International Economics, Development & Immigration

May 21, 2020 4:36PM

Beware the Costs of a Technology Trade War

In a post last month, we raised concerns about the unforeseen and underappreciated costs of expanding export controls on U.S. technology. Either those concerns fell on deaf ears or the administration did its due diligence and determined that the expected benefits outweigh the expected costs because—earlier this week—the Commerce Department published new rules further restricting Huawei’s access to U.S. technology.

U.S. exports to Huawei have been tightly controlled since Huawei and its affiliates were placed on the Entity List in 2019 for national security reasons. However, because of the design of U.S. export regulations and the nature of technology supply chains, Huawei and its affiliates were still able to import semiconductors from foreign producers that use U.S. chipmaking equipment and software. The new rules are intended to close this loophole and completely cut off Huawei from U.S. technology.

Explaining the purpose of those new rules, Commerce Secretary Wilbur Ross—betraying naïve expectations that Huawei would have just thrown in the towel and shut down its operations after last year’s U.S. sanctions—offered:

Despite the Entity List actions the Department took last year, Huawei and its foreign affiliates have stepped‐​up efforts to undermine these national security‐​based restrictions through an indigenization effort. However, that effort is still dependent on U.S. technologies. This is not how a responsible global corporate citizen behaves. We must amend our rules exploited by Huawei and HiSilicon and prevent U.S. technologies from enabling malign activities contrary to U.S. national security and foreign policy interests.

Although we have been skeptical from the start that this is the right way to proceed with China, the die most definitely has been cast and the technology trade war is moving ahead at full speed. Of course, the U.S. government (many in the Trump administration and many in the Congress) has its reasons (some factual; some presumptive; some political) for this course of action. So, instead of rehashing concerns already raised, we offer (in convenient bullet point fashion) the most relevant facts and assumptions culminating in the current policy, as well as the expected benefits and likely costs of that policy. Unfortunately, the list of likely costs is long.

Facts

  • The U.S. government sees the Chinese government as a bad actor.
  • The U.S. government sees Huawei as an adjunct of the Chinese government.
  • The U.S. government sees Huawei as the leader in 5G technology.
  • The U.S. government sees Huawei’s leadership in 5G technology as a threat to U.S. national security.
  • The U.S. government sees a vulnerability to Huawei’s 5G leadership in Huawei’s dependence on U.S. semiconductors and semiconductor technology.
  • The U.S. government seeks to exploit that vulnerability by depriving Huawei of the technology it needs to continue to dominate 5G.

Assumptions

  • Targeting Huawei with export controls and entity list restrictions to deprive it of needed inputs will slow or stop Huawei’s progress.
  • U.S. sanctions on Huawei from the supply side will compliment U.S. efforts to compel other governments to forego purchasing Huawei gear on the demand side.
  • Slowing or stopping Huawei’s progress will enhance U.S. national security.
  • U.S. national security will be enhanced because U.S. or U.S.-backed 5G companies will emerge and fill the void as standard‐​setters and dominant suppliers of 5G network gear and consumer products.
  • Leadership in 5G begets leadership in the next generation of communications technology and other technologies; followership consigns to more followership.
  • The expected benefits of the U.S. government’s approach outweigh its expected costs.

Benefits (if the assumptions are accurate)

  • The Chinese government’s ability to control or have disproportionate influence over global information and communications networks (and whatever other currently unforeseen powers that control or influence would bestow upon Beijing) will be reduced.
  • Reducing Beijing’s power is—in this context and with certain caveats—akin to enhancing U.S. national security.
  • Impeding Huawei’s success (albeit, through compulsion of other governments and laws restricting private companies from engaging in commerce or research and development with Huawei) could buy time for U.S. companies or U.S.-backed companies to emerge and take leadership in 5G and 6G technology space, providing U.S. economic and security benefits that might not otherwise manifest.

