Opinion

The Great Debate

Jump-start U.S. growth through immigration

March 12, 2009

 Diana Furchtgott-Roth– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. —

When people think of what to do to help the U.S. economic recovery, admitting more immigrants into America isn’t what usually comes to mind. But a new study by Arlene Holen, an economist and senior fellow with the Technology Policy Institute, could contribute to resolving the current economic crisis.

The study finds that letting in more highly-skilled immigrants would generate more tax revenue, and over time raise labor earnings and national income. (Click here for the study in PDF format.)

Coincidentally, this week the Wall Street Journal reported that bankers are quitting due to onerous conditions imposed by the federal government on banks receiving public funds. Yet the new economic stimulus bill specifically makes it harder for banks to hire foreign workers, thereby limiting the flow of talent to a troubled industry.

If Congress had not imposed a tight lid on green cards, according to Ms. Holen, America in 2008 might have had up to 300,000 more highly educated engineers and graduate students performing path breaking research. They would have added about $23 billion to GDP, and the federal government would have gained about $5 billion more in tax revenues.

Based on Congressional Budget Office estimates, Ms. Holen (who used to be associate director at CBO) said that if comprehensive immigration reform had been enacted in 2007 then GDP would have been $180 billion greater over the next decade, and federal revenues would have been higher by $40 billion.

A similar argument was voiced by Representative Zoe Lofgren, a California Democrat and chair of the House Subcommittee on Immigration, Citizenship, Refugees, Border Security, and International Law in a speech on March 10. She said that “we need to jump start our growth through immigration.”

Ms. Lofgren explained that the billions of dollars allocated to scientific research in the 2009 economic stimulus bill cannot be effectively spent without more H-1B (temporary) visas for foreign scientists, “because all this spending needs people to do research.”

She said that comprehensive immigration reform, which was rejected by Congress in 2007, can pass this year if President Obama supports it.

To invoke a familiar truism, America’s immigration system is broken. Every year, the U.S. Center for Immigration Services issues only 65,000 H-1B temporary visas for skilled workers out of over 600,000 applications from employers.

A similar backlog exists for permanent residence visas sought by individuals both in America and abroad, with applications often close to ten times the number of “green cards” that may by law be issued. In 2006, more than 12,000 newly-arrived workers received green cards to work in the United States, and 53,000 temporary workers already in America were granted green cards.

For fiscal year 2009, the H-1B visa cap of 65,000 was reached in a few days. This is not to say H-1B visas have always fallen short of demand. During the 1990s, Congress temporarily raised the quota to 195,000, a number that did not exceed demand, but the quota reverted to 65,000 in 2004.

This quota represents a small fraction of the U.S. labor force of 154 million. Even if the quota were raised to 150,000 a year, that would still be less than one tenth of 1% of the labor force, hardly a source of the mass depicted by anti-immigration xenophobes.

By limiting visas, America is hurting itself, because the number and percentage of PhDs in science and engineering awarded to Americans and permanent residents have declined dramatically over the past decade. Fifty-eight percent of PhDs in physics are awarded to foreigners in 2007, compared with 48 percent a decade earlier. Foreigners earn 66 percent of PhDs in computer science and 53 percent of PhDs in chemistry.

Columbia University professor Amar Bhidé has shown in his new book “The Venturesome Economy” that it’s efficient for Americans to get advanced degrees in law and business rather than in science and math if they prefer these fields. However, we need to issue more immigrant visas so that we have enough scientists.

Issuing more green cards and H-1B visas can provide effective economic stimulus—and this can happen at little or no cost to Uncle Sam or working Americans.

You can reach Diana Furchtgott-Roth at dfr@hudson.org.

Comments
124 comments so far | RSS Comments RSS

I think the Americans take offence to anyone stating the facts…The education system in the natives’ contries may not be as well funded as the one in the US but in terms of identification of talent it is much more competetive as compared to the US.From around 400000 students that appear for an entrance exam to IIT in India(based on the MIT system)only around 5000 make the cut.That makes an intake-rejection ratio of nearly 1out of every 80 students.
what drives these students to pursue higher education is not the lure of undercutting the salaries of american workers but to pursue research in the much better funded universities there.
What differentiates the immigrant engineers or science students from their American counterparts is their ability to value the resources at their disposal at American universities as one can value something only having seen its scarcity.
Having these bright and highly motivated people in their workforce is naturally very alluring to US corporations.
The author is right in saying that these highly skilled immigrants have the ability to help revive the US economy.

