Trump’s Immigration Firewall Will Not Aid the Economic Recovery

By Urbashee Paul – Urbashee is now an economics PhD candidate at Northeastern, where she is researching the impact of US immigration law changes on the American and international labor markets.

When pressed, President Trump’s supporters—a dwindling cohort—inevitably retreat to a common ground: despite his flaws, he is laser-focused on improving the United States economy, the rest of the world be damned. Trump’s recent immigration proclamation—which targets highly-skilled, foreign-born workers who are legally entering the U.S. on the basis of merit—appears, on the surface, to promote that singular mission. Indeed, the proclamation’s title speaks for itself: “A Proclamation Suspending Entry of Aliens Who Present a Risk to the U.S. Labor Market Following the Coronavirus Outbreak.” But closer examination reveals that, as a matter of fundamental labor economics, Trump’s proclamation rests on a false premise. The foreign workers whom Trump is denying entry do not present a risk to the U.S. labor market. Quite the opposite is true.  In signing this proclamation, Trump has effectively closed our doors to the very people who grease the wheels of U.S. innovation and job growth.

Trump’s executive order suspended the entry of several temporary work visa categories.  Most troubling among these suspensions is that of the H-1B visa, which empowers employers to hire foreign workers in occupations that require the application of highly specialized knowledge and the attainment of at least a bachelor’s degree. The largest employers of H-1B workers are tech companies, among them Amazon, Apple, Facebook, and Google. According to a recent study conducted by the National Foundation for American Policy, the demand for high-tech skills remains strong among employers in the U.S. labor market, with an unemployment rate for individuals in computer occupations of 2.8% in April 2020, compared to 15% in all other occupations.

Trump’s theory that foreign workers pose a risk to the labor market relies on the misinformed assumption that the workers he is targeting are perfect substitutes for native workers. But as a foundational labor economics study by Kerr and Lincoln demonstrated, high-skilled H-1B workers do not crowd out native workers in science and engineering occupations, and in fact, lead to small crowding-in effects. Similarly, another study finds using Census data that adding 100 H-1B workers results in an additional 183 jobs among U.S. natives—supporting the theory that high-skilled immigrant workers complement, rather than substitute native workers.

Through entrepreneurship, immigrants also create thousands of new jobs in the U.S. More than half of entrepreneurs in the San Francisco Bay area are foreign-born, and almost 45 percent of all companies on the 2019 Fortune 500 list were founded by immigrants or their children.  Unsurprisingly, a number of tech giants have denounced Trump’s stand against immigrant workers. Amazon stated in blunt rebuke: “Preventing high-skilled professionals from entering the country and contributing to America’s economic recovery puts America’s global competitiveness at risk.” Google’s CEO, an immigrant himself, tweeted “Immigration has contributed immensely to America’s economic success, making it a global leader in tech, and also Google the company it is today.”

The conventional wisdom is that U.S. employers pay foreign-born workers lower than market wages, thereby displacing native workers. Not so. As a matter of fact, the U.S. Department of Labor stipulates that employers must fill out a labor-condition application attesting to paying H-1B workers “a wage which is no less than the wage paid to similarly qualified workers”. A 2015 research paper showed that an increase in foreign-born STEM workers in the U.S. led to significant wage gains for college-educated native workers and increased total factor productivity in the U.S., even during the Great Recession. 

COVID-19 has rattled the U.S. economy. But raising a firewall on foreign-born tech professionals will only stifle our economic recovery and, ultimately, erode America’s technological and scientific dominance. Any country with its long-term economic interests in mind should be chomping at the bit to claim these skilled workers. America is fortunate that these skilled workers, for now, want to come here.