Costs

  • Cutting off Huawei from U.S. semiconductors, semiconductor equipment, and software will expedite China’s development of indigenous semiconductor production capabilities and, ultimately, put the world’s largest market for semiconductors out of reach of U.S. producers within a few years.
  • Cutting off Huawei from semiconductors made with U.S equipment in third countries will compel chipmakers in those third countries to purchase non-U.S. equipment, ultimately drying up current U.S. export markets.
  • Cutting off Huawei will inject even more uncertainty into global information and communication technology (ICT) markets, which likelywill slow the process of standards setting, which likely will retard product development schedules, which likely will deter investment in new technologies, and which likely will be resolved only by bifurcation or even greater splintering of global technology standards.
  • Bifurcation or splintering of technology standards would significantly limit scope for economies of scale in production, as firms all along the ICT supply chain would be producing for fewer customers or producing in separate production runs for customers that follow different sets of standards.
  • U.S. supply chain warfare could prove contagious, encouraging Chinese restrictions on exports of rare earth minerals or other inputs and Chinese retaliation against U.S. technology companies, while opening the door to all countries to treat trade as a strategic weapon rather than as a tool of cooperation and economic betterment.
  • Technology decoupling will inspire a cold‐​war style competition between the United States and China to win the hearts and minds of third countries through the offering of carrots and the threats of sticks.
May 21, 2020 3:07PM

Why Ban Foreign Workers From H-2B Jobs U.S. Workers Rejected?

President Trump is reportedly considering a ban on H-2B temporary workers that a few Republican senators proposed this month. Companies hire H-2B workers in seasonal jobs outside of traditional farms, such as landscaping, meat packing, and seafood processing. The plan is supposed to “save” jobs for U.S. workers. Yet this justification holds no water: unemployed Americans already reject 100 percent of jobs for which H‐​2Bs are hired.

H-2B regulations require that employers recruit U.S. workers before they can hire any foreign workers. Employers must do the following:

  • Not lay off any qualified U.S. worker for 120 days before the job start date;
  • Post a notice of the job’s availability for all current U.S. employees;
  • Contact all its former U.S. workers in the prior year and solicit their return to the job;
  • Have the State Workforce Agency post the job on the state’s electronic job registry for unemployed U.S. workers for about 60 days; and
  • Recruit and accept all qualified U.S. workers interested in the position until three weeks prior to the job start date.

In other words, the H-2B program already has a built‐​in unemployment adjustment. When unemployment increases, H-2B approvals automatically fall, and not just because of a government mandate, but also because employers won’t hire anyone for jobs that aren’t in demand right now. There aren’t too many carnivals in operation right now, so that industry will not be requesting workers this year. Figure 1 shows how during the last spike in unemployment, the number of H-2B requests and approvals fell quite significantly.

But Figure 1 shows that unemployed Americans won’t accept certain H-2B positions even when unemployment is high. Landscaping, forestry, meat and poultry processing, and certain construction jobs are so physically demanding that Americans would simply prefer unemployment to taking them. In many cases—such as in forestry—the jobs require constant time apart from family and friends. It is not reasonable to expect that temporarily furloughed Americans will ditch inflated unemployment benefits for dangerous and physically taxing jobs away from their families.

These recruitment and acceptance requirements come on top of onerous wage and hour regulations that require employers to pay inflated wages and benefits to both the new hire and all existing similar employees. The H-2B minimum wage requirements exceeded every state’s minimum wage requirement by an average of 60 percent last year.

During the economic recovery, the goal should be to help businesses get back to the pre‐​pandemic status quo as quickly as possible. Forcibly keeping jobs open hinders that goal and will delay the recovery, hurting U.S. workers elsewhere in the economy. The government should stop trying to micromanage the labor force and focus on addressing the actual cause of the unemployment crisis: the COVID-19 outbreak.

May 20, 2020 3:26PM

The Facts about Optional Practical Training (OPT) for Foreign Students

The Trump administration reportedly is considering a plan this week to restrict or ban foreign students from working after graduation from U.S. universities. Under Optional Practical Training (OPT), foreign students can study for at least one year after receiving their degrees. Foreign students in Science, Technology, Engineering, or Math fields can extend OPT for another two years.

The plan is supposedly to benefit unemployed Americans—almost none of whom work in the relevant fields—after states reopen for business. The program is the main on‐​ramp for American companies to recruit and retain foreign talent in the United States. Gutting it would harm U.S. workers by undermining the very companies that would employ them.

What is the OPT?

The U.S. government created the Optional Practical Training (OPT) in 1947 to allow foreign student to seek jobs “where employment for practical training is required or recommended by the school” for “a six‐​month period subject to extension for not over two additional six‐​month periods.” In 1991, it split OPT into pre‐​completion and post‐​completion authorization and permitted only a single year of post‐​completion OPT “directly related to his or her area of studies.”

What is STEM OPT?

