The Path Forward for Immigration

The Path Forward for Immigration

By Diana Furchtgott-Roth,

Senior Fellow

December 6, 2012

The Path Forward for Immigration

Introduction
America has to rework immigration policy in several ways. We have to facilitate the process of obtaining high- and low-skill legal work in the United States. We are turning away too many highly qualified workers at a time when we are concerned about our international competitiveness. In addition, we are turning away tourists who can contribute to economic growth.

In essence, we must embrace a more flexible system that allows the visa process to respond to market pressures. The visa quota should be amended as economic conditions change.

Current immigration law places family reunification before the economy. Only 35 percent of green cards authorizing permanent residence—and a path to citizenship—are granted for employment purposes; 56 percent for family; and most of the remainder for refugees.[1] In many countries the wait for American green cards can stretch for over a decade. Since green cards bring in few workers, most skilled workers use temporary visas. Many unskilled foreign workers are here illegally, a situation which needs to be remedied.

Despite America’s need for innovation, entrepreneurship, and workers with different skill sets, it is cumbersome getting the papers needed to work legally in America. Green cards are allocated primarily on the basis of family reunification rather than on the basis of the skills our economy needs.

America needs to take a rational look at a better immigration policy, one that covers costs of immigrants and allows immigrants to enter and leave depending on economic conditions. Recently several economists have proposed auctioning off work permits to employers or visas to individuals.[2] This would raise funds that could be used to reduce the deficit or distributed to those parts of the country with the highest concentration of immigrants.
The remainder of this paper is divided as follows. I will first discuss the visa shortages faced by those who seek to come to work and to vacation. Then I will address the traditional arguments against increased immigration, such as depressing effects on wages. Next, I will discuss the positive job creation effects of immigrants in America, both high-and low-skill, including workers without adequate documentation.To conclude, I will propose a rational immigration policy, including pricing of visas and work permits.
America Faces Perennial Visa Shortages
Each year the United States Center for Immigration Services accepts applications for H-1B visas. Recipients include 65,000 H-1B temporary visas for skilled workers certified by the Labor Department, as well as 20,000 H-1B visas for those with U.S.-awarded masters degrees.[3]In addition, some companies will acquire three-year extensions on previous visa renewals. Non-profits and institutions of higher education are exempt from the visa cap, so those workers will also receive visas. In 2011, the Center issued 495,000 new or extended H1 visas. While some types of workers are “current,” highly educated Chinese workers who applied after October 22, 2007 and Indian workers who applied after September 1, 2004 are not eligible to apply.[4][5]
The demand for foreign labor far outstrips the supply of H-1B visas. Visa applications can be filed on April 1 of each year. In 2012, the cap was reached June 11.[6] 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.
The current figure (85,000) represents a small fraction of the U.S. labor force of 156 million.[7] Even if the quota were raised to 150,000 annually when employment growth picks up, that would be less than one tenth of one percent of the labor force. A higher quota would still block admission to the vast majority of applicants who are discouraged from applying due to the small likelihood of success.

After receiving an H-1B visa, the next step is to get permanent residency, a work visa known as a “green card.” Government data show that of the 1.1 million awarded “green cards” in 2011, 15,000 went to new arrivals sponsored by an employer, and 124,000 went to current residents sponsored by an employer. Of these, about 1,400 were low-skilled workers.[8]

Applications for permanent residency, as with applications for H-1B visas, have a severe backlog. The wait times for immigration court processing are substantial. According to data from SyracuseUniversity’s Transactional Records Access Clearinghouse, the average wait time for an immigration case decision was 525 days in the year ending October 31, 2012.[9] Table 1 shows waiting times by country of origin. Chinese citizens, for example, had an average wait time of 786 days.[10]
The U.S. Citizenship and Immigration Services estimates that there are about 13.1 million legal permanent residents of the United States, and 495,000 workers were admitted with H-1B visas in 2011.[11][12]The estimated number of illegal immigrants was 11.5 million in January 2011, close to the number of legal permanent residents admitted for any reason – family, sanctuary, or work.[13] A 2012 estimate suggested that 4.9 million illegal immigrants had entered the country between 2000 and 2011.[14]
An individual offered a job in the United States has to navigate a number of obstacles. First, the employer must have some degree of certification from the Department of Labor, demonstrating the need to hire a foreign worker rather than a U.S. one. This includes evidence that local workers are unavailable at market wages, and a commitment from the employer to pay prevailing wages.
Then, a complicated game of “application tag” ensues, with the State Department and Department of Homeland Security sending documentation back and forth, validating identities and ensuring that no employer is trying to hire a criminal, terrorist or undesirable person. These may be necessary steps, but they are time-consuming. Even if the State and Homeland Security Departments would find a worker acceptable, arbitrary quotas may render the entire process moot.
These protections and regulations are less burdensome for temporary workers, but still require extensive documentation and cost. Applications for "national interest waiver-based permanent residency visas" can take an entire month to complete and cost $6,000 in legal fees and $1,000 in application fees. For people looking for permanent residency, the process can take years. This adversely affects U.S. labor market competitiveness.