Posted by Bharat | Report as abusive
 

Allowing more immigration is NOT the answer. There are PLENTY of skilled citizens begging for jobs right now. The problem is not with a lack of skill, it’s with a lack of JOBS. Why? Because to improve the bottom line (read increase CEO bonuses), US companies have been exported jobs to Asia at an ever increasing rate. In this attempt to slash labor costs, and build a “free” worldwide economy, business and government have failed to recognize that they are not only destroying the tax base, but also slashing the ability of the consumer in America, to consume: Hence the massive reliance on credit, leading to the collapse of the biggest credit market: Housing. It seems so obvious: Take away the ability to pay the mortgage, and what do you know> People stop paying them. Your call for more immigration, is a short sighted attempt to follow the status quo created by big Businesses control of the government: Cheap Labor. What is needed is to redistribute wealth to those who will spend it through consuming. 90 percent of wealth in 10 percent of the populations hands is what is causing the economy to crash. Not a lack of immigrants.

Posted by Dan Dryfus | Report as abusive
 

Workers do best with low population density w.r.t. resources so many investment dollars chase few workers. Squeeze-that-gravy outa capitalist FatKat$. To say nothing of dilution of the commons, yet another globalist $$$.hoe fantasy. Immigration increase is cultural and economic suicide_101 for working American citizens.

Posted by noshellswill | Report as abusive
 

Are you on drugs lady? There’s over 300 million people in this country and not enough jobs as it is. I think people like you need to make about $25,000 a year and see how you feel about immigration. Immigrants send there money back home to there families in there native countries. Why don’t you feed the world on your paycheck.

 

Let us give H1 and L1 visas to only IIT graduates. There is no problem with that. We do not want junk h1, L1 candidates to take covers behind the good ones. Most of candidates we are importing have very few similarities with those IIT graduates.

Posted by Ashoka | Report as abusive
 

Ashoka : “Let us give H1 and L1 visas to only IIT graduates.”

What’s so special about IIT graduates? Could you elucidate their inventions here in the US that helped the US in any way? I actually read an article today which stated that IIT Bombay had only 150 patents from the time it was founded till now!

The Americans are not understanding the real problems. Some Americans at least, like the author of this article. If US wants “highly-skilled” workers, then why not go to each and every country of the world and recruit the best brains? But wait, won’t that mean that the very definition of US would then change?

The problem is not that America lacks innovators or highly skilled workers. The problem is the greed of the few top elite employers. In the 50s, 60s and 70s, when there are negligible number of immigrant students to the US from developing countries, weren’t there new innovations coming up more regularly and commonly by the Americans? There were not immigrants then, and yet the standard of engineering and research was so high here, that almost any radical innovation like the computer, google etc happened here. Moreover, since its the immigrants who are coming to study in the US, and not the Americans going to study in India or China, it shows whose education is better. Therefore, even education is not the problem. The problem is the greed of these few top brass employers who want to make profit by employing cheaper labor from the third world countries.

There is not scarcity of people in the third world countries who want to immigrate to the US. They only need a chance, and that chance is given by these employers.

If the trend goes on, one day all the goods, including the most basic ones, would be manufactured by the foreigners for the US, and all the important jobs left over in US would be taken by the immigrants. Americans would become third class citizens serving these NEW Americans. US is doomed in the trend goes!

Posted by fallenmonk | Report as abusive
 

By all means, let’s continue to destroy the U.S. by importing even more immigrants, advocating more “free” trade, more outsourcing, building more manufacturing plants abroad, etc. etc. until we truly have one glorious financial world where American citizens get to compete with the lowest paid slave labor in the entire world. One glorious financial world where there are even more opportunities for thieves at the highest levels of business to steal even more money. How about a one world government to control it all? Wouldn’t that be nice?
That’s where we’re headed as fast as big businesses can arrange to turn another penny of profit. We’ve already destroyed the American middle class and now it’s time to destroy the American lower class so we can keep complaining about how the poor won’t work because they’re lazy no-good bums. That is so much FUN!