In 2008, the Department of Homeland Security (DHS) permitted extensions of OPT for Science, Technology, Engineering, or Math (STEM) graduates of U.S. universities for up to 17 months because the “ability of U.S. high‐​tech employers to retain skilled technical workers, rather than losing such workers to foreign business, is an important economic interest for the United States.” In 2016, DHS extended the period to 24 months, allowing for a 3‐​year period of total post‐​graduation employment. The 2016 rule requires employers hiring a worker on a STEM OPT extension to attest that the worker is not replacing a U.S. worker and will receive similar pay to the employer’s similarly situated U.S. workers. DHS can conduct an on‐​site audit to review employer records to confirm the accuracy of these attestations.

How many foreign students apply for OPT?

In fiscal year 2019, U.S. Citizenship and Immigration Services (USCIS) approved 223,284 requests for Employment Authorization Documents (EADs) for all types of OPT—the highest number ever. Nearly all approvals were for post‐​graduate OPT—either regular OPT (152,029) or STEM (69,353). Figure 1 shows that the numbers of approved EADs has nearly tripled from less than 80,000 in 2003 to more than 223,000 in 2019—nearly all of this growth occurred during the Obama administration from FY 2009 to partway through FY 2017. STEM OPT accounts for almost half the growth.

How many OPT recipients are employed?

Not all OPT recipients find jobs, but a much greater share are finding them than in the recent past. Unfortunately, an exact comparison between the share with and without jobs is not available, but Figure 2 compares OPT approvals to OPT participants with jobs. In 2007, there were more than 3 approvals for each participant with a job. By 2018, the ratio was nearly 1:1. Overall, 200,162 OPT participants had jobs in 2018.

What companies employ OPT participants?

Table 1 displays the top 100 companies for OPT hires in 2018 and 2017 as well as the entire period from 2003 to 2018. The largest OPT employer with 2,911 OPT employees was Amazon, which makes most of its hires under the STEM OPT program. Other technology companies—Integra, Intel, Google, and Microsoft—fill out the top 5 with more than 1,000 employees each. The Top 100 companies make 18 percent of OPT hires. Under the H-1B program, the Top 100 employers make 35 percent of H-1B hires. This disparity is compatible with previous research concluding that OPT is more common among startups than the more expensive, complex, and bureaucratic H-1B program.

What countries do OPT participants come from?

In 2018, two thirds of OPT participants came from India and China, according to the Institute of International Education (IIE). IIE—with the sponsorship of the U.S. Department of State—conducts a survey of international students including those with OPT. It shows that an astounding 42 percent of Indian international students are currently enrolled in OPT. That share is well over double the rest of the world. The difference can be partly attributed to the difficulties that Indians have obtaining employment‐​based green cards compared to the rest of the world. They end up using OPT to maintain status in the United States, while other nationalities can simply adjust to permanent residence.

IIE doesn’t report data specifically on STEM OPT, but Immigration and Customs Enforcement data show that again, India represents 59 percent of all STEM OPT participants, and 40 percent of Indian STEM students are involved in OPT—by far the highest share of any nationality with more than 2 participants. It also shows that the United States risks losing nearly half a million STEM students if the government rescinded OPT.

How has COVID-19 affected OPT occupations?

OPT participants can work in any field directly related to their major, but as the list of employers makes clear, they overwhelmingly work in technology and computer professions. As Stuart Anderson first noticed, computer occupations have almost entirely remained unscathed by the recent economic downturn. As of mid‐​April, the unemployment rate had actually declined slightly since January. Anderson comments that this positive employment situation “makes citing unemployment in these occupations as a reason for new restrictions on H-1B visas and international students on OPT more dubious.”

What does research say about OPT?

Business Roundtable and the Interindustry Forecasting Project at the University of Maryland found that “scaling back OPT would cause the unemployment rate to rise 0.15 percentage points by 2028.” In 2019, economist Madeline Zavodny found that “A larger number of foreign students approved for OPT, relative to the number of U.S. workers, is associated with a lower unemployment rate among those U.S. workers.” In March 2019, Jeremy Neufeld used OPT data to conclude that “higher levels of OPT participants in a region lead to increased innovation in that region, as measured by the number of patents, higher average earnings among the college educated. In addition, it finds no evidence of adverse effects on average earnings, unemployment, or labor force participation.”

Stuart Anderson has also found that 39 percent of Nobel Prizes in chemistry, medicine, and physics since 2000 have been immigrants to the United States. International students dominate the STEM majors. NFAP has also found that in 2015, more than three quarters of the graduate students in electrical engineering, petroleum engineering, computer science, and industrial engineering were international students. A majority of the graduate students in pharmaceutical sciences and chemical engineering—two majors of particular interest today—were also foreign‐​born. In 2018, NFAP found that nearly a quarter of American startups valued at $1 billion or more had a founder who entered the Untied States as an international student, which had created 1,200 jobs per company. Michelle Zatlyn, co‐​founder of Cloudflare, and Ashifi Gogo, founder of Sproxil, both used OPT to launch their businesses.

