Immigration Reform: Fuel for an Idle Economy

GAME CHANGER BUsiness Horizon Quarterly

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W ith the U.S. economy continuing to be stuck in idle and unemployment trapped at alarmingly high levels, it’s a good time to look for game

changers—events, policies, and people that might signi!cantly disrupt the status quo and propel the American economy forward.

To unearth those game changers, it helps to consider some of the nation’s history as a guide. As with earlier disruptive periods in America’s long-unfolding economic story, the game changers often come from beyond our shores. Simply put, we need to bring more of the world’s most talented people to the United States.

To understand why a new wave of skilled immigration might fundamentally change the game here at home, it’s important to understand what makes the U.S. economy unique. After all, a game changer for America might not work for a country like Japan, Sweden, or India.

"ree things, when combined together, make the United States almost uniquely suited to bene!tting from a wave of skilled immigrants.

"e United States is the dominant nation today at the technology frontier. Given its size, the diversity of its work force, and its unrivalled research universities and technical institutes, American innovators are always pushing the technological envelope. "is is true in areas as diverse as information systems and communications, biotechnology, manufacturing, energy, pharmaceuticals, and more.

For the United States to continue to grow rapidly, it must advance that frontier. Aspiring nations can grow by copying or adopting the best technologies, as well as methods developed by other nations—practicing what Brink Lindsey calls imitative growth. Often that means imitating what the United States has done in the past.

By de!nition, the United States can’t imitate itself. "e United States has to keep pushing forward—it must practice what Lindsey calls innovative growth, which comes from developing and deploying ideas in original ways.

For this reason, talented immigrants—brimming with fresh perspectives and human capital—can play a vital role in helping the American economy push forward through innovative activity.

It’s di#cult to overstate the importance of immigrant-entrepreneurs to American political, economic, and technological success. "ink of Alexander Hamilton, the nation’s !rst Treasury Secretary; or the industrial giant Andrew Carnegie, who came from Scotland and remade American business and philanthropy; or Intel’s Andy Grove, who $ed communist oppression and found a safe haven the United States and went on to build what some regard as the most important technology company of the

america is at the technology frontier

america has a history of successfully integrating immigrants and unleashing their talents

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GAME CHANGER BUsiness Horizon Quarterly

20th century; or Elon Musk, the serial entrepreneur who is breathing new life into America’s electric car industry and private-sector space enterprise.

No other nation of comparable size can boast a record of welcoming immigrants and providing an ecosystem within which they could !ourish.

"at ecosystem consists of many interconnected and self-reinforcing parts—a system of private property rights; deep and varied capital markets; a tolerance of risk-taking and failure; an openness to new ideas and new business models; a culture of “venturesome consumption” in Amar Bhide’s phrase, that yields a market of buyers willing to try new technologies and models of commerce and enterprise.

It is not as if there aren’t other countries that are technologically sophisticated. Consider Japan, one of the great technological and industrial success stories. Unlike the United States though, Japan does not have a rich tradition of welcoming immigrants and permitting them to reach for the stars.

One of the many things that attract aspiring entrepreneurs to the United States is the breadth and variety of its marketplace.

"e United States o#ers a continental economy with a huge, educated, and growing population. "is gives aspiring immigrant entrepreneurs a higher degree of con$dence, such that their innovative ideas might $nd that critical initial niche to get o# the ground.

Smaller nations, or countries with a less dynamic and free consumer sector, understandably hold less appeal.

In addition to being large, the United States economy is quite competitive. Firms large and small compete with one another vigorously for market share. A primary

america has an enormous, dynamic marketplace of goods, services, and ideas

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way of innovating is by adopting new technologies to get a leg up on their competitors. !is competition dynamic ensures that entrepreneurs will be con"dent that innovations they develop will at least get a hearing from private "rms looking for advantages in the marketplace.

America clearly o#ers so much potential to skilled immigrants; what might America receive in return? Fortunately, there is ample research documenting the enormously bene"cial e#ects of skilled immigrants on the American economy and the U.S. labor market.

Madeline Zavodny of Agnes Scott College and the American Enterprise Institute recently studied the e#ect of skilled immigrants, such as those with science, technology, engineering, and math (STEM) degrees, on the job market. She found that adding 100 foreign-born workers in STEM "elds with advanced degrees from American colleges was associated with more than 250 new jobs for native-born Americans.

Temporary foreign workers also have a bene"cial e#ect on the job market. For example, for every 100 holders of H1-B visas, Scott found an associated increase of 183 jobs for U.S. citizens.

Skilled immigrants are more likely to start new businesses, something an economy at the technology frontier needs in order to catapult forward. Skilled immigrants are also disproportionately represented in our high-growth sectors, such as telecommunications, biotech, and health care. !ey are also more likely than natives to "le patents, a sign of their importance in an economy built on human ingenuity, science, and technological advance.

So what part of the American game needs to change? !e United States would bene"t from a fundamental

rethinking of its approach to immigration. As Pia Orrenius of the Dallas Federal Reserve recently noted, “!e United States issues about 1.1 million green cards a year and allocates roughly 85% to family members of American citizens or legal residents, people seeking humanitarian refuge and ‘diversity immigrants,’ who come from countries with low rates of immigration to the United States. !e remaining 15% go to people who are immigrating for work reasons—but half of these are for workers’ spouses and children, leaving a mere 7% for so-called principal workers, most of whom are highly skilled. No other major Western economy gives such a low priority to employment-based immigration, and for good reason: these immigrants are the most skilled and least likely to be a burden on taxpayers.”

Here’s the kicker. Changing our approach to immigration costs the nation absolutely nothing. As Washington debates various trade-o#s between spending cuts and revenue enhancements, changing the game on immigration offers something for everyone. It’s a blessing to those many aspirational immigrants, to be sure. Yet, it also boosts the American economy and boosts job prospects for the native-born. Moreover, it doesn’t require raising taxes or cutting cherished spending programs.

Most game changers in life are hard. !is one is easy. !ere’s no time to waste.

Nick Schulz is a former scholar with the U.S.

Chamber of Commerce Foundation as well

as the former DeWitt Wallace fellow at the

American Enterprise Institute. He has been a

frequent contributor to the Business Horizon

Quarterly from its beginning. Schulz now

serves in the private sector.