Posted by Ray | Report as abusive
 

US,
Just leave to Indians to change a debate of immigration to IIT.Dont get fooled by the Brand name of IIT. Half od the new graduating class is based on reservations not merit.Few decades ago they were called “untouchables” by society.

 

fallenmonk:
You are right about IIT graduates. My comments was in response to “bharat”, who was trying to imply that most H1s are IITians.

As related to IIT graduates, personally I know some of them and they are very intelligent. But, in this country, we need honest folks (after seeing AIG, MS, LB, etc) not intelligent ones at this time ;-).

The problem here in this country is, the immigrants have even started influencing the media now. Look the following link, where immigrants are boasting on how they influenced Wall Street journal, to get their agenda.

http://immigrationvoice.org/forum/showth read.php?t=24428

Posted by Ashoka | Report as abusive
 

Its only a very few percentage of immigrants to the US, who are contributing in innovating new technologies through scientific and engineering research. Many of them just come and open Indian/Chinese restaurants, work as taxi-drivers, construction or any other job that any American can also do. In fact, I believe that around 80% of the immigrants go for these jobs. How will displacing the jobs of Americans help the American economy?

And Ashoka, you are right in your assessment that many of these immigrants have actually penetrated the power center of the wall street and even government perhaps. I don’t know if the author of the article is even reading the comments or not, but its ludicrous how she quotes another immigrant, Prof. Amar Bhide, to convince the Americans about her agenda. Isn’t she biased to be only quoting an immigrant by no American?

Its obvious that she is funded by these rich immigrant class to further their propaganda.

Posted by fallenmonk | Report as abusive
 

Without immigrants this country wouldn’t exist. Wake up! Who would pick the crops in California? What would that cost? Americans don’t do the jobs that these immigrants do on the wages that they are paid nor, in the conditions that they live.

I have a close friend who is a graduate of IIT, he has dozens of patents under his name and the company he is associated with would not exist with out his daily contributions. This company employs 400. Previous to this he was the senior scientist with 6000 engineers under him. China has over one billion population, this is their wealth and market. America needs to see things with clarity if it wishes to compete with these countries. They will produce 5 engineers to everyone of ours. They are hungry and will work harder then ours, and believe me they are just as capable and outnumbers us as well. If you aren’t convinced just go to Home Depot and see what is made in America compared to China. In fact if the Chinese didn’t buy our garbage Wall Street paper we would be in deep.

 

I fervently agree that highly skilled workers should be allowed to come to America and contribute to our society and economy, but why the push for comprehensive immigration reform? Seems to me that if highly skilled labor were at the heart of the issue, then the best solution would be to just raise the limit on H-1B visas. I think most Americans understand the need for highly skilled workers, but the problem with the comprehensive immigration reform as proposed by our politicians is that it focuses mostly on unskilled laborers and their unethical employers. By providing a legal alternative to cheaper labor that undercuts the American worker, the Government basically proposed a stealth labor subsidy through the guise of “immigration reform.” At the time of its proposal, most Americans understood the unethical nature of comprehensive immigration reform legislation and subsequently rose up en masse to prevent its passage. So, if there is truly a need for highly skilled workers, then, by all means, let’s increase the number of H-1B visas, but please leave comprehensive immigration reform where it belongs – in the dustbin of unethical legislation.

Posted by Matthew L. | Report as abusive
 

I have experience of working in IT industry. It is true that 95% of IT companies from India do c-grade work and play only on cost arbitrage. Most of the professionals that come from India even those from IITs, end up doing work that a graduate from a top US University will loath to touch. Just check out how many IITans are currently doing c grade IT support and development work at various US organisations and yes 50% of batch from IITs is from reserved category.