In 2008, the Department of Homeland Security (DHS) when it launched STEM OPT concluded that the expansion was a national security necessity. “With their large and growing populations of STEM‐​graduate scientists, high‐​tech industries in [Russia, China, and India] and others in the OECD now compete much more effectively against the U.S. high technology industry.” It notes that China and India had 31 percent of global R&D staff up from 3.2 percent in 1990. It would be strange for the department to reverse itself completely a decade later, even as the underlying trends continue.

May 18, 2020 9:37AM

100% of H-1B Employers Offer Average Market Wages—78% Offer More

The Economic Policy Institute (EPI) released a report last week that purports to show that “H-1B employers undercut local wages.” Employers use the H-1B program to hire temporary foreign workers in specialty occupations. EPI writes, “By setting two of the four wage levels below the median—and thereby not requiring that firms pay market wages to H-1B workers—the DOL [Department of Labor] has in effect made wage arbitrage a feature of the H-1B program.” This post explains why this is mistaken.

The median wage for an entire occupation is not the “market” wage for a specific worker. EPI confuses the median wage—the statistical midpoint in the entire range of market wages—for the singular “market wage.” A market wage is just whatever an employer would pay a worker in an open market—which depends entirely on the characteristics of the job and the productivity of the worker. Some employees receive offers above the median because they have more skills, more experience, or more significant job duties and so are more productive and valuable to the company than most other workers, while others receive wage offers below the median for the opposite reason.

As the Bureau of Labor Statistics (BLS) has detailed, wages in skilled occupations can vary dramatically within an occupational category—a fact that EPI acknowledges but fails to explain. BLS explains that these pay differences are a result of differing credentials, experiences and skills, industries or employers, job tasks, and performance.

By EPI’s definition of the market wage, half of American workers also receive “below market” wages since half are by definition paid below the median wage, yet it states—correctly—that “conceptually, the market wage is the wage a U.S. worker would command for a position in a specific occupation and region.” Since U.S. workers command wages both above and below the median, that means all those wages are market wages, not just the median. Yet EPI wants to stop H-1B employers from paying foreign workers in accordance with their skills (strangely, it doesn’t object to skill‐​based pay for U.S. workers).

Nearly all H-1B employers offer above the median wage for H-1B workers of a specific skill level. The DOL estimates the market wage for H-1B jobs by taking the average wage for workers in the same geographic area and same occupation who have similar levels of experience and skills, using wage surveys from the Bureau of Labor Statistics. DOL calls this average market rate the “prevailing wage” and provides for four levels based on skills, experience, and responsibilities (1. Entry; 2. Qualified; 3. Experienced; 4. Fully competent or supervisory).

Because the prevailing wage is the average wage at a given skill level, and averages were above the medians for 97 percent of occupations in 2019, nearly all H-1B employers were already offering for a specific skill level wages above the median, which EPI insists is the best statistical proxy for the market wage. EPI wants to mandate the median wage, just not the median most relevant to the worker being hired. If DOL did use the median wage rather than the average at a given skill level, it would reduce the required wage for nearly all occupations. For computer and math occupations—the largest H-1B occupation—for example, the national average was $5,190 more than the national median.

100 percent of H-1B employers offer H‐​1Bs at least the average prevailing market wage for similar U.S. workers. By law, H-1B employers must offer their foreign workers the average prevailing wage in the occupation for the relevant skill level. DOL provides the prevailing wage rate through BLS prior to approving the hire. This means that no H-1B employer can offer below the market wage for the occupation, and the DOL data bear this out (see Table 1 below).

Some H-1B employers might sometimes fail to pay out what they offer, which is why DOL audits employers to verify that they meet their obligations. Some H-1B workers would also make more money if they had a status that allows them to easily change occupations or positions to ones where they would be most productive and so earn higher wages. Allowing H-1B workers to change jobs as easily as legal permanent residents would fix this problem. But these issues are very different from claiming, as EPI does, that H-1B employers are offering below‐​market wages for the actual job being performed. They are not.

78 percent of H-1B employers offer wages, on average, above average market wages—20 percent above. Each year, DOL publishes the prevailing wage determination for each H-1B job offer and the actual wage offer for each employee in those jobs. The average offered wage for all 61,420 H-1B requesting employers in FY 2019 was $100,461, while the average prevailing wage determination was $83,619, meaning H-1B employers were offering an average of $16,842 more than the average market wage that the law requires—20 percent above. In fact, 78 percent of H-1B employers had average wage offers above their average prevailing wage determination. The vast majority of H-1B employers pay at least some employees more than they are required to pay.

