The Business Case for Comprehensive Immigration Reform
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Policy Organizations Economics Aug 14, 2019

The Business Case for Comprehensive Immigration Reform

Two economists propose a bipartisan immigration overhaul, with an eye towards the future of the labor force.

An H1-B Visa holder applies for a job

Yevgenia Nayberg

Based on insights from

Benjamin Harris

Douglas Holtz-Eakin

The Kellogg School convened a panel discussion earlier this year on the economic impact of U.S. immigration policy.

The speakers included Benjamin Harris, executive director of Kellogg Public–Private Initiative and former chief economist for Vice President Joe Biden, and Douglas Holtz-Eakin, President of the American Action Forum, former director of the Congressional Budget Office and chief economic policy adviser for John McCain’s 2008 presidential campaign.

This Q&A was compiled from that conversation, as well as follow-up interviews with Harris and Holtz-Eakin, with responses edited for length and clarity.

Kellogg Insight: We’re used to hearing about immigration as a moral and political issue. Why does it matter from a business perspective?

Harris: It’s almost impossible to imagine our country’s economy growing the way we would like to see it grow without a suitable immigration system. For example, looking forward, we’re going to need a lot more home-care workers. And we hear tech firms saying, “We need more programmers.” It would be great if there were native-born people who could do these jobs, but we just don’t have enough of them, and we can’t train them fast enough to fill these slots. So we only have one other option and that’s just to look abroad; otherwise we’ll have shortages. And we are seeing shortages now.

Holtz-Eakin: Big picture, if you just look at the numbers, the native-born population in the U.S. has sub-replacement fertility. We don’t have enough babies. So, in the absence of immigration, the United States becomes progressively older, smaller, less influential, and less capable of projecting its values, like democracy, around the globe.

Harris: Also, there are these immigration success stories. The corporate sector is littered with successful CEOs who came from abroad, and now you see them hiring five, ten, twenty thousand workers. They produce products that Americans enjoy. They pay taxes on their corporate profits, and we use that tax revenue to do great things in this country. Those businesses wouldn’t be created without immigrants.

Insight: But aren’t there also economic drawbacks to immigration? For instance, hasn’t immigration led to lower wages in the U.S.?

Harris: When you take Economics 101, you learn that the shift in the supply curve that comes with immigration should push wages down. But then you take Economics 102 and realize that we’re not talking about the same type of workers. Immigrants tend to have really different skills than native-born Americans, so they end up being more complements than substitutes.

Holtz-Eakin: You have to look pretty hard at specific areas and specific low-skilled workers to find any evidence that immigration lowers wages. For example, in 1980, over 100,000 Cubans arrived in Miami via the Mariel boatlift—many of them very low-skilled. But despite what people tend to think, it has taken an enormous amount of effort and torturing of the data to find any evidence that low-skilled wages were suppressed in the Miami metropolitan area.

Harris: When it comes to skilled workers, some people worry that the system—especially the H1-B visa program, [which grants temporary visas to immigrants with advanced expertise in fields like engineering, math, and science]—is being used to hold down wages. But the H1-B program has rather elaborate safeguards to try and protect against this. And while there is some academic evidence that H1-Bs do suppress wages a bit, or at least they did a few decades ago, in my opinion that’s a signal that we should revisit safeguards, rather than be wary of skilled immigration altogether.

“Broadly speaking, we just need more visas of all kinds to help fill vacant jobs.”

— Benjamin Harris

Insight: Tell us a little bit more about how the U.S. immigration system works. Where do you think it most needs reform?

Holtz-Eakin: It’s a system built on family reunification and humanitarian intentions, largely, and not much on economics. So there’s sort of this randomness to the economic content of the people who come in. They may be entrepreneurial and/or high-skilled, but they just as likely may not.

Harris: One knock on the current system is that it’s not well designed to meet the needs of U.S. companies. For example, each year, about 1.1 million people transition to permanent status. Of those 1.1 million, the bulk are transitioning for family-based reasons, with only 140,000 for employment-based reasons—a drop in the bucket relative to the size of our labor market. Broadly speaking, we just need more visas of all kinds to help fill vacant jobs.

For instance, take H-1B visas. Since the Great Recession, those tend to get filled up within about five days of the application opening. So it’s a pretty good signal that we’re not allocating enough visas.

Insight: The two of you are currently working on an immigration reform plan you hope will get bipartisan support from lawmakers. Tell us about that plan.

Harris: We started by looking back at S-744, an immigration reform bill that passed the Senate with 68 votes in 2013, when everyone was talking about the lack of bipartisanship. It was this rare bipartisan victory. So Doug and I said, “Look, here’s something which can be palatable to reasonable bipartisan lawmakers. Let’s start there.” That bill was a points-based approach—basically putting together an algorithm that assigned points for different characteristics and then came out with a single score.

