Regaining America’s Competitive Advantage: Making our Immigration System Work | U.S. Chamber of Commerce

Regaining America’s Competitive Advantage: Making our Immigration System Work

Tuesday, August 10, 2010 - 8:00pm

Executive Summary

America's greatness rests in its institutions and its historic openness to new people and innovations. Closing the door to highly educated individuals seeking opportunity and who aid the competitiveness of U.S. companies will weaken, not strengthen, our country and will diminish the competitiveness of American employers. In the global economy, investment follows the talent and attempts to restrict the hiring of talented foreign-born professionals in the United States encourages such hiring to take place overseas, where the investment dollars will follow.

The analysis in "Regaining America's Competitive Advantage: Making Our Immigration System Work," released by the U.S. Chamber of Commerce and the American Council on International Personnel (ACIP), takes a balanced approach to employment-based immigration. It recognizes that problems exist that should be addressed through administrative or legislative means. Moreover, it is understood that in any dynamic situation where a market exists not all will succeed and this will result in anger towards traditional targets, particularly the foreign-born. This analysis finds the admission of high skilled foreign nationals provides significant benefits to the U.S. economy and much of the criticism levied at such foreign nationals and their employers is misplaced.

A recent report by the Department of Professional Employees, AFL-CIO – Gaming the System – gathers together arguments that have become traditional for those advocating a closed door policy for America. As such, it is worth examining the report, explaining where its portrait of highly educated foreign nationals is incomplete or inaccurate, while also addressing which immigration policies are most likely to create more jobs and innovation in the United States.

If the immigration policies recommended by the AFL-CIO had been in effect since 1990 few if any high skilled foreign nationals would have been allowed to work in the United States. The innovations, complementary jobs, and companies created by such individuals would have been lost – or created in other countries. While the arguments offered by the AFL-CIO are couched in language of concern for foreign-born professionals, there is no evidence in its report or other actions that the AFL-CIO believes highly educated foreign nationals have any legitimate place in the American workplace or even in our society.

In sum, the position of the AFL-CIO is that a) highly educated foreign nationals are underpaid, and b) even if they are paid properly, Congress should prohibit them from working in the United States because high skilled foreign nationals are not needed, and c) if U.S. employers wish to hire high skilled foreign nationals, a government commission should be established to overrule those hiring choices and prevent these professionals from being eligible to work in the United States.

The consequences of such a policy would be negative for U.S. employers, the U.S. economy and Americans in general. It would weaken the competitiveness of important industries at a time when recent economic conditions have already clouded the financial situation of many U.S. companies and organizations.

It is a common mistake among critics of immigration to assume there is only a fixed number of jobs in the economy. As discussed in this report, an examination of America's most noted technology companies illustrates how this assumption is untrue. Between 2002 and 2009, Qualcomm, Google, Amazon, Apple, Cisco, Oracle and Microsoft all (at least) nearly doubled their overall employment (U.S. and non-U.S. employment combined). Amazon increased its employment total from 7,500 to 24,300, a 224 percent increase from 2002 to 2009, while Apple increased the number of its employees from 10,221 to 36,800, a rise of 260 percent.

To varying degrees, these seven companies have hired high skilled foreign nationals on H-1B visas. In 2009, Amazon's net income (earnings) was $902 million and Apple's was $5.7 billion. Can anyone plausibly argue that either Amazon or Apple – two of America's most successful companies over the past decade – would have been more successful or experienced greater employment growth if they had been barred from hiring high skilled foreign nationals?

Those arguing to place more restrictions on hiring foreign nationals have shown little interest in whether particular U.S. employers are successful, never mind that they should have the freedom to hire employees who the companies believe will make them successful. And this is crucial: Who is in a better position to determine which employees are most likely to make Apple, Amazon or other U.S. companies successful? Is it critics of immigration, government bureaucrats, or the companies themselves? Since immigration critics and agency officials have no vested interest in whether particular U.S. companies are profitable the answer is self-evident.

This report also addresses the AFL-CIO's lack of intellectual consistency on immigration. The unfortunate position of the AFL-CIO and some other critics of employment- based immigration is that the entry of high skilled foreign nationals should be opposed under almost any circumstances, though if the same individuals or international students had entered the country illegally they would be welcomed and provided legal status. Legalization has a place in the context of comprehensive immigration reform, but the AFL-CIO's position of favoring those who entered illegally over highly educated foreign nationals who seek to work legally is, at minimum, intellectually inconsistent.

The findings of this report include:

  • Leading high tech companies cite the role that highly educated foreign nationals have played in their success. Google and other companies cite individual visa holders who have made substantial contributions to their leading positions in the marketplace.
  • The AFL-CIO and other critics argue America already has too much talent and should block the entry of high skilled foreign nationals, including international students, into the labor market. However, the real immigration-related problem is that many talented people have not been able to stay in the United States after graduation because of low quotas for H-1B visas and employment-based green cards.
  • A large source of education funding in America is derived from U.S. employers. American businesses pay over $91 billion a year in state and local taxes directed toward public education, according to the Tax Foundation. H-1B visas are a large source of scholarship money for U.S. students, with H-1B training and scholarship fees levied on each petition (and renewal) having funded more than 53,000 math and science college scholarships for U.S. students through the National Science Foundation.
  • There is little evidence high skilled foreign nationals on H-1B visas are in general paid less than their American counterparts. A 2009 study by University of Maryland researchers Sunil Mithas and Henry C. Lucas, Jr. showed foreign-born professionals in information technology (IT) actually earned more than their native counterparts: "This result implies complementarity among American and foreign IT professionals and supports the view that high-skill immigration can potentially make everyone (i.e., American as well as foreign workers) better off."
  • The Economic Policy Institute, a research group closely aligned with the AFL-CIO, concluded in a recent study, "the estimated effect of immigration from 1994 to 2007 was to raise the wages of U.S.-born workers."
  • Studies by University of California, Berkeley, economist Giovanni Peri reached the same conclusion on the overall impact of immigration, noting that the foreign-born fill jobs, but also create them through consumer spending, complementary skills, entrepreneurship and other means. Peri concluded, "The United States has the enormous international advantage of being able to attract talent in science, technology, and engineering from all over the world to its most prestigious institutions . . . The country is certainly better off by having the whole world as a potential supplier of highly talented individuals rather than only the native-born."
  • Critics who insist H-1B professionals are hired to "save money" fail to note that in addition to the legal requirement to pay H-1B visa holders the higher of the prevailing wage or actual wage paid to comparable U.S. workers, employers must pay significant legal and government fees. The American Council on International Personnel estimates combined H-1B and green card sponsorship costs (government/legal fees) can exceed $35,000 for one individual.
  • Critics also ignore that the labor market is global and if U.S. employers were interested only in lower labor costs they would shift all their work overseas. The average annual salary in San Francisco for a systems engineer (computer networking/IT) with two years of experience is approximately $62,400, compared to $6,000 in India and $5,500 in the Philippines, according to PayScale.
  • Some have expressed fears that H-1B professionals hired by Indian technology companies threaten the American workforce. In FY 2009, Indian tech companies used approximately 4,800 new H-1B visas, which equals to 0.003 percent of the U.S. civilian labor force, less than 1/100th of 1 percent. When information technology services companies – whether Indian or non-Indian – perform work in the United States it is only because U.S. companies believe such work makes their businesses more profitable. And if such service providers enable U.S. businesses to concentrate on core functions and run more effectively, then U.S. companies can hire more people in the long run.
  • As evidenced by the long backlogs, it is clear many employers sponsor skilled foreign nationals for permanent residence (a green card). However, the recent argument that using an H-1B visa is only legitimate if the employer later sponsors the individual for a green card ignores the history of H-1 temporary visas, the enormous time and expense to sponsor individuals for permanent residence, and the legitimate need to serve customers on projects of limited duration.
  • While concern about fraud is legitimate, the bottom line finding of a 2008 U.S. Citizenship and Immigration Services report is that there is little evidence of widespread abuse among companies with more than $10 million in annual gross income (revenues). Only seven percent of companies with more than $10 million in annual revenues (eight cases) audited were found to have suspected fraud or technical violations.
  • The responsible U.S. agencies should enforce current law, rather than Congress passing new laws. An employer that commits fraud under the existing statute will not become law-abiding under a new set of complex rules. Current immigration law already contains significant deterrents to underpaying workers, including payment of back wages, civil penalties from $1,000 to $35,000 per violation, and debarment of employers from H-1B and other immigration programs.
  • As proposed by the AFL-CIO and others, a government commission to set the annual number of temporary visas and green cards (or even eliminate employment categories) would possess more power than the President or Congress in deciding immigration policy matters, since its findings and recommendations would become law unless blocked by a separate Congressional vote. Commission members' decisions would be inherently subjective. The data do not exist to determine fine gradations in particular fields, never mind to know the demand among all U.S. employers for specific specialties. In short, the labor market is global, not only domestic. A key reason a "labor shortage" may not show up in any government data is that employers find "work arounds" and take creative action, such as offshoring, to address an inability to hire people they need here. A government commission to set the annual level of temporary visas and green cards would become a new set of obstacles employers would need to overcome to hire foreign nationals and could effectively end employment-based immigration to the United States.
     
    The vision of the AFL-CIO and other critics is of a future where American employers have little or no access to highly educated foreign nationals. Such a vision ignores much accumulated evidence about the benefits of foreign-born professionals:
  • A study by the National Venture Capital Association found "Over the past 15 years, immigrants have started 25 percent of U.S. public companies that were venture-backed, a high percentage of the most innovative companies in America."
  • In electrical engineering, 68 percent of the fulltime graduate students (master's and Ph.D.s) on U.S. college campuses were foreign nationals in 2006, according to the National Science Foundation. In engineering overall, the percentage of foreign nationals was 54 percent, and in computer science the proportion was 58 percent.
  • An overlooked benefit of admitting skilled foreign nationals is the achievements of their children in America. Nearly half – 18 of 40 – of the finalists at the Intel Science Talent Search in 2004 had parents who entered the country on H-1B visas (known as H-1 prior to 1990).
  • Paula Stephan (Georgia State University) and Sharon G. Levin (University of Missouri- St. Louis) performed extensive research on the contributions of the foreign-born in 6 areas of scientific achievement and concluded, "Individuals making exceptional contributions to science and engineering in the U.S. are disproportionately drawn from the foreign-born. We conclude that immigrants have been a source of strength and vitality for U.S. science and, on balance, the U.S. appears to have benefitted from the educational investments made by other countries."
  • Research by William Kerr (Harvard Business School) and William F. Lincoln (University of Michigan) shows a connection between H-1B admissions and increased patent filings both for cities and companies.

The best policy for the United States is one that sides with freedom and innovation, not restriction. It is a policy where the H-1B cap is either eliminated or set high enough that we can let the market decide on the number of new skilled foreign nationals who work in America each year. The best policy would ease the way for employers to sponsor high skilled individuals for green cards by exempting from labor certification and current employment- based immigrant quotas many who now languish in 6 to 20 year queues. Allowing top talent who graduate from U.S. universities to gain a green card directly will help U.S. employers retain the world's leading future innovators. Keeping the door open for high skilled foreign nationals strengthens America. As is often the case, freedom, not restriction, is the right choice.