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.

124 comments

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Here is yet another fine example of the dominant hegenomy of the western world maintaining its neoliberalism attitudes towards the rest of the world and inparticular to the underdeveloped nations.
So long as you can improve your nations wealth then the resources (including its skilled labour)of those countries in a less priviledged position are of little consequence.
If the lesser nations of the world are to develope then the wealtheir ones need to stop raping and pillaging the best of the pool of foreign labour for their own selfish interests and desires.

Posted by nilsey105 | Report as abusive

If I am going to study for 5-6 years MS in engineering, and in a reputable American university my expenses are estimated total $300 000, HOW I can compete on a cost basis with an Indian engineer, whose educational expenses are $30 000 or less? Simple question; my friends and I have been through this :), so how Diana can give me a good explanation?

What she is asking about is Substitution of higher American education with imported skilled labor…several more years there will be no any American with engineering degree if this trend continues.

Also, why MS or other high-tech companies just not hire their talented R&D people in oversea facilities? Thus, the companies will not need to struggle for work visas. Of course, they will also ned to calculate in the price of political risk, and then everybody on Wall Street will figure that most of the tech multinationals are overpriced 50%, since NOBODY ever measures political risk properly in the stock prices.

Yeah, another highly conservative article, which I don’t mind, but this strategy doesn’t serve well even to the conservative businesses. It is quite suicidical, I would mildly say :)

Posted by Ananke | Report as abusive

The unemployment rate stands at 8.1 percent. Tens of millions of Americans are unemployed, working part-time involuntarily, and seeking gainful employment. Since December, over two million Americans have lost their jobs.

If we can’t retrain Americans for new jobs, then we won’t revive our economy.

Posted by Alexandre | Report as abusive

Great article! It’s time for reform in immigration, and reward the smartest and best people who want to contribute here.

Ananke, while I agree with you that educating an engineer overseas is likely cheaper, the domestic supply of engineers and scientists is simply not sufficient to cover the demand.

I think that one of the reasons why we need more “imported” engineers in the U.S. is because the high school education in the fields of math and sciences has been of poor quality in this country. Without good teachers who can inspire students to go into engineering, physics, and math, less people take the time to receive their Bachelor’s in one of those fields. Many foreign students receive their Bachelor’s abroad but come to the U.S. to receive a Master’s or a Ph.D., and are frequently awarded funding because there is a shortage of American-born students applying for those programs of study. Those same foreign students who obtain a Master’s or a Ph.D. degree in the U.S. are currently returning home, to India and other countries, because of the lack of H1-Bs. The U.S. educational system has already invested in those people in many cases, so why not let them stay longer and contribute to the U.S. economy?

Better high school curriculum would encourage more domestic scientists and engineers. But seeing the results of an improved high school curriculum would take a decade, so why not allow additional H-1B visas for now?

Posted by Lyuba | Report as abusive

As an entrepreneur– if you don’t allow for H1-B’s I’ll do the only other logical thing… Outsource.

Posted by Roger | Report as abusive

Oh boy here it comes. Now this is really early for the big immigration fight and debate that is coming mostly likely just after the mid-term elections because as poorly as things are going on the economy that fight would ensure huge demorat losses in the mid-terms but they have to start the propaganda early. Yes massive immigration is good for America. Repeat it with me until you believe it.
Now reality. THIS-IS-AMERICA! You do not have a “right” to immigrate here, you do not have a “right” to wade across the Rio Grande with your belly full and squirt out a kid on our soil so you can claim your an American and then proceed to belly up to the public trough. We have allowed immigration at a measured rate in order to absorb newcomers into OUR culture. Mostly they came with a common ancestry, culture, belief, or ideal and wanted to participate and become American. They were primarily religious people of some type or another Christian, or Catholic primarily, and that allowed common assimilation with our own population. We are becoming a densely populated Nation now and we have every right to say when enough people have come to our shore until such time we can assimilate them into our culture. We have the right to demand that only the best and brightest with something to offer be put at the front of the line in order to better our society. But WE have the say so and every right to say it. Not the world or the UN. We can discriminate in any way we see fit on who to allow in our home, and America is our home. If you don’t like this then stay where you are. We don’t need you. To the educated and entrepreneurial spirited, I welcome you to come assimilate, produce, and succeed. Take part in the great parts of America but not to feed off of the goodness and largess like some human lamprey. On a side note. All you California, granola eating, eco-Marxist types that want to migrate to the South like as in Texas. Don’t. We don’t want you here either. Capiche?