As far as comparing Indian education system with that of the US is a joke. But have pity on these IT engineers, for you dont know the extent of super exploitation that goes on in this industry. Call centre workers and IT engineers dont have a life, those in India are awake till late hours while those in the US are on call at 7 in morning to interact with peers. Many put on fake accents other fake names. But you have to do this to survive in the Indian jungle.

Just contrast it with American workers who walk out of the office at 5 in the evening and it is a fact that next US generation needs to buck up if it wants to survive. It takes no genius to figure out who companies want to employ. Insecure Indian or Chinese worker who will work like a slave for them at lower or equal wages and have never even heard of anything like ‘Quality of Life’.

Globalisation benifitted America in the past. But it will benifit it no more. The tables are turning. Diffusion of technology is so fast that a company cannot compete solely on basis of innovation. It will have to reduce costs to compete with companies from developing countries.

Eureka! If I shift manufacturing and services to Asia I am able to reduce costs, sell products in ASIAN markets and at the same time extract money out of the pockets of Americans and finally when Americans and Europeans are broke shift headquarters to Shanghai or Mumbai. American organisations are currently eating their own country up for short term gains. But from the beginning that is what American values have been – materialism and self interest.

America is simply letting go of everything in its economy and the interesting fact is that American people wont be able to stem this flow no matter how hard they try. As it has always been with America Large Oragnisations and Investment Banks will prevail over national interest.

Also give a kick to your Havard and Wharton graduates and professors there who indoctrinate graduating managers with only one value, ie, maximise shareholder interest no matter what!!! Trust me these people, politicians, business tycoons and investment bankers are the greatest enemies of America more so than the innocent humble immigrant who leaves his nation simply in hope of a better life and better education.

Posted by asterix117 | Report as abusive
 

I doubt very seriously the the ‘billions” in the stimulus package allocated for “scientific research”cannot be spent because there not enough domestic people to do the research. I would also bet there are other factors that American researchers have to take into consideration before they can accept federal research employment. I’m sure that it’s not a simple dollars and cents ordeal. If uneducated Americans are our true problem and if having so many more degrees per year are what we “need” then obviously there is not enough of an incentive for people to learn in America. Perhaps we are putting our educational dollars in the wrong place. With a national education budget of $972 Billion and a total enrollment (primary, secondary, and post-secondary)of 76.6 million students we can see roughly what gets spent per student on average to educate them. There is something drastically wrong with this picture. I do not believe more immigration is a solution to the situation.

Posted by jason | Report as abusive
 

I can’t believe that with all of the IT people losing jobs in the US, that people are advocating importing more IT workers from foreign countries.
My firm belief is that those who are promoting the increase in H-1B visas, and those who want to increase the number of immigrant engineers have an agenda entirely different from what’s being expressed. e.g., more interested in stock prices of companies they own stock in, and don’t really care about the health of the American Economy, and can’t see further than the next quarter’s bottom line.
Listen folks! How can we strengthen the American Economy by taking the jobs away from the people who pay taxes (which supports the American Economy)? Why are we advocating firing the American worker and replacing them with cheap imported labor? We have so many people out of work, why don’t we instead of firing more people and replacing them with cheap labor, give them jobs and give them a chance to pay taxes?
Don’t you just love these people who advocate the increase of immigration, and taking away American Jobs, while their main objective is personal gain?

Posted by Bert | Report as abusive
 

This article is such big business BS, and its the same kind of BS that got this country into the mess it is in.

Whenever visa patent attorneies and CEO’s of large corporations use their excessive amounts of money to buy the media into suggesting these ideas of letting more foreign labor in, its always about pointing to some abstract study which somehow proves that more labor from other countries is better and will bring in BILLIONS of dollars into the economy.

Its the same kind of magic mumbo-jumbo nonsense that the ‘invisible hand’ economists use to take the stance that letting corporations do whatever they want is the best economic sense. Well guess what, life aint that easy, and the truth is it takes national efforts to support national causes. The drain on the middle class is a direct result of these kinds of policies. We don’t need more labor, we need more investment in what we HAVE. TRAIN AMERICANS for a damn change instead of spending all our money on other nations.