Table 1 shows the average offered wages and average prevailing wage determinations for the top 500 H-1B requesting employers. The takeaway from the data is that H-1B employers are, on average, offering a premium for many of their foreign workers. The average wage was higher than the average prevailing wage determination for every company in the top 45 H-1B requesting companies. For major companies like those EPI calls out in its report—such as Microsoft, Amazon, and Google—the average increases over the prevailing wage were substantial: 17 percent for Microsoft, 19 percent for Ama​zon​.Com Services, and 64 percent for Google.

71 percent of H-1B employers have average wage offers above average market wages at every skill level. EPI repeatedly emphasizes that employers are underpaying H-1B workers who receive prevailing wage determinations at Level 1 entry or Level 2 qualified wage levels. Yet DOL data show that in fact, not only were 100 percent of Level 1 and Level 2 H-1B employers offering the prevailing market wage for U.S. workers at the workers’ skill levels in 2019, 71 percent of Level 1 and 76 percent of Level 2 H-1B employers were offering wages that were an average of 19 percent and 18 percent higher, respectively, than the prevailing wage for U.S. workers at their skill level.

Level 1 or level 2 wage offers may be below the median for their entire occupation, but they are higher than those for similarly skilled Americans. At the major companies that EPI calls out specifically, this is also true. The average H-1B offers at Microsoft, Amazon, and Google for Level 1 or Level 2 jobs were as much as 96 percent higher than the average prevailing wage determinations for those companies. Overall, 71 percent of H-1B employers had average wage offers above their average prevailing wage determination at every skill level at which they request H-1B workers.

The lowest skilled H‐​1Bs were the most likely to receive above market wage offers. Looking at the share of jobs rather than the share of employers shows that 100 percent of all certified job offers were at least at the prevailing wage in FY 2019 and about half (47 percent) were above it. In other words, the actual market wage was actually above the estimated average market wage for nearly half of H-1B hires. This includes 52 percent of Level I jobs, 46 percent of Level II, 50 percent of Level III, and 44 percent of Level IV. Just because a worker had a lower wage offer did not mean that they were more likely to be underpaid relative to U.S. workers. In fact, the opposite was true (Table 3). Microsoft, Ama​zon​.Com Services, and Google exceeded the prevailing wage for U.S. workers on 57 percent, 67 percent, and 98 percent of their job offers, respectively. Yet EPI states that these companies are “are exploiting a flawed H-1B prevailing wage rule to underpay their H-1B workers relative to market wage standards.” This is incorrect.

H-1B employer requests at higher wage levels have doubled since 2010. EPI might assert that H-1B employers can write whatever they want on the H-1B application, so these numbers are meaningless. Of course, they are the same numbers on which EPI bases its report that concludes H‐​1Bs are underpaid, but more importantly, this theory would fail to explain why employers are increasingly requesting employees at higher wage levels. From 2010 to the second quarter of 2020, the share of H-1B jobs requested at Level I entry level wages fell from 54 to 13 percent, while wages for Level 2 workers almost doubled 29 to 48 percent. Level 3 grew from 11 to 25 percent, and Level 4 from 6 to 15 percent (Figure 1). EPI reports similar numbers, but fails to explain why employers would choose to do this, if it were not reflective of the market.

H-1B workers’ median wage was double the U.S. median wage and growing twice as fast as all U.S. wages. While the data unequivocally show that H-1B workers are not being underpaid relative to similar U.S. workers, it also shows that H-1B workers do not receive “low wages”—as EPI alleges—in an absolute sense either. The median H-1B worker received a salary of about $98,000 in FY 2019. The median for all workers was just short of $40,000. It is absurd to describe workers in the top 10 percent of wage earners as “low” paid. Figure 2 is also inconsistent with the idea that H-1B employers can pay whatever they want, regardless of the market. H-1B wages grew twice as fast as wages in the labor market overall from 2004 to 2019 (88 percent v. 38 percent).

H-1B law requires the government to allow wages based on skills and job duties. EPI’s entire report is based on the idea that employers shouldn’t offer wages based on a workers’ actual job responsibilities and skills and that the government should stop allowing this practice. Instead, they state that the Trump administration should bar wages below the 75th percentile for the entire occupation. That would effectively bar all current job offers at Level I-III wages and even most Level IV offers as well. It would shrink the program by about 95 percent. The law mandates that the government provide “at least 4 levels of wages commensurate with experience, education, and the level of supervision.” EPI asserts—without actually quoting the law—that the government can interpret this requirement as requiring all wage levels be far above the median wage for the entire occupation.

