Skilled immigration is good. The U.S. economy depends on it. But the nation’s system for admitting educated workers needs major improvements.
That is the central message of “The Gift of Global Talent: How Migration Shapes Business, Economy & Society,” a new book by Harvard Business School professor William Kerr.
The basic reason skilled immigrants are good for the economy is because they produce a lot of economic output – they write the software, design the products and start the businesses that make the U.S. technology industry the best in the world. As of 2016, Kerr calculates, 29 percent of college-educated STEM, or science, technology, engineering and math, workers were foreign-born, and about a quarter of all patents were filed by an immigrant.
Even more importantly, skilled immigrants complement both skilled native-born workers and each other, by exchanging ideas. They also create a deeper market for companies seeking employees and venture capitalists looking for entrepreneurs to fund, helping keep both employers and financial backers in the U.S. These effects all depend on skilled workers being physically close to one another.
The nation’s system for admitting educated workers needs major improvements.
This clustering effect is probably why skilled immigration doesn’t hurt native-born American workers. Some researchers find that when a company hires more skilled workers, it hires fewer natives. Others, including Kerr, find the opposite. At the level of a city, however, the positive effect seems unambiguous – more workers with H-1B visas means higher wages and more jobs for college-educated native-born workers. This suggests the positive effect of the local networks skilled immigrants create outweigh any competitive pressure they create, meaning everyone benefits.
But what about the countries that send their talented people abroad? Don’t they suffer from brain drain? Kerr cites evidence that the U.S.’s gain doesn’t necessarily translate to other countries’ loss. Skilled immigrants send technology and investment back to their home countries, helping to build cross-border networks of innovation. What’s more, the possibility of getting a job in the U.S. motivates lots of people in foreign countries to get more education, often increasing the stock of local talent.
Given all these benefits, you’d think the U.S. would be stumbling over itself to open the door to more skilled foreigners. But even before President Donald Trump started trying to close the gates, the U.S. system was badly in need of upgrading.
For one thing, too many H-1B visas go to low-paid workers in companies focused on cheap, low-value contract work. Kerr suggests allocating H-1Bs not by lottery as they are now, but by salary – the more a company is willing to pay for a foreign worker, the quicker they can get a visa. That change would also ease Americans’ fears about wage competition.
A second change would be to allow H-1B workers to apply for permanent residency green cards on their own, without having to be sponsored by their employers. Now, during the green-card application process, H-1B holders are essentially required to stay at the company sponsoring them. Breaking that tether would give them the chance to move around the country, spread ideas and technology, and seek higher wages, which in turn would relieve pressure on native-born workers who feel like they must compete with indentured colleagues.
There are several other important measures that could allow the U.S. to make better use of global talent. Letting states and cities sponsor immigrants would direct highly productive, tax-paying newcomers to struggling regions, such as the Rust Belt. A Canada-style points system for green cards would create a parallel pathway for skilled immigrants. And removing country caps for employer-based green cards would allow the U.S. to get more of its skilled workers from China and India, meaning small countries wouldn’t lose their most talented workers.
Noah Smith is a Bloomberg Opinion columnist.