Posted by Brent | Report as abusive

Diana Furchtgott-Roth might need to look on this problem from people who lost jobs to visa holders. If her job will be in jeopardy or her salary could go down significantly she will change position quickly.
In general geniuses-talents from abroad should be paid higher rate than locals, and this will encourage students to take technical carreer path.

Posted by acidential reader | Report as abusive

Great move i would say, however the green cards must be given to highly skilled folks who got their BS, and MS degrees from the states and not from overseas, in this case the argument presented by Ananke would not be valid.
I am myself on H1 B have a MS from an US university, been here for 10 yrs, paid a lot of taxes, saved some money, and i am being driven out from the country thanks to the myopic and xenophobic immigration attitude.
Would the country benefit from me being here ?, i have made technical contributions in my field, i have enough money to buy a house (only on permanent residence), already bought more than 2 american cars, got my wife a MS in an american university, and have been paying taxes and observing the rule of law.
Folks you decide !, its your country and your future. BTW thanks for letting me in a legal immigrant, i got to see the world :)

Posted by Ananke_V2.0 | Report as abusive

This is brilliant thinking that could only come from such an enlightened study done at such a prestigious institution.

Nothing would help decrease the percentage of unemployment by bringing in a bigger number of employed people. Its so simple I don’t see why Ananke can’t figure it out.

And bringing in more tax revenue because more people will be working… its like a warm summer breeze of logic across my smooth, glass-like cranium.

More people taking all those jobs that U.S. citizens are too lazy to take and don’t want, making all that money that U.S. citizens are too lazy to make, and paying all those taxes that U.S. citizens are to broke to pay. My goodness… well, if you can’t figure this one out…

Posted by Jason | Report as abusive

You would think that after completely wrecking the economy economists would give their mouths a rest, and rethink their ideas in quiet comtemplation. I agree that American employers do not put the same hidden employment barriers to qualified immigrants that Canada does but the current economic crisis in case you don’t know is based on insufficient highly paid jobs. Bringing in more immigrants will lower salaries. And don’t tell me that they are going to create high-paying jobs – that is a myth.

Posted by Cheryl | Report as abusive

30,000 $ and 300,000$ is not a valid comparison. You might need to check the income of an avergage indian which is lot less than 5000$. You might need to compare the cost/expense with the income (average income of an Indian) and not directly with dollars.

Posted by Bobby | Report as abusive

The current Green Card situation is really out of touch with reality — which is why for example Microsoft has moved a lot of R&D across the border from Seattle to Vancouver Canada, where foreign experts are welcomed. With teacher unions in education, seniority has replaced skill as the basis for promotion and so our schools are graduating uneducated students. Obama is right to pay good teachers more, at which point we may not need so many foreign workers with good educations…… who are willing to work hard to get ahead. Hey, now theres another idea thats foreign, pardon the pun, to government employees.

Posted by tourist | Report as abusive

A better way to boost economic growth would be to outsource all the senior executives to cheaper countries and save us from their sucking in all the wealth. Now that would be a radical idea, Diane, would not it. Why does not Diane go further and suggest to get rid of all Americans and replace them with low cost immigrants so the ruling elites can pocket even more profits.

Posted by Sam | Report as abusive

No need to worry about lack of talent…cloud computing is a torrent of outsourcing via the internet. Everyone look this term up on Wikipedia and see what is coming to white collar workers.

Posted by Ken | Report as abusive

I don’t know whether Ms. Furchtgott-Roth is an American citizen or not, but when she is her article convinces me of the fact she’s absolutely right.