Posted by Jason P. | Report as abusive
 

By the way I would like to point out that I have worked in the Biotech industry for almost 8 years now, and I can say from personal experience that the ‘need’ for more skilled labor from other countries is a lie. In the companies I have worked for, every time they open a new position, hundreds of people apply. Even assuming half that number are totally unqualified, it proves that this skilled labor shortage is a LIE designed to suppress worker wages and allow executives to collect bigger bonuses each year.

Posted by Jason P. | Report as abusive
 

I agree that the US needs immigration to stay healthy. My long stated opinion is, lots of legal immigration and no illegal immigration. I would love to see the US strip the rest of the world bare of their best citizens. Send us your rebels, your freethinkers, your malcontents, your dreamers, your capitalists. More criminals and welfare cases? That we don’t need and can’t afford. As currently implemented and enforced, our immigration policy operates in reverse. Millions of unskilled, uneducated workers are allowed to stream into the country, while top people with valuable skills are prevented from coming here legally. Heaven forbid the Labor department set strict immigration quotas based on the labor supply in each job sector.
“Oh, you’re a systems engineer AND a CADD/CAM machinist? Here’s your work visa. Give us your fingerprints and a DNA sample on the way out. Welcome to America!”
“You’re a day laborer? Sorry, we have no jobs right now. Try back in a few months. Next!”

Posted by Mark Stockman | Report as abusive
 

This is not the right time to discuss immigration. I am a H1 and I am not from an IIT that doesnt mean I am this “Unethical dumb Cheat” described by some of the commenters. I work for fortune 500 company get paid 100k for programming (I dont think i am cheap). I came to this country for two reasons 1 Money all the MNC’s exploit Indians Offshore developers (Its your fellow American Ceo who do that) . 2 Quality of Work The good architects and inventors hardly stay in India cos they mostly migrate to US and IT is still new India and no direct client interaction so the kind of work that gets offshored is boring.US still has the good stuff and its only insecure Americans who just dont want to compete and evolve complain. There will always be demand for good programmers.Lets think all we Indian Programmers are crapy then what motivates the big American companies to keep us year after year. I wont buy something which doesnt work cos its cheap again and again.There are few among us who realy are crappy and the market will kick them of in this recession. Bottom line is we provide more bang for the buck and believe me you will do the same if your ancestor didnt migrate to this country. If not for the visa restrictions i will start my own company and try something new.Its the greedy and Unethical practices from your fellow citizens that are dragging you to unnecessary wars ,deficits and bailouts we Immigrants just aspire for a better life and work hard . I just want to throw in a different prespective.

Posted by peaceboy | Report as abusive
 

@peaceboy:
You may be one of those deserved to be brought in on H1, but have you not seen the quality of the H1/L1/L2 around around you, brought in my the companies (both US and India) in the guise of non-availability of talent here?

I also work for a fortune 100 company(it is actually in top 20), with 20 years IT experience. Do you want me to tell you how many junk candidates are being dumped by the staffing firms weekly on a regular basis, convincing the immigration that they are all highly skilled and such talent is not available in USA?

Do you know, how many honest hard working US Citizens have lost jobs due to a cheaper replacement. You may be glaoting over the fact that, you are getting 100K on H1, but the fact is, your company hired you for 100k, and (possibly) laid off an US employee after showing his/her expense as 200K!!. Now, the company can tell the shareholders/higher management they saved 100K/candidate. In reality, we as a country are becoming more vulnerable.- An US Citizen is without work, unproductive, is on unemployment, his/her family may not have health insurance, mostly under foreclosure notice, etc …

The blame is not just on CEOs of US companies. Even Indian IT companies have to take blame for misusing the visa provisions. It is the entire system, including the immigration authorities for looking the other way, while they are expected to protect the jobs of US Citizens.

How many Europian countries, Asian countries allow massive inflow of immigrants and allow them to start influencing the “laws of land” to depreive the oppurtunities for the locals. Have you seen the web site, immigrationvoice.com, where the immigrants are actively advising each other on how to beat the system, how their employers are harassing them?

No one is accusing you as fraud. Most of the comments are generic. It is a discussion and it is ok to disagree.

