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Commentary By Allison Schrager

Conversation with E21: Jennifer Hunt on the State of America's Immigration System

Economics Immigration

Jennifer Hunt is a leading expert on the economics of immigration and wage inequality. She is a professor of economics at Rutgers University. From 2013-2015 she was first Chief Economist of the U.S. Department of Labor, then Deputy Assistant Secretary for Microeconomic Analysis at the U.S. Department of the Treasury.

What is the fiscal impact of the current US immigration program?

Currently, while both native-born and foreign-born American residents receive more in benefits than they contribute in taxes (this is why we have a budget deficit), foreign-born residents are more of a fiscal drain than native-born residents. However, the most important way in which the foreign-born are more costly may be unexpected: because they have more children, the cost of educating their children in public schools is higher. This could be viewed as an investment, since those same children of immigrants exert less pressure on the budget as adults than the children of native-born parents. 

A fiscal positive associated with foreign-born residents is that they tend to be younger than the native-born, so they tend to be working and not receiving Social Security. This begs the question of what will happen in the future, as the foreign-born age. So many assumptions are required to make the calculations to answer this question that it is very difficult to determine.

What kind of visas give us the biggest bang for our buck in terms of innovation, job growth, and tax revenue?

This question gives me the opportunity to point out that there isn’t a clear “buck.” Immigration results in both winners and losers among the native-born, but the overall effect on natives is positive. This is not disputed by any economist. Economists who favor reducing immigration do so because they believe it is worth foregoing the overall benefits in order to protect the least-skilled native-born citizens, who are the losers under the current situation. I would advocate maintaining immigration and helping the losers in other ways.

Concerning the biggest bang: it is tempting to favor skilled STEM workers. My own research has shown that they increase patenting per capita: because this increases economic growth, not just the level of the economy, these workers have beneficial effects that compound over time. In contrast, general immigration makes a one-time contribution to the economy. However, it is hard to be sure that STEM workers contribute more than low-skilled workers. We expect the greatest contribution to the level of the economy from those workers who are most different from the native-born, whether they are unskilled workers or very skilled workers.  These kinds of immigrants allow greater specialization in the economy, including allowing natives to specialize in language- and communication-intensive jobs, which improves efficiency. 

Another point to note is that, among skilled workers, we study STEM workers in particular because we can measure their innovation via patents. There are many other types of innovation that aren’t patentable (and thus not as easily measurable), but nevertheless lead to growth. It is possible that immigrants also contribute to these innovations that are harder to measure.

Most of America's permanent immigration is lower skill family reunification. Should we encourage more economic migration?

My arguments above would support more immigration of both types. It is useful to bear in mind that the US is not a high immigration country compared to Canada, Australia, Switzerland, and some other countries, if immigration is measured as a share of the population. So, yes: more economic migration would increase GDP per capita, and this increased migration need not be at the expense of family reunification. With or without increased migration, it would be beneficial to expand childhood programs to help children from disadvantaged families overcome the negative effects of immigration and other, probably larger, pressures on their wages.

In your opinion, what would an ideal immigration policy look like?

This is fundamentally subjective. The arguments against free migration either are about the distribution of the economic benefits, or are not economic in nature. The right distribution of income generally is subjective, as are preferences regarding non-economic factors such as culture.

Would a points system work better than what we have now?

There is no guarantee that it would. The traditional point system involves the government deciding who can immigrate, and governments are worse than firms in judging the best workers. So even if it is true that innovative STEM immigrants are the most valuable immigrants, the points system would not necessarily select them. Australia and Canada are moving from their traditional point systems toward a hybrid system where the government selects a pool of potential migrants from which employers can then choose. This new approach may be an improvement over the traditional points system.

The H1-B visa is a pathway to work and eventually permanent residency for many highly skilled migrants, but it's not without problems and abuses. How would you reform it?

One of the fundamental problems with the US immigration system is the mismatch between temporary visas and green cards (permanent residence). In many countries, working a certain number of years on a temporary visa leads automatically to permanent residence, with some exceptions, such as temporary workers with criminal convictions. In the US, we have separate quotas for visas and green cards, and have made the quota for H-1B visas large enough that there are many more temporary visa holders applying for green cards than there are green cards. Currently many workers are therefore in a special limbo state where their H-1B visa has expired but there is not yet a green card available for them. This needs to be fixed.

You’ve said before that the O-1 visa is really the category that is meant to bring the “best and brightest” immigrants to work in the United States. Are we getting all that we can out of this pathway? Are there opportunities to reform the way that we issue O-1s?

There is an inherent difficulty with the O-1 visa approach that is related to the point system issue. For a government to be really sure that someone is the best and brightest, the immigrant must have a documented track record. This means, though, that they will tend to be older, and the US will miss out on some of their most creative or productive years—and potentially overlook promising young immigrants. Furthermore, admitting more people via the O-1 visa is not an effective answer, as it would make the green card bottleneck even worse. 

Allison Schrager is a senior fellow at the Manhattan Institute. Follow her on Twitter here.

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