Holtz-Eakin: Our plan essentially has two ways for people to demonstrate their value in the U.S. labor market. One is that they have credentials like a college degree, maybe from a U.S. university, or they have language skills. You get points for those things. The second way is, if you don’t have the fancy piece of paper, you can work. If you have a job offer, you can come on a temporary visa, demonstrate that you can hold down a job and contribute to the economy and society, and after a period of time we say, “Okay, that person gets points because they’ve shown that they’re a good worker.”

Harris: Then the U.S. government would basically decide how many people to let in, and based on that, we would say, “Everyone above a score of 70 can come in,” or “Everyone above a score of 50.” This is very similar to what Australia and Canada did with a fair amount of success.

Holtz-Eakin: It’s basically replacing all these targeted programs—H-1s, H-2s, H-4s—with a core visa-granting system that respects this economic value.

Insight: Does more economic focus mean paying less attention to other circumstances, such as asylum-seeking status or family relationships?

Holtz-Eakin: It’s important to emphasize that it is not an exclusively economic system. There is still a place for the United States to unify families and to welcome those who are being persecuted. These are long-standing and widely shared goals of U.S. immigration policy.

Harris: We focus solely on family- and jobs-based immigration, without weighing in on the humanitarian side of the system. But I will say that we both value the role of asylum in the U.S. immigration system and don’t think it should be curtailed. Also, our plan recognizes and respects the long-standing tradition of keeping extended families together, so we propose awarding points for family relationships. The major difference is that we also consider other criteria, rather than the current system, which awards a lot of visas exclusively for non-immediate family ties. Our plan would reduce wait times for many prospective immigrants—wait times that can now approach two decades. From that perspective, I would say ours is more pro-family than the current system.

More broadly, it’s not that I don’t think of immigration as a moral or humanitarian issue. I do. I just don’t think that the moral argument is going to get us a better system. Sometimes rather than wagging your finger and saying, “You’re a terrible person if you don’t want immigrants coming to the United States,” I think it’s much more compelling to make the case, “Look, this is good for everyone. And it’s going to be really hard for our economy to thrive without it.”

“It’s just not true that everyone’s sitting out there hating immigrants. It’s political demagoguery, I think, that’s stirred up that idea.”

— Douglas Holtz-Eakin

Insight: And would your plan also increase the number of immigrants we brought in, to address labor shortages?

Harris: Yes. One of the plan’s guiding principles is allowing employers to draw on immigrants for jobs that U.S. citizens don’t want or can’t fill. But we do build flexibility into the system, so that the number of admitted workers goes down when jobs are less plentiful. If that need is especially high, the total number of visas goes up.

Holtz-Eakin: Again, from an economic perspective it does not make sense to establish a firm cap to immigration years, or even decades, in advance. The goal is to have economic conditions play a greater role in determining the inflow. Right now, the need is for more immigration.

Insight: This would be a significant reform to our immigration system. Is such a drastic change really viable in this divided political climate?

Harris: We’ve come close to reform before. Remember: in 2013, a comprehensive immigration plan got 68 votes in the Senate at a time when things were about as polarized as they are now. And it’s a lot easier to pass comprehensive immigration reform today when we’re at full employment than if people are searching for jobs.

Holtz-Eakin: Also, it’s not true that our country is divided on immigration. Back in 2013, we did some polling on self-identified Republican primary voters—this is the Republican base. And when we asked if the system’s broken, 80 percent agreed, 20 percent disagreed. Asked if they want to get it legislatively fixed: again, 80-20. Asked whether immigration’s good for America: 80-20. So it’s just not true that everyone’s sitting out there hating immigrants. It’s political demagoguery, I think, that’s stirred up that idea.

Insight: What is the status of your reform plan right now?

Harris: We’re putting the final details on it. It’s being vetted by immigration experts. I can’t say for certain when it’s going to come out, but when we do release it, the hope is that some policymakers will see it and will find it attractive and eventually we’ll find a sponsor.

Insight: President Trump recently unveiled his own immigration plan, which also included a points-based system. How was his plan different or similar to what you’re proposing?

Harris: The Trump plan is not public yet, so we can’t say for sure. But based on the Administration’s talking points, our plan is very different than what is being proposed by President Trump. Our plan would boost high-skilled immigration, his would lower it. Our plan would help keep families together, his would separate them. Our plan would allow for more legal immigration, his would demand less. Our plan would look at the whole applicant when deciding who gets a visa, his would preserve the practice of awarding visas for only a single criterion. So, on the whole, we take a very different position on comprehensive immigration reform.

Holtz-Eakin: Yes, as near as we can tell, the common point is that there is a point system. But points are merely the means to an end, and our objectives appear to be quite different from those in his plan.

Featured Faculty

Previously a Visiting Associate Professor at Kellogg

About the Writer
Jake J. Smith is a research editor at Kellogg Insight.
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