Tag Archives: immigration

Immigration Reform: A Spark for the Economic Recovery

Although immigration reform in the United States can be extremely controversial, I believe  successful reform will greatly benefit the economy. A successful overhaul of America’s immigration policy would benefit our economy by opening our borders to highly skilled noncitizens. According to the Wall Street Journal, “The most important reason to reform immigration laws is to promote economic growth and prosperity. The U.S. has long had a generous immigration system, but it has been skewed to family unification rather than U.S. economic interests”. Considering the slow recovery from the financial crisis of 2008, I believe immigration reform could be an effective way to give the economy a meaningful push forward. The current immigration system seems outdated and reform seems in the best interest of the economy.

Attracting and keeping highly skilled workers would be a positive step toward economic growth. Highly skilled workers would provide a boost to productivity, which in turn would help increase gross domestic product (GDP). According to the Wall Street Journal, “In today’s global economy, with many rising nations, the U.S. is in an increasingly competitive contest for human capital. Yet often today the U.S. educates talented foreigners in our schools only to deny them visas to stay and work in America. The companies they create will be in China and India rather than Austin or Minneapolis”. I have always thought that it was silly for foreign students to come to the United States for a fantastic education, but not be able to stay after graduation and contribute to long run economic growth. During high school (boarding school), I lived with a foreign student who expressed the challenges he would face if he wished to work in the United States after college. Although some foreign students might (understandably) wish to return home, I think it is clearly in the best (economic) interest for the United States to retain these trained workers.

On the one hand, some see immigration reform as a boost for the economy. On the other hand, some claim that immigrants steal American jobs and depress wages. According to the Wall Street Journal, “The populist wing of the [right] wing party has talked itself into believing the zero-sum economics that immigrants steal jobs from U.S. citizens and reduce American living standards”. However, in the long run this will likely not be the case. The concern that immigrants “steal” American jobs operates under the assumption that immigrants only impact the labor supply and not labor demand. The key is that immigrants would not be substituting for American workers – instead, immigrants would complement the natural-born American labor force. Although adding more workers to the labor force in isolation would lower wages and add to the unemployment rate, this ignores the fact that new workers will also add to demand by spending the money they earn.

Successful immigration reform would provide increased productivity and higher wages once businesses expand to absorb the larger labor force and meet increased demand from a larger population. Unfortunately, promoting the benefits of long run policy can be a challenge since the long run is so intangible. As Keynes said, “In the long run we are all dead”. In the short run, the increase in demand for labor might lag behind the increase in demand for goods and services causing unemployment rate rise in the few years following the implementation of immigration reform. However, I am confident that the long run is not that far off. Ultimately, adding immigrants to the labor force should benefit the United States economy. The political landscape can be extremely challenging, but the Senate has a bill that might solve these issues. According to the Wall Street Journal, “This is why the Senate bill wisely opens the gates wider for foreign graduates and high-tech (H1-B) visas“. I am hopeful that the Senate bill will get passed and implement successful immigration reform.

In Re: Immigration in the US

Few weeks ago, professor Kimball made an analogy of US immigration to the movie Hunger Games. In the movie Hunger Games, the capital city is abundant in resources  and is full of luxury. However, many other districts are poverty stricken and is suffering from scarcity of just about everything. There is no hope for social mobility to have the luxurious life in the capital unless you fight for your life in the hunger games against all other districts. Is this in some way analogous to the current situation in the US in regards to the immigration law?

According to a Wall Street Journal article, net immigration level dipped lower last year and some see that slow economic recovery as one of the reason. Compared to the highest levels in 2000-2001, with about 1.2 million a year, this level dropped to 900,000 in mid-2000’s then dropped further to 725,000 in post-great recession years. To keep in line with the stories of the Hunger Game, yes, the rich capital also suffered from great economic downturn, but should there still be opportunities for outside world to reach the capital? Like professor Kimball have mentioned. I also think this is a moral case as much as is a case for an economic one.

When we debate this issue, people often argue that Latin American and South American immigrants flooding the job market and driving the wages down. Also, there is a high cost associated with converting illegal immigrants to a legal status. However, a recent study shows that in the long run, legalizing illegal immigrants now could actually close the national deficit in the long run. Their status being legal, they have rights to demand for the minimum wage requirement, and also more taxes could be collected.

From a different vantage points, these lower wage taking immigrants do not tell the full story of the immigrants. There are plenty of more trained workers in foreign countries who are willing to come to the US and work. In some industries that need more trained workers like software engineering (often times being outsourced to India and China), more immigration of high skilled workers would only help to drive the economy forward.

I myself being the first generation immigrants, or 1.5 generation as they call it, I strongly believe that the so called “American Dream” is still a very real thing. Surely economic downturn has been tough for everyone in the US, but it was equally if not even harsher in the outside world. The education and opportunities for me here is unparalleled in many case. To bar these well of hope from everyone who is willing to work just as hard if not harder is quite absurd. Just having been fortunate to be born in the right geography deciding the fate of 80+ years seems a little bit unfair.