EPI claims that “DOL has yet to explain its reasoning and justification for setting the two lowest levels below the local median wage.” Yet this is false. DOL has explained how it arrives at the four levels in its Prevailing Wage Determination Policy Guidance. Level 1 “entry” wages are for those who have a basic understanding of the job and who perform only routine duties. Level 2 “qualified” wages are for those who have a good understanding of the job and perform moderately complex tasks. Level 3 experienced wages are for experienced workers who have a sound understanding of the job and have special skills or knowledge. Level 4 “fully competent,” supervisory wages are for those workers who solve “complex problems” that require “judgment and independent evaluation” with minimal supervision.

These wage classifications are entirely legitimate categories for evaluating pay and correspond to real observed differences in the wages of U.S. workers, as U.S. Citizenship and Immigration Services’ Administrative Appeals Office has recognized. Private businesses use similar classifications for determining what wage to offer when seeking new hires anyway. EPI fails to explain how DOL could base wages on “experience, education, and level of supervision” as the law requires without permitting wages across the entire wage distribution. Instead, it simply asserts that the median wage for the entire occupation is the “market” wage and that H-1B workers should always receive wages far higher than the median occupational wage, regardless of their experience, responsibilities, or skills.

If employers carried out EPI’s recommendation, it would result in H‐​1Bs being paid far more than comparably skilled U.S. workers in the same occupation. Obviously, this is an untenable result, and instead, the policy would effectively ban hiring nearly all H-1B workers. The H-1B program is the main on‐​ramp that recent foreign college graduates have to the U.S. labor market. Excluding these new skilled foreign workers, the entire immigration system for skilled foreign labor would shrink by more than 50 percent, and America would lose talented workers that are essential to the post‐​COVID‐​19 recovery.

May 15, 2020 1:16PM

Migration Reciprocity with Other Nations Is a Path Toward Expanding Legal Immigration

Cato just released a large white paper chock full of new and innovative ways to reform the legal U.S. immigration system for the 21st century. All of the essays are worth reading and they all shifted my opinion on the relative merits and demerits of certain proposals. But I especially want to highlight a point made by Michelangelo Landgrave in his chapter on a bilateral labor agreement with Canada.

Landgrave, my frequent coauthor, proposes a bilateral agreement between Canada and the United States where citizens of both countries can work in either country with minimal rules. He analyzes other such arrangements between developed countries offers some suggestions for how to adapt their rules to North America, but his most striking finding is how popular such an agreement would be among Americans – if it’s reciprocal. If Americans and Canadians can both work in each other’s countries, as long as there are certain rules, then it would be very popular with Americans.

Landgrave analyzed survey data on this point and found broad agreement along three principles of a bilateral agreement: work authorization, restricted welfare access, and reciprocity. He wrote:

Of the respondents, 66 percent favored a BLA if it were to allow immigrants to live and work, approximately 5 percentage points more than if immigrants faced work restrictions. Seventy percent favored the agreement if immigrants were to be explicitly denied access to welfare, a 13 percentage point difference compared with if welfare access were allowed. An explicit reciprocal agreement garnered the support of 70 percent of respondents. All three differences are statistically significant using conventional measures.

Landgrave discovers that there is a partisan gap in support for a bilateral worker agreement with Canada. While 76 percent of all Democrats favor such an agreement with Canada, 44 percent of all Republicans do. Landgrave is quick to point out that this gap is somewhat misleading. When all three principles of work authorization, restricted welfare access, and reciprocity are included in a proposed bilateral labor agreement, “a sizeable majority of Democrats (87 percent) and Republicans (64 percent) favored a BLA with Canada.”

Reciprocity in immigration reforms elicits a “this is fair” response among Americans. Anecdotally, one criticism I frequently hear against liberalizing U.S. immigration is that Americans can’t work in other countries and, if they tried to do so illegally, they would be treated much more harshly than the U.S. government treats illegal immigrants. Thus, Americans are treated worse than immigrants in their minds. I never thought this was a big criticism of liberalized immigration, but the results from Landgrave’s analysis of the survey data convinced me otherwise.

