One of the biggest challenges ever to face the U.S. (and global) economy emerged completely unforeseen this year: the novel coronavirus. While the data has yet to reflect the full scope of the damage done, we can already see the signs of economic stress and erosion both in a macro and individual sense. Despite promising jobs numbers in May and June 2020, the reality is the employment market will likely be in the worst state we’ve seen in years, for years.
In various discussions about the needed course correction for the job market, one common thread is the need for the country’s leadership to pull as many levers as possible to soften the free-fall. Despite a generally lackadaisical and disorganized response to the crisis, in June 2020, the current White House administration took one predictable hard-line stance in the fight against unemployment by suspending all work and student visa programs including H-1Bs through the rest of the year.
Ostensibly with this order, the U.S. is working to reduce the potential for international transmission of the virus. A solid strategy as New York State commonly links the overwhelming spring outbreak there to the millions of Europeans who visited New York in February largely unchecked. Additionally, the White House has tied the suspension of these visas to the desire to avoid a protracted economic recovery should the labor market supply exceed the demand thanks to a glut of immigrant workers. As a human capital expert and someone who believes economies are driven and bolstered by talent, I find myself battling these common misconceptions about immigrant talent.
Below I’ll explore the main ideas at the heart, if not exact language, of the executive order
that push misconceptions about how immigrant workers affect the U.S. economy and if restrictive migration practices actually “protect the U.S. economy.”
Myth 1: The U.S. will be more competitive if the borders close
The technology market is one of the crown jewels of the U.S. economy, valued at around $1.7T or 32%
of the entire world’s technology spend. This market domination is possible in part due to the open nature of the American society and economy which allows for rapid investment, innovation and collaboration. This openness is one of the competitive advantages of working in the U.S. and has attracted the kind of innovative talent that makes it one of the most aspirational countries to work in for foreigners (including myself). In fact, more than half of the start-ups valued at over $1B (think Google, Tesla, Uber
) were co-founded by immigrants.
While it is true that the United States faces a protracted economic recovery - and once in a lifetime unemployment levels due to the COVID-19 outbreak - the negative effects of the pandemic will be heightened further if foreigners perceive the country as unfriendly or unsupportive to the groups that helped to make it great in the first place.
By suspending the visas of such a broad swath of international workers, the country will be put at a distinct disadvantage as highly skilled workers turn to more welcoming shores. Canada, Mexico and other more accepting countries will benefit from the borderless nature of today’s businesses. Companies benefit from having a global workforce that understands a diverse range of cultures and practices. This globalization has fueled technological innovation and cross sector growth throughout national and global
economies. Isolating policies like this one send the wrong message on a global scale and discourage the rapid growth that has made the U.S. so influential. If people no longer see the U.S. as a safe space for new ideas and diverse individuals, it may start a cycle of brain drain which could be difficult to recover from.
Myth #2: American workers compete against foreign nationals for jobs in every sector of our economy, including against millions of aliens who enter the United States to perform temporary work
With millions unemployed (around 30 million are receiving government unemployment benefits
), on the surface, the idea of reducing foreign competition for native jobs does seem logical. However, research by the Wharton School
has found that restrictive migration policies have actually actively reduced the availability of work within U.S. borders. Companies seeking welcoming borders for their globalized workforces were more likely to offshore work to avoid dealing with onerous immigration laws and tie ups in the United States.
H-1B workers generally perform highly skilled work in the STEM fields and research has shown that the presence of these workers has led to a significant increase in wages for U.S.-born workers nationwide over a 10-year period. A thirteen year study found that the largest beneficiaries from the presence of H-1B visa holders in the American job market are college educated, young Americans who see reduced levels of unemployment and faster earnings growth in career fields with high numbers of H-1B employees.
Myth # 3 Hiring native keeps money native
Another popular refrain is that immigrant workers send money back to their home countries, which negatively impacts the U.S. bottom line. While remittances are common, the benefits to the U.S. foreign workers and students bring to the U.S., in terms of actual dollars and diplomatic currency, far outweigh the net worth of international remittances. Foreign students alone pay a large number of fees to study mostly STEM programs at universities all over the U.S. In fact, international students (who make up about 12% of the U.S. university population) account for more than double that percentage (28%) of total tuition revenue.
Furthermore, a large percentage of the 525,000 workers affected by this order are highly skilled and thus command high salaries, upon which they pay taxes, make purchases and have disposable income which drives the economy. Much of this work can be done remotely which means disruptions due to coronavirus are minimal as the work was never dependent wholly on workers congregating in one place. Their economic contribution to the United States should be embraced and welcomed, especially considering likely the global economic contraction in the next 18 months.
Closing off the U.S. borders to highly skilled talent will not stem the rising tide of unemployment, economic contraction and recession that looms large over the U.S. In fact, it’s likely to exacerbate that painful slide as the country becomes less innovative and less attractive to immigrants - both temporary and permanent ones. The evidence has shown that there is no sound economic reasoning behind the logic as there’s never been a time when increased immigration didn’t lead to increased prosperity and productivity for America as a whole.
Read the full article in Nasdaq