How New Immigration Policy Can Save America’s Economy

According to the WSJ, 2014 will be a great year for the American job market.  Total jobs is projected to pass it’s pre-recession peak, while adding almost 200,000 jobs per month. (WSJ: Signs Point to Healthier Job Market in 2014).  Nevertheless, even the aforementioned, optimistic WSJ article concedes that there is still considerable room for improvement, particularly given the distribution of new jobs.  In January of 2014, the Bureau of Labor Statistics released projections for job growth until 2022.  Unfortunately, with respect to salary levels, the jobs projected to experience the most growth pay very low wages.  Specifically, of the top five jobs projected to grow, 3 of them barely exceed the federal poverty level for a three-person family (annual income of $19,090), and 1 of them is below this poverty threshold (see graph below for details from MetroTrends Blog).  This data seems to suggest that job recovery in the United States is extremely one sided; low-wage employment is making a recovery while high-wage employment is not.  In this way, while the unemployment rate is falling, the Untied States definitely still has an employment problem

Job Growth

Interestingly, according to an article in Forbes titled “The Cities Creating the Most High-Paid Jobs, And Why They’re Good for Low-Wage Workers Too,” points out that if we focus on growing high-wage jobs, the low-wage job growth will follow (Forbes: The Cities Creating the Most High Paid Jobs…). This article points out that high-wage jobs, typically those requiring a large degree of specialization and existing in export-oriented industries (like technology, which siphons money into silicon valley from outside the region), have a very large “multiplier effect.”  Because they draw in so much money, high-wage jobs created a demand for services that pay low wages, like grocery services, food prep, and health aids.  Thus it seems logical that policymakers should focus on increasing high-wage employment, as the multiplier effect will help local economies maximize growth.

But how do we increase the amount of high-wage jobs?  One potential solution is to refocus immigration policy.  Specifically, the United States immigration department, by issuing more H1-B visas, can increase the level of high-wage employment (note: an H1-B visa is a visa granted to non-immigrants who temporarily come to the United States to work in specialized occupations like biotechnology, medicine, business, or engineering).  Indeed, data supports that issuing H1-B visas has an extremely positive impact on domestic employment.  In 2008, Bill Gates stated that “Microsoft has found that for every H-1B hire we make, we add on average four additional employees to support them in various capacities” (Immigration Policy Center).

It is logical to suspect that issuing fewer H-1B visas would force American corporations to rely on domestic labor for the “specialty labor” that foreigners provide.  But this does not seem to be the case.  A survey by the National Foundation for American Policy found that 65% of firms respond to low limits on H-1B visas by moving operations oversees where these firms can freely access the specialty labor they need (Immigration Policy Center).  Furthermore, H-1B visas allow non-immigrants to “temporarily” work in the United States.  In this way, they allow firms to create high-wage employment opportunities domestically by hiring foreign experts to get the ball rolling.

Certainly, adjusting immigration policy is just one way to increase the amount of high-skilled labor in the United States, and I would certainly enjoy hearing additional ideas.  The key takeaway, however, is that increasing the amount of high-skilled labor is a far more effective way of fueling economic recovery than growing low-wage employment.  By fueling high-wage job growth and taking advantage of the multiplier effect, US policymakers can accelerate this country’s economic recovery.

The Immigration Stimulus Bill

 

Yesterday it was announced that John Boehner and the Republican Party will endorse a path to legal status for more than 11 million people living illegally in the United States. (WSJ – GOP Leaders Set to Embrace Legal Status for Immigrants) This announcement comes at a time when Republicans are struggling to gain support. Now more Americans than ever are claiming to be “liberal” and thus associating with the Demographic party. This move by the Republican’s is likely a desperate political ploy to get a piece of the Latino voting bloc, but regardless of the intention the support from the Republican’s will inevitably lead to big changes in the United States for illegal immigrants and the United States Economy.

 

The simple argument for opening immigration in the United States is the historical fact that our nation was built on immigration and that outlawing immigration is not only hypocritical but also fundamentally un-American. Regardless of your philosophical views of the previous argument, it is hard to debate the economic benefits of creating a path for illegal immigrants.

 

According to those who have seen the bill, the new policy would qualify 4.4-6.5 million illegal immigrants. University of Michigan economist Sherrie Kossoudji estimates that those who receive a “legal” status from this bill will see increased wages on average of 14-24% simply due to their new immigration status. This change in income will lead to a wave of consumer spending from immigrants in the US. According to the numbers done by Raul Hinojosa North American Integration and Development Center at UCLA, over a three year period this would increase net personal income in the United States $30-36 billion (about 75% of this income will be put to consumer spending) and will generate $4.5-5.4 billion in tax revenue. (IPC: An Immigration Stimulus: The Economic Benefits of a Legalization Program) This approximately $5 billion tax base growth won’t get us out of our deficit but it’s definitely a solid place for the Congressional Budget Office to start finding money.

