Open

by Kimberly Clausing

  First, immigrants traditionally remit some portion of their larger paychecks to family members left behind. For example, in 2015 Indian-Americans, a group the size of 0.2 percent of India’s population, earned an amount equal to about 8 percent of India’s GDP. India was estimated to receive $69 billion in remittances (from multiple countries) in 2015, over 3 percent of GDP. Mexico received about 2 percent of GDP in remittances from the United States in 2015. As a source of funds, the influx of remittances can be vital to the economy of the home country.40

  Second, the mere possibility of emigration may raise the perceived benefits of education in the origin country, as potential emigrants compete for scarce visas. This spur to educational attainment increases the capabilities of those that remain in the country, benefitting productivity growth.

  Third, evidence suggests that brain drain effects on the home country are limited. For example, there are not worse health outcomes in countries that have larger health-worker outmigration.41 Skilled immigrants send home substantial funds, helping to make up for their absence, and most studies of the effects of brain drain on production in the origin country yield estimates that are quite small.42

  A Better Immigration Policy

  The United States attracts many types of immigrants: workers of various skill levels seeking better economic opportunities, refugees fleeing persecution and war, family members seeking to be reunified with their relatives in the United States, and foreign students who come for an education but desire to remain in the United States. Most immigrants enter the United States legally, and new undocumented arrivals have dwindled in recent years. About eleven million people, however, reside in the United States who first entered the country illegally or overstayed their visas; this population is a little less than one quarter of all immigrants.

  Our immigration policy has changed infrequently over the decades. A notable change of priorities occurred in 1965, when a nation-based quota system was repealed in favor of prioritizing family reunification. Two decades later, the 1986 Immigration Reform and Control Act set up a system of employer sanctions for hiring undocomented immigrants, increased resources for border enforcement, and provided amnesty for undocumented immigrants residing in the United States. Since then, changes to our immigration system have been smaller, including changes in visa allotments and the creation of the diversity category of visas in 1990, provisions that made it more difficult for immigrants to access welfare benefits in 1996, and laws that tightened documentation and reporting requirements as well as immigration rights in 2003 and 2005.

  In recent years, many middle-class voters have come to feel threatened by changes in the world economy, yet opinions about immigrants are more positive than negative (fig. 8.7). As this chapter has argued, that should be the case. Immigrants have an overwhelmingly positive effect on the economy as a whole. This is not to say, however, that immigration policy cannot be improved. Below, I offer three ideas.

  Automatic Green Cards for Foreign-Born Graduates of US Universities

  The United States has shortages of workers in science, computer science, and engineering, areas that are essential to the productivity growth and entrepreneurial future of American industries. Foreign-born workers have a huge role to play here: they are more likely to innovate, they are more likely to found businesses, and they have a disproportionate influence in scientific fields.

  The United States makes available 140,000 employment-based slots for permanent residency each year. Also, the H1-B visa program allows businesses to sponsor high-skilled workers for temporary visas; current law allows up to 65,000 of these visas each year. While there is an overlap between the recipients of such visas and foreign-born students who come to study in the United States, typically foreign students are allowed just one year after leaving school to work in the United States before they are required to return home.43

  As noted above, many foreign students seek graduate degrees in science and engineering fields in the United States, and of course there are also a large number of foreign-born students doing their undergraduate work in the United States. During the 2015-6 school year, American colleges and universities hosted over one million international students, comprising 5 percent of the nation’s student body. Why do so many foreign-born students study in the United States? Simply put, our higher education system is the best in the world. While our K-12 education is not stellar, all leading rankings of world universities put a large and disproportionate share of US institutions at the top. These institutions are an incredible source of strength for the US economy.

  Figure 8.7: US Opinions of Immigrants Are More Positive than Negative

  Note: Favorable views refer to those who agree that “Immigrants today strengthen our country because of their hard work and talents.” Unfavorable views refer to those who agree that “Immigrants today are a burden on our country because they take our jobs, housing, and health.” About 10 percent of respondents indicate both, neither, don’t know, or provide no answer; these answers are excluded. Data source: Pew Research Center.

  The United States is the world’s most attractive destination for international students, even as the United Kingdom and other Anglophone countries gain ground. US institutions are particularly popular with Chinese and Indian students; of those studying abroad, 41 percent of Chinese students and half of Indian students choose the United States for their degrees.

  Foreign students must meet both the admission criteria of our institutions of higher-learning and the requirements necessary for a student visa. Most of these students face very competitive processes in order to qualify for study in the United States, and international student tuition amounts to billions of dollars of service exports for the United States. International students typically study diligently and perform well in their classes. Many of these students desire to stay in the United States after graduation.