Posted by Anonymous | Report as abusive
 

@Anonymous
I totally agree with you on one thing there is a problem with current H1 system. The requirements for the system were written long back and its quite easy for a company to cheat and get faulty candidates. Its not the best in India who get these anymore I know so many deserving friends who dont get chosen in the lottery. Even if a fake guy gets into this country its very tough for him to manage a position for long you need to understand that most H1′s are on very short contracts. The flaws in the Immigration have left the deserving candidates with no advantage at all this has really damaged our reputation here. The first time when i heard that someone got fired cos i started doing a good job as a offshore developer I felt very sad. Its not my decision to fire someone I just did what I was hired for. U were born in a country rich in resources poor in labor and its reverse for me. Its the recession now and we all are feeling the pinch but i still believe there are good opertunities for American programmers with all the bussiness here in US. Peace.

Posted by peaceboy | Report as abusive
 

@Anonymous
onemore thing 200k for programming is really crazy.
5 times the national average salary is little too much dont you think. Comming to quality I really learnt a lot from good American Architects and Managers they really are top of world cos a US has Computers before I was born and you get a whole generation of Architects. No offshore or Onshore company can make them nervous. Comming to new developers my team is half american and half rest of the world and you get good and bad coding examples from both.
There are flaws in every system and just dont take everything for face value those who cheat will reach there right place.Peace

Posted by peaceboy | Report as abusive
 

@peaceboy:
Yes, I agree 200k approximation for a developer appears crazy. But, if you talk to a finance person in a big company, they do not think that way. Here is how “The cost of an employee” is calculated for an employee in big companies (I mean top 100).

- When an employee is paid 100K (for example) for an experienced IT guy, the company calculates the total expense for the employee as 200K based on his 401K, training, sickdays, vacation, pension (if exists), liability coverages such as medical insurance, accidental coverage, disability, etc.

The rule of thumb in most cases to calculate employee expense is (till 125k), twice the salary as total expense. remember, the scale is not linear for all salary ranges, and definitely not for CEO salaries ;-).

Another rule of thumb to rememer (if you ever start a staffing firm, it is very important ;-) ) is, your hourly rate multiplied by 2, is the approximate yearly salary in K). For example, your hourly rate is $50/hour then, you are making approximately 100K/year as salary.

Then a contracting house, convinces the hiring manager that, they can supply a contractor for just $75-$80/hour
for most decent developers. $75-$80/hour translates approximately to $150K-$160/year, which is cheaper than $100/hour ($200K/year) the company is paying the present employee.

Now, the H1/L1 company (contracting house) takes the $75/hour, gives the H1B candidate 65k-70k/year (minimum salary for H1 as per labor department in most states, which comes to about $35/hour), a medical insurance worth $10/hour (remember candidates are young and group insurance for a company, is much less than what you think), and pockets the rest (about 20-35$/hour), which amounts to anywhere from 30k to 60k.

Believe me, I am not exaggerating. My figures may be off by about 10% and not more that. These are the figures given by a very close friend who runs a consultancy company and he feels sad he is doing this unethical business ;-).

These figures are per candidate. This explains, why these guys (staffing firms) have the money to lobby the congress ;-)

Posted by Anonymous | Report as abusive
 

I’ve worked in biotech for the past 15 years and it’s become obvious to me that the reason foreign workers are encouraged to come here is that they **they’ll do the job at a cut rate**, and there’s a plentiful supply of them. There’s nothing more to it. They’re not the brilliant scientists and engineers that the Furchgott-Roth types would have you believe. In fact, the best scientists I’ve worked with over my career have been almost exclusively American-born, despite that these people have been a numerical minority in the labs I’ve worked in.

The effects of the policies which Furchgott-Roth wants to have continued and expanded have been A) lowering of wages in science and engineering fields, and B) driving out of the native-born from them. It’s pretty funny how she points out that fewer Americans are getting PhDs, but doesn’t admit that the main reason for that is saturation of the fields with foreign labor. Another example of George Bush’s “jobs Americans won’t do.”

Posted by Peter | Report as abusive
 

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