Immigrant founders of U.S. businesses employed approximately 560,000 workers and generated $63 billion in sales during the period 2006 to 2012, according to a Kauffman Foundation study.[15] Immigrants have a higher propensity to start businesses than native-born Americans. For example, 44 percent of high-tech Silicon Valley businesses had at least one immigrant founder. “Historically and today, the United States continues to benefit directly from the contributions of such immigrants. Far from expendable, high-skilled immigrants will remain a critical asset for maintaining U.S. competitiveness in the global economy,” the study concludes.

However, the share of immigrant-founded Silicon Valley companies has declined from 52 percent between 1995 and 2005 to 44 percent between 2006 and 2012. By making it difficult for high-skill workers to stay in America, Congress is dissipating the value America receives from taxpayers' investments in research.[16]

American universities are among the world's leading research institutions, attracting the top minds, not only those from America but also from many other countries. The National Science Foundation data show that 166,000 foreign graduate students studied science and engineering in American universities in 2010, up 35 percent from 163,000 in 2009.[17]
In 2009, the most recent data available, the federal government spent more than $63 billion on science and engineering research at American universities and research institutions.[18] This funding helps finance PhD programs, which are heavily populated with foreign students. More than $35 billion of this research spending is health-related. Other funders include the Defense Department, at $6.8 billion, and the Department of Energy, at $7.2 billion.[19]
Many universities rely on graduate students for research assistance and technical expertise. Government research trains graduate students in the latest technologies. Most research does not require security clearances, and little if any research is restricted to American students. Because of this, 51 percent of doctorate recipients in engineering and 41 percent of graduate students in the physical sciences were foreign-born temporary U.S. residents in 2010.[20]

On November 30, 2012, the House of Representatives passed the STEM Jobs Act of 2012, which would grant an additional 55,000 visas to immigrants who have PhDs from American universities. The Labor Department would have to certify that the position cannot be filled by a U.S. citizen. The bill awaits passage in the Senate.

The sponsor of the bill, Chairman Lamar Smith of the House Judiciary Committee, said, “Many of the world’s top students come to the U.S. to obtain advanced degrees in science, technology, engineering, and math (STEM) subjects. We could boost economic growth and spur job creation by allowing American employers to more easily hire some of the most qualified foreign graduates of U.S. universities. These students have the ability to start a company that creates jobs or come up with an invention that could jump-start a whole new industry.”
Apple founder Steve Jobs, whose biological father was a Syrian immigrant, agreed. In a February 2011, at a small dinner with President Obama, Jobs emphasized the need for more engineers in America. He suggested rewarding foreign engineering students earning a degree in the United States with a visa. At the time of their conversation, Apple employed 700,000 line workers in Chinese factories, because there were 30,000 engineers on-site. “You can’t find that many in America to hire... If you could educate these engineers, we could move more manufacturing plants here.”[21]

Some might say that offering visas to foreign engineers denies opportunities to native-born aspiring engineers. But, as Jobs pointed out, the demand for engineering in the United States is far from met, because not enough Americans want to be engineers.

The same holds true at the low end of the skill scale. Farms provide income to farmers, as well as to other native-born Americans employed in the industry in trucking and distribution. If farmers cannot get low-skill immigrants to pick fruit, as was the case in Washington State for the apple crop in the fall of 2012, agriculture will move offshore to where low-skill labor can be found. It makes little sense to send a whole economic sector to other countries just to avoid employing immigrants. America could import produce from abroad at little additional cost. Consumers may not care where their food comes from, but American farmers most certainly do.

Immigrants choose different jobs from Americans.Low-skill immigrants come to be fruit pickers, as well as janitors and housekeepers, jobs native-born Americans typically do not want. However, they are not found as crossing guards and funeral service workers, low-skill jobs preferred by Americans. Similarly, high-skilled immigrants also take jobs Americans do not want. They are research scientists, dentists, and computer hardware and software engineers, but not lawyers, judges, or education administrators.