  It is counterproductive for the United States government to send graduates of US colleges and universities home after only one year of work in the United States. While some of these foreign-born graduates eventually qualify for employment-based visas, many do not, and they are therefore required to return home despite their often strong wish to stay in the United States.44

  One could argue that such restrictions suit the interests of the origin countries of these students, since the students can return home and apply their education to the betterment of their homelands. Yet it is clear that these restrictions are not in the economic interest of the United States. Why exclude such a well-educated and diligent population, and cut ourselves off from the additional benefits these graduates would provide in terms of productivity, innovation, and entrepreneurial energy? They speak English well, are culturally assimilated, and have skills our employers desperately need.

  One possibility is a policy whereby graduates from a list of accredited and selective institutions of higher education would automatically qualify to start the process of receiving their green cards for permanent residence in the United States. (After, they would be free to seek US citizenship through the usual process.) If such a policy increased the number of foreign students too steeply, reducing slots at US universities for native-born students, limits could be set accordingly, or the US education system could expand.

  Of course, there are other ways to increase skilled immigration, such as simply increasing the number of H1-B visas. Many highly qualified workers are forced to leave the country because they are not successful in the H1-B visa lotteries. One in eight tech workers in the United States is here because of an H1-B visa, and there is a shortage of native workers with the skills required in math, science, and technical positions.45 Still, there are serious arguments that the H1-B program would benefit from reforms in the allocation process.46

  A Balanced Immigration Policy

  While the above policy would bring more highly-skilled immigrants into the United States, a balanced immigration policy would serve our economy’s many needs for immigrants. There are both effi
ciency and moral arguments for admitting less-skilled workers who have lacked opportunities abroad. In terms of efficiency, these workers gain immensely from a change in location for themselves and their descendants, and these large gains provide a compelling argument for migration.

  From a moral perspective, Americans have frequently taken pride in welcoming diverse populations from around the world, including those fleeing adversity at home. The inscription on the pedestal of the Statue of Liberty, near Ellis Island (the point of entry for many previous generations of immigrants), captures this spirit well.

  Give me your tired, your poor,

  Your huddled masses yearning to breathe free,

  The wretched refuse of your teeming shore.

  Send these, the homeless, tempest-tost to me,

  I lift my lamp beside the golden door!

  Something would be lost if we replaced this sentiment with a plea to send instead “your PhD researchers, your doctors, your investors with millions to invest, the well-dressed elites of your glittering shore.” While there is much to be gained from inviting highly-skilled immigrants, there is also a moral imperative to continue the American tradition of welcoming those less fortunate.

  In recent decades, our immigration policy has emphasized family reunification as a goal, and while this is an important priority, it should not be the only driver of our immigration populations. In 2016, 68 percent of the immigrants admitted to the United States as lawful permanent residents were admitted based on family ties; of that group, 70 percent were spouses, minor children, or parents.47 While the argument is strong for reuniting such immediate family members, it is perhaps less imperative that more distant relatives (such as adult siblings) be prioritized at the expense of greater access for those fleeing persecution or war. For example, there are over five million refugees due to the Syrian conflict.48 This massive number of refugees has created a migrant crisis for the European Union, affecting many of our closest allies. There is a strong argument for the United States to continue opening its doors to these “huddled masses yearning to breathe free,” with the usual precautions regarding screening and national security.

  Thus, I recommend reorienting immigration policy, holding steady family reunification visas, or perhaps cutting the number of non-immediate family member visas slightly, but expanding both lottery admission for new immigrants from other countries and refugee admission, on net allowing a modest (perhaps 30 percent) increase in the total numbers for these groups.49 In addition to the efficiency and moral reasons for expanding these immigration flows, the additional labor force would help the United States with upcoming demographic challenges. These workers are likely to complement the skills of American workers, resulting in few harmful effects on US-born workers. Also, recent research suggests that refugees begin making a positive net contribution to government budgets within nine years of arriving, a swift transition for those huddled masses.50

  Compassion toward Undocumented Immigrants

  Of the forty-three million foreign-born people in the United States, a little less than 25 percent are here illegally.51 While undocumented immigration is publicly perceived to be a large problem, evidence indicates that the net flow of undocumented immigrants from Mexico, the dominant source country, has in fact turned negative, and the total number of undocumented immigrants residing in the United States has fallen.52

  While enforcing the border controls of the United States is necessary, greater expenditures in this area are unlikely to be cost-effective. Spending on border patrol exceeds spending on all other Federal criminal law enforcement activities combined. There are likely more cost-effective ways to discourage undocumented immigration.53 This is especially likely since, in recent years, more undocumented immigrants have overstayed visas than entered without documentation.54

  For those undocumented immigrants already in the country, I would suggest providing a path toward citizenship, as suggested by Obama Administration and congressional leaders in prior immigration reform plans such as the DREAM Act. Providing a path to citizenship does not benefit only the undocumented workers; it also benefits the US economy as a whole. Documented workers are likely to pay more in tax revenue than they receive in benefits, helping the federal budget.55 Giving workers legal status also gives them a greater incentive and ability to invest in learning and skill-building, allowing them to contribute more to the economy and reducing wage competition for the lowest-wage workers.