Reciprocity is an underused way to create a sense of fairness among Americans skeptical of liberalizing the immigration system. Essentially, it will probably convince Canadians to support such a system. I must confess, that I didn’t place much emphasis on the principle of reciprocity before. Immigration is a huge net benefit to the United States regardless of what other countries do. But reciprocity not only garners more support, it liberalizes immigration rules for other countries as well. Mutually beneficial policy changes like these should be seriously considered by policy makers who want to liberalize immigration.

Imagine the selling points for such a plan: “This will allow Americans the freedom to work in other countries. Yes, this will allow Canadians to work here and will allow you to work in Canada.” It also removes the (false) stigma that migrants from one country are exploiting another by making the movement two‐​way.

Of course, this can work with countries other than Canada. The biggest gains are with poorer nations like Mexico, but we should try this policy first with Canada to work out all of the problems. Then we can extend it to other developed nations and, eventually, to countries like Mexico, Haiti, and Guatemala. We can’t just steam roll our political opposition to immigration. Although I disagree with them and think their policy positions are bad for America, we need to address their concerns in thoughtful ways. A bilateral labor agreement that allows Canadians to work in the United States, under certain rules that restrict welfare access, and allows Americans to work in Canada under the same set of rules would do much to alleviate a visceral negative reaction to liberalized immigration.

May 14, 2020 12:08PM

Don’t Ban H-1B Workers: They Are Worth Their Weight in Innovation

The Trump Administration is reportedly working on an executive order to ban the issuance of new H-1B visas. His order is expected to be issued before the end of this month. His order would be quite a negative blow to the U.S. economy and hit American economic innovation the hardest. The H-1B visa system has problems: It’s unreasonably costly to change firms, workers are restrained from starting their own firms, and the wait times to adjust their status to a green card are absurdly long. Complete H-1B worker portability between firms, allowing workers to sponsor themselves if they start a firm, and reducing the backlog, as well as other reforms, need to be implemented. But ending the H-1B visa is not the way forward and will hurt American innovation especially.

H-1B visas are for highly skilled workers in specialty occupations. They have to make a minimum of $60,000 a year. Annually, 85,000 are available to U.S. firms with an additional uncapped number available for non-profit research institutions, universities, and governments. Many workers who get an H-1B visa start as students in an American university, adjust to an H-1B visa, and eventually earn an employment-based green card – but often with obscenely long waits. H-1B workers primarily labor in STEM and computer occupations.

H-1B workers have an especially big impact on American innovation. New technology and knowledge allow for more efficient machines and production processes that increase nationwide productivity. Highly skilled migrants on H-1B visa, as well as those on other visas and green cards, directly increase the production of knowledge through patents, innovation, and entrepreneurship. These effects are localized and diffuse throughout the country.

Read the rest of this post »
May 13, 2020 1:40PM

12 New Immigration Ideas for the 21st Century

Today, Cato released a new white paper entitled “12 New Immigration Ideas for the 21st Century.” Edited by myself and my colleague David J. Bier, the essays in this white paper are written by academics, policy analysts, advocates, and smart people from outside of the Beltway who each propose a new and innovative way to reform the U.S. immigration system. Most of the essay contributors participated in a workshop where their ideas were analyzed by other experts, immigration attorneys, and people who have worked on immigration reform on Capitol Hill. Our intent from the workshop was to expose and correct any deficiencies in the proposals and to help improve them. The resulting collection of essays represents the most innovative set of new immigration reform ideas in a single place.

Here is our introduction from the white paper in full:

Congress has repeatedly considered and rejected comprehensive immigration reform legislation over the past few decades. The most bitter debates were in 2006, 2007, and 2013 when comprehensive bills passed one house of Congress and not the other. Those reforms each failed for particular reasons—groundswells of populist opposition, Democratic senators working with Republicans to remove guest worker provisions, or Republican failure to bring it to the floor in the House of Representatives—but the bills were all basically identical.

Those failed immigration reforms all included three policies: legalize illegal immigrants currently living in the United States, increase border and interior enforcement of the immigration laws, and liberalize legal permanent immigration and temporary migration through an expanded guest worker visa program for lower‐​skilled workers. A domestic amnesty for illegal immigrants was supposed to clear the black market and allow those who have made a life here to settle permanently; extra enforcement was supposed to reduce the potential for illegal immigrants to come in the future; liberalized immigration was supposed to boost U.S. economic prosperity and drive future would‐​be illegal immigrants into the legal market.

In theory, this comprehensive approach was supposed to make future amnesties unnecessary by fixing the laws that encouraged illegal immigration in the first place. The bill Congress considered in 2013, the last attempt at comprehensive immigration reform, followed the same model, which is a major reason the bill failed. For instance, the guest worker provisions for lower‐​skilled workers were all clones and the result of negotiations between the same stakeholders.