The reason immigrants come to America is because they see opportunity – gaps in our economy that they have the skills to fill. To argue that it is the dream of any worker to compete with Americans in their own field is disingenuous. The goal for any worker is to find a market it which his skills are valued; for many workers in other countries, that is not the United States.

Some foreigners want to come to America not with dreams of work opportunities, but with dreams of vacation. These people also encounter visa problems. Even though America could generate trillions in revenue from tourism, and the industry supports millions of jobs, the visa process for tourists is lengthy, bureaucratic, and mystifying.
In 2011, tourism-related spending was $1.4 trillion.[22] This includes direct tourism spending such as hotel accommodations, and indirect tourism-related spending, such as supplies used by hotels and restaurants. Nationally, direct tourism spending as a share of GDP has declined from about 6 percent in 2000 to 5 percent in 2011.

The decline is partly the result of the terrorist attacks of September 11, 2001, and the 2007-2009 recession. But terrorism and recessions are not the only reason tourism has declined. Data from the from the U.S. Travel Association show that in many key markets, the United States is losing ground as a tourism destination.

For example, while India’s travelers have increased their “long haul” trips by 149 percent from 2000 to 2010, their trips to America have increased by only 137 percent.[23] In Japan, where long haul trips decreased by 29 percent over the decade, trips to America decreased by 33 percent. Between 2000 and 2010 British travelers increased long-haul trips by 25 percent, but decreased trip to America by 18 percent.

One exception is Chinese tourists. Chinese long haul travel increased by 176 percent, but trips to America increased by 221 percent. This increase likely reflects strong economic growth in China and increased family and business connections between America and China.

Tourism-related employment was 7.6 million in the second quarter of 2012, including direct workers like hotel staff, and indirect tourism workers like those who manufacture souvenirs.[24] Hospitality is one of the few low-skilled industries in America that is growing. Importantly, services like cleaning hotels rooms and waiting tables cannot be outsourced, providing low-skilled workers with paycheck that contribute to consumption and economic growth. Providing more tourist visas would create more jobs.

Instead, our embassies and consulates around the globe seek to discourage visitors with long wait times and substantial sums for a visa application, in the range of $200 to $300. If the visa application is rejected, the embassy keeps the fee. In contrast, other countries issue visas freely. For instance, hotels in Zurich, Switzerland, contain brochures in Mandarin Chinese promoting the surrounding area, unlike hotels in America. America has the potential to attract even more Chinese tourists.

Addressing Arguments against Immigration
As America emerges from the recession and seeks to increase economic growth, immigration reform should be part of the growth agenda. Immigrants have been founders of many companies that have grown to billion dollar giants, such as Google and Yahoo. They have different skills from the native-born population, and complement the skills of the U.S. labor force. Immigrants make the economy more efficient by reducing bottlenecks caused by labor shortages, both in the high-skill and low-skill area. The U.S. government can charge for work permits and visas to offset costs of immigrants.
The educational skills of native-born American workers are in a bell-shaped curve. Many Americans have high school diplomas and some college education, but relatively few adults lack high school diplomas and even fewer have PhDs in math and science.
Immigrants, however, have a different pattern of skills. Their skills are in a U-shaped curve, with adults without high school diplomas who want to do manual work and adults with PhDs in math and science.

One reason that Congress does not increase the number of visas is the popular perception that foreign workers, especially those with low skill levels, harm job opportunities of native-born workers. However, the different patterns of skills of immigrants make the economy more efficient, increasing economic growth.

The concern that immigrants drive out native-born immigrants from jobs is predicated somewhat on the assumption that large numbers of immigrants are displacing American workers. Yet annual immigration is a tiny fraction of the U.S. labor force. Annual immigration from all countries as a percent of the labor force has been declining since its peak in 1999.[25]

Documented annual immigration in 1999 equaled 1 percent of the labor force, which declined to 0.7 percent by 2011.[26] Caribbean, Central American and South American immigrants combined were equivalent to two tenths of a percent of the labor force, whereas Mexicans accounted for one tenth of a percent of the labor force.[27]Foreign-born workers of Hispanic origin, including undocumented workers, made up 8 percent of the labor force in 2011.[28]
Hispanic and Latino immigrants comprised 42 percent of the American unskilled labor force (defined as those without a high school diploma).
Low-skilled immigrants are disproportionately represented in the service and construction sectors, with occupations such as janitors, gardeners, tailors, plasterers, and stucco masons. Manufacturing, the declining sector, employs few immigrants.
A major concern of those critical of immigration, such as Harvard University professor George Borjas, is that immigrants depress wages. However, the research findings of most economists show little effect of immigration on wages of native-born Americans.