 

Another economic argument in favor of legalizing these immigrants is the entrepreneurial growth they will provide to our economy. According to models done by economist Arlene Holen, if there were no green card constraints in 2008, foreign graduates with science and technology backgrounds would have contributed over $14 billion to our GDP and between $2.7-3.6 billion in tax payments. (IPC: An Immigration Stimulus: The Economic Benefits of a Legalization Program) Many of the top companies in the United States were founded by immigrants including Google, Yahoo!, Ebay, and Paypal to name a few. A report done by the Partnership for a New Economy found that immigrants are more than two times more likely than an American born citizen to start a company in the United States. (Huffington Post – 16 Iconic American Companies Founded by Immigrants) Such entrepreneurial spirit is what grew the American economy in the 19th and 20th century and can help our economy today.

 

I couldn’t find any specific numbers detailing the costs of the immigration change, but we do know that costs would come in the form of increased enforcement on the borders and on illegal immigrants already in the states, healthcare, and welfare. Although I don’t have any numbers to back this claim up I would believe that these cost changes would be rather minimum. Illegal immigrants are already taking advantage of our healthcare system, but now with legalization they will have an opportunity to pay into the system. Similarly, the rules outlining the immigration status change will require the recipient to be working, so the unemployment benefits will be limited. Overall I believe that the legalizing of illegal immigrants in the US will provide a nice economic stimulus for the US economy.

 

 

 

http://online.wsj.com/news/articles/SB10001424052702304419104579324532878523334?KEYWORDS=immigration

 

http://www.immigrationpolicy.org/just-facts/immigration-stimulus-economic-benefits-legalization-program

 

http://www.huffingtonpost.com/2013/04/22/american-companies-founded-by-immigrants_n_3116172.html

 

Raise the Minimum Wage

Recently, a movement to raise the federal minimum wage has gained some steam, with an article chronicling the initiative featured in the New York Times .  Perhaps the most outspoken proponent of such an increase is Californian Ron Unz, who has led successful initiatives in California to deny services to illegal immigrants (which was later overturned by courts), and to change the bilingual education system.  Recently, Unz filed an initiative that would raise the minimum wage in California to $12.00 per hour by 2016.  In his 2012 piece for the New American Foundation, Unz details his case for raising the minimum wage.  In summary he writes:

Our government has sought to ensure a decent living for American workers through an enormous array of income subsidies, public benefits, training programs, and educational loans; at this point, many of these components have accumulated powerful and parasitic side-beneficiaries while leaving the working class behind.

Since this vast and leaky conglomeration has failed at its intended goal, perhaps we should just try raising wages instead.

One of the main criticisms of minimum wage is that it creates a price floor for jobs and thereby induces unemployment.  However, this effect is not fully realized because of the fact that businesses cannot simply fire all their workers due to higher wages.  While it is true that most (if not all) minimum wage workers could be released from their jobs at any time, retail and food giants cannot let go of all their work force. Furthermore, as Unz points out in his piece, the largest employment categories are things that cannot be shipped overseas, like salespeople, fast food workers, childcare workers, home health aides and custodians.  In this sense, these jobs are “protected” and a necessary part of society; an increase in the minimum wage cannot wipe these jobs out altogether.

That being said, others, such as Reihan Salam, disagree, claiming:

My sense is that Unz underestimates the number of less-skilled native-born U.S. workers who would be negatively impacted by a higher minimum wage, e.g., ex-offenders, teenagers, the long-term unemployed, and workers plagued by substance abuse, mental illness, and other maladies, etc.

Certainly there is some truth to this statement. Raising the price floor of employment would indeed distort employment levels, perhaps making it more difficult for certain people to get jobs.  I think that a minimum wage increase would also disproportionally burden smaller businesses, rather than larger corporations, although more research would be required to know for sure.

The benefits of putting higher wages into the hands of low income workers is threefold.  First, those making less income seem to be more likely to immediately spend that money, thereby pumping more money into the economy than the expected $150 billion dollars in wage increases due to fiscal multipliers.  These fiscal multipliers, along with slightly higher prices (resulting from businesses trying to offset costs) would lead to an increase of government revenue from state and federal sales taxes.  Thus, the whole economy would benefit at least indirectly from this proposal.

Second, raising the federal minimum wage takes some of the burden off of the government to provide for low income individuals and puts that burden onto firms instead.  Currently, the government helps subsidize low income individuals through programs like the EITC (Earned Income Tax Credit), but by increasing the minimum wage firms themselves would have to pay the real costs for their employees instead of letting the government subsidize the employees.

Thirdly, Unz claims that increasing the minimum wage will reduce illegal immigration because less skilled (and non-fluent) immigrant workers might not be worth the increase in costs, but an unemployed American might.  Personally, I’m not sure how much I agree with this claim.  Perhaps I am just cynical, but I’m not so sure that making undesirable jobs (washing dishes, mowing lows, etc.) more desirable by raising wages would necessary draw more unemployed American citizens to do those jobs.

Moreover, as Unz stated, raising the minimum wage is simple.  People understand getting paid $12 for every hour they work much better than the labyrinthian federal aid system.  Instead of the government making up for people who don’t make enough, lets just give people enough in the first place.