  A Pragmatic and Compassionate Immigration Policy

  These policy suggestions blend pragmatism and compassion. Americans mindful of their own immigrant ancestors may be motivated by the compassionate side of these policies. There is a strong moral case for treating fellow human beings kindly. Yet this compassion need not come at the expense of native workers. There is ample evidence that immigrants are a boon to the economy, helping spur innovation, productivity, business creation, and job growth.

  Small segments of the workforce may be harmed by new immigrant flows. Since the benefits from immigration are so large, however, there will be ample additional resources available to help groups that are hurt. In this respect, the case for immigration is even larger than the case for trade, since the efficiencies associated with free product mobility have already been largely achieved, whereas there are still enormous restrictions on labor mobility.

  In sum, immigrants are viewed favorably in the United States for good reason. We should continue to have a sensible, pro-growth, pro-immigrant policy stance. Like other types of international economic integration, immigration provides huge benefits that we’d be wrong to turn down. While the current political climate has policy-makers looking for quick and easy solutions to middle-class discontent, tighter immigration restrictions are a bad idea. The fourth part of this book will lay out a better path forward.

  IV

  Securing the Future of the Middle Class

  The prior chapters have argued that globalization is a force for good. Global trade makes countries richer, raising living standards and benefiting consumers. International capital mobility can make both borrowing and lending countries better off. International business is a source of efficiency and innovation. Immigration is one of America’s greatest strengths, both historically and currently. Immigrants play an essential role in economic growth, innovation, entrepreneurship, and relieving demographic pressures.

  There are also worries, however. After several decades of middle-class wage stagnation, economic insecurity is a serious problem. Income inequality has increased dramatically, and the role of labor in the economy has changed fundamentally. This has raised skepticism about globalization. Many worry that the benefits of participating in the global economy are not worth the costs.

  The next big American debate concerns this question. Will we keep our economy open to the world around us, fostering international economic relationships across borders and accepting immigrants into our country? Or will we work to erect barriers, stemming the flow of goods, services, capital, and people, both into and out of the United States? In times of hardship, economic stagnation, and inequality, it may be tempting to choose the closed path. Foreigners provide a convenient scapegoat for our problems; rallying around the flag makes people feel united against an external threat.

  Easy answers are not always right. Sometimes, they are dangerous. Closing borders and injuring international economic relationships are both perilous moves. Raising import prices causes standards of living to decline; trade barriers disrupt many industries. Damaged international ties reduce mutually beneficial economic relations and weaken international cooperation. Fewer immigrants mean fewer new businesses, slower innovation, heavier demographic burdens, and the tarnishing of our image as a hopeful land of opportunity.

  Importantly, restricting immigration, trade, and international business is more likely to harm workers than help them. Such restrictive policies come with unintended consequences, large collateral damage, and disruption. Further, such policies respond to on
ly a small fraction of the influences that have caused labor market disruption in recent decades. For example, technological change is an important factor; automation and the rise of computerization and the internet have changed workers lives dramatically. Many other factors are also at work, including evolving social norms, changes in tax policy, the larger role of companies with market power, and the role of “superstars” in winner-take-all markets. Thus, not only are trade and migration barriers likely to generate harmful side effects, but they are also likely to be ineffective in addressing workers’ economic problems.

  In this fourth part of Open, I put forward a positive policy agenda for responding to the economic stagnation of the middle class and the recent dramatic increases in income inequality. These are not small problems, and they require bold, yet sensible, responses. While the necessity of responding to these problems is obvious to most observers, too many of the proposed solutions are either timid or foolish.

  The positive policy agenda of the following chapters works to bring together a pro-growth, pro-jobs, pro-middle class alliance that is clear-eyed about what works in the global economy and compassionate about what doesn’t. It draws on the American traditions of rugged individualism and self-sufficiency, but also on the American traditions of openness and caring. It relies on markets to do what markets do well, recognizing that government must ultimately be responsible for civilization itself; we need rules and sound public policies for a good society.

  Chapters 5 through 8 included policy suggestions regarding globalization itself: trade, international capital mobility, international business, and immigration. These suggestions preserve what is working about the global economy while also making necessary changes to modernize economic policy in order to meet the challenges of today’s technologically sophisticated global economy.