Liberalizing legal immigration is the most important component of workable, long‐​term reform. The legal immigration system sets and regulates numbers, procedures, and the types of foreigners who can come to the United States from abroad to work, live, and in some cases eventually naturalize. Providing legal paths for more immigrants, either for temporary work or permanent citizenship, is the best way to secure the border and would help provide for the future prosperity of the United States. The government cannot regulate a black market of illegal immigrants, but it can regulate legal immigrants.

Expanding legal immigration is a worthy goal, but there are many ways to accomplish it. The mission of this collection of essays from policy analysts, economists, political scientists, journalists, and advocates from around the world is to provide new policy suggestions that future Congresses could use to liberalize the legal immigration system. We intentionally avoided seeking proposals from the usual stakeholders and included many original ideas that could increase legal immigration or improve the selection of legal immigrants. The essays fall into four broad categories based on how much they would transform the current legal immigration system. The first category includes proposed rule changes that would substantially improve the current system.

In one essay, Daniel Griswold of the Mercatus Center proposes that Congress abolish the static numerical caps on certain visas and instead create a built‐​in numerical escalator that automatically grows the number of visas as employment grows. For example, the number of H‐​1Bs issued would increase as employment in certain high technology sectors increases. Similarly, Stuart Anderson of the National Foundation for American Policy recommends addressing the extreme wait times that skilled immigrants currently face by guaranteeing them legal permanent residence within five years, essentially replacing numerical quotas with a specific wait time.

The second category of essays includes discussions of adding visa categories to the current system. Many of the ideas in this category are based on older visa programs that have been discontinued, visa programs in other countries, logical extensions to the current U.S. system, or admissions policies in other public institutions, such as military academies.

Michael Clemens of the Center for Global Development proposes a jointly regulated migration system with Mexico based on lessons learned from the past and best practices from other bilateral migration programs enacted around the world. Michelangelo Landgrave, a political science doctoral candidate at the University of California, Riverside, proposes a similar policy for Canada based on the principles of reciprocity in work authorization and limited access to welfare, of which, according to survey data, Americans and Canadians alike approve.

David Bier of the Cato Institute proposes state‐​based visas that would allow state governments to accept immigrants based on their diverse economic conditions. In a similar vein, coauthors Jack Graham and Rebekah Smith propose a system whereby local governments would work with private sponsors to bring immigrants into their communities. Both essays highlight the importance of engaging state governments to implement important reforms.

Grover Norquist of Americans for Tax Reform offers a proposal inspired by the acceptance policies of U.S. military academies. It would allow each member of Congress to sponsor 100 immigrants for legal permanent residence— similar to how they nominate recruits for U.S. military academies.

The third category includes proposed changes that would transform how the current U.S. immigration system works.

George Mason University professor Justin Gest envisions a major overhaul of the selection process for immigrants. Under his system, the government would collect much better data on various immigrant outcomes and track immigrants over time to see how they integrate. It would then assign points for immigrants with certain characteristics that the data show correlate with immigrant success.

Steve Kuhn of IDEAL Immigration proposes selling visas to employers, provided they’ve made job offers to foreign workers and paid the workers premiums that match the cost. Nathan Smith’s proposal would increase the number of immigrants admitted but charge them an extra 20 percent tax on their incomes so long as they reside and work in the United States.

The fourth category and the last two fundamental policy reform ideas come from Robin Hanson, associate professor of economics at George Mason University. His reforms would increase immigration, cause more Americans to profit directly from the immigration system, and provide a way to select immigrants that are more beneficial to the United States.

Hanson’s first essay is similar to Gest’s proposal but relies on a more decentralized decision making process to select immigrants using prediction markets. Under this proposal, the public would place cash bets in an open market on which immigrants would succeed based on objectively measurable criteria such as net‐​fiscal impact. The immigration system would then select those priced the highest. In his second essay, Hanson suggests letting U.S. citizens sell or lease their citizenship to noncitizens abroad in exchange for leaving the country. This would monetize the value of American citizenship and create an asset held by every American.

These proposed reforms are just a few of the new and interesting ideas out there. Hopefully, some will be incorporated into future bills; others could spark new and more creative ways of how to change immigration laws. We don’t endorse every essay in this paper, but the stagnant state of the current debate shows the need for bold new ideas and out‐​of‐​the‐​box thinking that will better prepare us for the next immigration reform debate.