Posted by Me | Report as abusive

This study defies the reality of what has happened in the past 15 to 20 years. Even with the large number of foreign technical people having been brought into the country, large breakthroughs and growth have not occurred. Also, if there is or was such a large shortfall in engineers and scientific personnel in this country, why are so many older (age 50+) engineers unable to find employment in that field? Interestingly, foreign engineers who have come to this country over the years are now victims of the same issue. It happened to me, who eventually chose to change careers at a significantly reduced wage, I might add. The purported shortfall in scientific personnel has been falsely generated by top executives to enhance their bonuses by reducing salaries (while increasing their) or by out sourcing to again reduce salary costs, at least temporarily. The same people who have convinced the writer and the study author of this shortage are the same ones who have brought the current world wide economic crisis. Need I say they are not to be trusted! They are masters at manipulating the numbers and data to their own advantage. You should not believe the authors of this study any more than you should believe all the other “Madoffs” out there.

Posted by Floyd Segar | Report as abusive

The economic elite, such as Bill Gates, III are mostly indifferent to the national harms that result from the substituion of “fresh young (imported indentured and inexpensive) blood” for experienced American citizen technical professionals. There has been a long-term glut of “techies.” Importation of more by the planeload just makes things worse for the American middle class.

Free-market advocate and Nobel economist Milton Friedman summed it up best in an article that quoted him in 2002. His verdict: H-1B is a “government subsidy” program.This program drives down the price of labor by worsening labor gluts.

The economic elite can spend buckets of money on intellectually suspect “studies” from sources that are willing to parrot claims that are not supported by actual economic data.

You may learn how Mr. Gates hired the “best and brightest” lobbyist in 1994. His name is Jack A. Abramoff. He and Team Abramoff helped Mr. Gates spend about $100 million in political expenditures between 1995 and 2000. Microsoft received at least 3 official acts liberalizing H-1B legislation in exchange for their things of value. Too bad this fits into the broadly – drawn description of corruption proscribed by the RICO statutes. You may learn more by googling on the title of my 2008 article, “The Greedy Gates Immigration Gambit” and selecting the more engaging and readable PDF version which is the second link.

As someone who has worked in the software engineering field for 30 years, I’ve seen tremendous shrinkage in the field in the U.S., due to large bank consolidations, defense contractor consolidations, out-sourcing, and green card immigrants willing to work for 25-50% of standard rates and salaries. It’s a field with no unions, and the only job security you have is your own skills, work ethics, and knowledge of the business you are currently employed in.
I’ve seen many competent associates and friends forced out of the field due to this shrinkage, both in salary and job oppounities, unable to make a decent professional’s salary. The work requires tremendous deligence and perseverance to be successful.
In the fields of research science, the government and corporate America give little incentive to enter the field with an advanced degree – high $$$ to get it, not well compensated for the 50-80 hrs/week the work requires, and no share of the rewards. Currently it looks like the best path to follow with a PhD is to teach, because there is great competition for PhD’s between universities right now, so the salaries and benefits are high. It’s completely flipped around from what it used to be, and should be.
Bringing in more highly trained immigrants is a band-aid, not a solution. Why don’t we give own own youth more incentive to pursue a math, science, or high tech career? Why are the lawyers, doctors, amd MBA’s treated with so more esteem (and compensation) then physicists or P.E.’s? I believe it’s harder to get an MS in Chemical Engineering than a law degree by far, but the compensation doesn’t seem to match the achievements here.
It’s been a tradition in corporate America to treat engineers and scientists as a commodity, and therefore not be considered as key part of the companies success. We need to break this pattern, go back to an awards system for technology advancements and provide incentives for the youth to enter the fields where we need them, rather then simply importing the expertise.

Posted by Tom E. | Report as abusive

Ananke. If you decide to pursue a PhD in Engineering and you are very well qualified (compared to the rest of applicants), you would most likely obtain a Teaching or Research assistantship that would cover your expenses and would also provide you some type of support (which is the same process that foreigners follow to obtain PhD degrees here). The question for obtaining a PhD degree in the US is not about the cost, the question is: are you qualified enough to be admitted to the degree? (Additionally, there are many other sources of funding specifically for American students who want to pursue engineering and science degrees).

Remember the article is referring to PhDs degrees obtained in the US, so if you or your friends really want to pursue advanced engineering degrees, go ahead and apply.

“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.”

Posted by walter | Report as abusive