and Carl Schramm — has this to say about immigration:

America also used to have one of the most business-friendly immigration policies. Fully 18% of the Fortune 500 list as of 2010 were founded by immigrants (among them AT&T, DuPont, eBay, Google, Kraft, Heinz and Procter & Gamble). Include the children of immigrants and the figure is 40%. Immigrants founded a quarter of successful high-tech and engineering companies between 1995 and 2005. They obtain patents at twice the rate of American-born people with the same educational credentials. But America’s immigration policies have tightened dramatically over the past decade, a period in which some other rich countries, such as Canada, have continued to woo skilled immigrants, while fabulous new opportunities have opened up in emerging markets like China and India. Why endure America’s visa obstacle course when other countries are laying out the red carpet?

These same themes are evident in a recent column for the Wall Street Journal by L. Gordon Crovitz. Crovitz also laments that the U.S. has less-competitive immigration policies compared to its neighbor to the north. Crovitz continues, presenting additional data that show the immense economic contributions of immigrants and highlighting the country’s backward policies:

There's no debate about the importance of skilled immigrants. Between 1995 and 2005, foreign-born and technically trained entrepreneurs founded half the firms in Silicon Valley. Graduates in scientific and technical fields can stay in the U.S. for 29 months under a program called Optional Practical Training. Then they can apply for one of 65,000 three- to six-year H-1B visas or one of 20,000 visas for advanced degree holders, including in nontechnical fields. This year the quota for H-1B visas was filled in less than three months. Even if someone gets one of these visas, he eventually needs to apply for a green card, of which 140,000 are granted each year, fewer than 10% for work-based applicants. The majority are for applicants who have family members in the U.S. These applicants should be admitted under other programs.

Last month, Alexandra Starr also wrote about immigration for the editorial page of the Wall Street Journal. Starr’s column, “Incubating Ideas in the U.S., Hatching Them Elsewhere,” discusses the problem immigrant entrepreneurs have securing visas that would allow them to growth their businesses in the United States. Starr highlights some of the extraordinary lengths to which some are going to work around the country’s restrictive immigration policies:

Stars of the tech community have pushed novel solutions to the visa quandary. PayPal founder Peter Thiel is backing a venture to launch a cruise ship 12 miles off the coast of San Francisco that would be populated with foreign entrepreneurs eager to develop business ideas in the U.S. market. Residing offshore would let them circumvent visa issues. Paul Graham, founder of YCombinator, advocates the creation of 10,000 founders visas, with an unspecified group—presumably from the venture capital community—developing the accreditation procedure.

Finally, this theme of immigration as it relates to economic growth is the topic of a recent article I wrote for the Huffington Post. In the article, I explain how immigrants help our economy grow and create jobs, rather than “stealing” jobs that unemployed Americans could otherwise fill. Here’s the economic logic:

The key is that immigrants bring new skills that complement American workers, allowing each group to specialize in areas where they hold what economists refer to as a "comparative advantage." Specialization makes economies more efficient, and efficiency drives economic growth. This is why immigration is not a zero-sum game when it comes to jobs. Since immigrants help grow the economy, they create more jobs for all of us, rather than stealing jobs that natives otherwise could fill. Indeed, a 2008 report by the National Foundation for American Policy calculates that each high-skilled (H-1B) visa requested by a U.S. technology firm is associated with an increase of employment of five additional workers.

We are pleased that immigration reform is getting attention. Immigrants are one group that can help us achieve 4% growth, but the proper policies must be put in place first. To read some of the leading academic research on immigration and innovation, check out this book by Pia Orrenius and Madeline Zavodny, as well as these papers (here and here) by Jennifer Hunt.


Author

Matthew Denhart
Matthew Denhart

Matthew Denhart is an expert on immigration policy and is the author of the Bush Institute’s America's Advantage: A Handbook of Vital Immigration and Economic Growth Statistics, now in its third edition. He currently serves as executive director of the Calvin Coolidge Presidential Foundation and is a founder of the Coolidge Scholars Program which provides full-ride merit scholarships to America's most promising college students. A summa cum laude graduate of Ohio University, Denhart has written and spoken widely on a variety of policy topics including the economics of higher education, labor, and taxes. He has contributed articles to numerous national publications including The Wall Street Journal, Forbes.com, CNN Opinion, and Bloomberg View. 

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