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Outdated Immigration Policy Vs. US Economic Health

Skilled Labor: Outdated Immigration Policy Threatens U.S. Economic Well-Being

* U.S. losing the race for talented immigrants

* Washington must update immigration policy to allow more skilled immigrants to work in the U.S.

In 2007, Microsoft opened a software development center in Vancouver, Canada, in part to have access to highly skilled workers who are presently prohibited from residing in the United States. Microsoft's recent Canadian venture highlights a growing trend of U.S. companies seeking available talented workers in offshore countries and keeping them there.

Much of this in-place outsourcing has to do with Washington's failure to provide sufficient work permits to fill the pressing domestic need for skilled immigrant professionals. Making matters worse, many of the immigrants who are unable to receive U.S. work permits have been educated at American universities.

The U.S. pours valuable resources into the education of would-be immigrants, whose knowledge and skills ultimately benefit other countries. The result is that the U.S. is missing out on substantial economic benefits by refusing to grant work permits to skilled laborers, especially to those schooled here.

Outsourcing: A Product of Misguided U.S. Immigration Policy

A main criticism of globalized economics is that it all too often results in the outsourcing of U.S. jobs. However, such outsourcing is partially attributable to antiquated immigration policies that encourage U.S. companies to seek capable workers from abroad to work in their newly opened overseas facilities. But there are benefits to this seemingly damaging process: there is less pressure to construct housing to accommodate newly arrived professionals. Also, there is less of a potential for civic stress when the concentration of new immigrants is limited.

H-1B visas and green cards are the most widely used options for legally obtaining employment opportunities in the U.S. H-1B visas are reserved for individuals with specific labor skills (U.S. Department of Homeland Security n.d.). There are only 65,000 H-1B visas issued annually to workers seeking employment in the U.S. (U.S. Department of Homeland Security n.d.) as well as 140,000 green cards (Will 2008) that can be granted.

These categories together do not even come close to meeting the number of work permits being sought by foreign workers or the expanding local demand for high-skilled workers. Over one million highly educated professionals are currently waiting for their green cards (Will 2008). Companies unable to hire enough skilled workers are increasingly forced to move out of the U.S. and turn their attention to acquiring foreign production facilities where they can install new employees. Microsoft's aforementioned expansion to Vancouver is just one example. The company has also opened locations in Denmark, Ireland, and Israel (Gohring 2007). According to a National Foundation for American Policy (NFAP) survey, 65 percent of tech companies responding to the query indicated that they had "hired more people (or outsourced work) outside the United States" due to a lack of H-1B visas (National Foundation for American Policy 2008).

Home-Grown Products

Another relevant fact is that many of those applying for H-1B visas were in fact previously educated in the U.S. In 2007, the number of foreign students pursuing higher education degrees in the U.S. increased by three percent to 582,984 (Institute of International Education 2008), many more than the H-1B program presently accomodates, if all such foreign students intended to remain here. Karen Hughes, Under Secretary of State for Public Diplomacy and Public Affairs, has observed that the U.S.'s acceptance of so many foreign students "reflects the dynamism, diversity and excellence of U.S. higher education institutions..." (Institute of International Education 2008). However, the pride the U.S. takes in its higher education system is undermined by inconsistent immigration policies that block individuals previously educated in the U.S. from seeking American jobs.

Aside from expending U.S. educational resources, which end up benefitting other countries, the U.S. economy also takes a hit from the outflow of jobs, production, and tax revenues. Filling skilled positions is integral to a company's growth and its ability to innovate and compete. In fact, the NFAP found that for every H-1B position filled, at least five new domestic jobs are created (National Foundation for American Policy 2008). Furthermore, besides increasing the U.S.'s gross domestic product, tax revenues would increase by an estimated $69 billion over eight years if the number of H-1B visas issued was increased to 195,000 (Sherk and Nell 2008).

Other Countries Taking Advantage of Skilled Labor

Conventional wisdom dictates that the "brain drain" normally flows in favor of the U.S. economy. Beginning in the middle of the twentieth century, highly educated individuals facing persecution or lack of opportunity at home poured into the U.S. The reverse is now true as other countries are capitalizing on the economic benefits brought on by expanding their labor in-flow policies and soliciting more skilled immigrants into their economies.

Canada, Australia, and the U.K. have significantly benefited from increasing the number of legal immigrants in order to fill high skilled jobs. The U.K., for example, has developed the Highly Skilled Migrant Program, which uses a simple point-based system to evaluate the skills of specific immigrants applying for work permits. The simplicity of the application process and the fact that no specific job offer is necessary in order to apply, encourages many professionals to consider migrating there from their native land (Siddiq and Froetschel 2007).

Similarly, Australia surveys its domestic employers to evaluate what sectors have labor shortages and courts foreign workers based on the results of its studies (Star Tribune 2008). The Productivity Commission of Australia projected that the Australian economy would grow by 3.5 percent if the government decided to increase its current intake of skilled immigrants by fifty percent (Cerna 2007).

Canada also has a Skilled Worker Points System. According to the Canadian Immigration Newsletter, the country's economy is growing faster than its population. In order "[t]o maintain economic growth, Canadian businesses are reliant on the large pool of new skilled immigrants, who by 2011 will account for all net labor force growth in Canada" (Canadian Immigration Newsletter 2008).

Many in the U.S. recognize that other countries are benefitting from the U.S.'s self-inflicted brain drain. Bill Gates testified before the U.S. Senate that "[w]e live in a different economy now, and it makes no sense to tell well-trained, highly skilled individuals - many of whom are educated at our top universities - that they are not welcome here" (Gates 2007). He emphasized that companies like Microsoft feel the pressure from the lack of H-1B visas, which he added ran out four months before the beginning of the 2007 fiscal year (Gates 2007).

Updating U.S. Immigration Policy

Much of the heated immigration debate now taking place in this country focuses on illegal immigration. The issue of skilled immigration has unfortunately been subsumed by the highly politicized aspects of undocumented immigration, such as border control questions and the enforcement of high labor standards. Forgetting about problems that exist within the category of legal immigration policy by hyper-focusing on illegal immigration may prove economically dangerous for the U.S. The discrepancy between the number of immigrants educated and employed here annually, as well as the demand for high-skilled labor and the outsourcing of these jobs, should be of reasonable concern.

Especially in the technology industry, the U.S. appears to be missing out on opportunities to expand employment and production. The unemployment rate in the tech sector is less than three percent (Sherk and Nell 2008), which means that nearly all U.S. citizens who are seeking employment in these sectors are already employed. There are simply not enough U.S. citizens with these skills who are in search of such tech jobs. Probably a preponderance of labor market analysts would find that the number of H-1B visas issued annually should be expanded to allow more skilled legal immigrants into the country in order to benefit the U.S. economy within a context that recognizes the limitations of the demographics of this population.

Unfortunately, even with a rapidly approaching presidential election, little focus is being devoted to resolving the U.S.'s bungled immigration policies.

John McCain's campaign website emphasizes securing the border as its main goal regarding immigration reform, only briefly mentioning that skilled immigrants should at least be given the "opportunity" to immigrate here (McCain n.d.).

Barack Obama grants a similar amount of attention to skilled immigrants, noting that the U.S. should bring them in "where we can" (Obama n.d.).

The lack of specific initiatives or desire to change the current work permit system will cripple any attempt by either presidential candidate to achieve "comprehensive" immigration reform. The problem with immigration is not simply how to control it, but how to harvest the potential economic resources it offers this country.

Not until U.S. immigration policy is reformed to recognize the economic value of skilled immigrants can it truly be considered comprehensive.

***

This analysis was prepared by COHA Research Associate Jamie Heine

July 18th, 2008

The Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit, non-partisan, tax-exempt research and information organization. It has been described on the Senate floor as being "one of the nation's most respected bodies of scholars and policy makers." For more information, please see our web page at www.coha.org

ENDS

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