STEM Immigrants Raise American Wages and Increase Economic Growth

Immigrants in science, technology, engineering, and mathematics fields have been responsible for higher wages among American workers, according to a new National Bureau of Economic Analysis working paper by

economists Giovanni Peri (University of California, Davis), Chad Sparber (Colgate University), and Kevin Shih (University of California, Davis). They looked at 219 U.S. cities from 1990 to 2010, the number of H-1B STEM workers in a city, and the effect on wages, employment, and productivity for college- and non-college-educated native workers.

In a given city, a one percentage point increase in foreign STEM workers’ share of total employment raised the wage growth of native-born Americans with a college degree by seven to eight percentage points.  The wages of Americans without a college degree rose by three to four percentage points. This translates into tens of thousands of additional earnings over the span of a career. The authors say a one percentage point increase in foreign STEM workers’ share of total employment reflects the change over the period 1990 to 2010.

Peri and his coauthors cite a vast literature that explains how important STEM advances are in creating economic growth. They conclude that “foreign STEM growth can explain between a third and a half of the average productivity growth in the period 1990-2010.”

The paper found no effect of foreign STEM workers on employment prospects for Americans. However, past research by Peri found that increasing legal immigration, regardless of education or occupation, would improve job prospects for American workers more than increasing deportation or border control.

Peri et al. had a very specific reason for analyzing the effect of STEM immigrants on cities instead of the nation as a whole. They write, “Tacit knowledge and face to face interactions still make a difference in the speed at which new ideas are locally adopted.” Innovative workers are more productive when they are concentrated in the same city. This is why high-tech startups tend to flock toward Silicon Valley—there are positive effects to clustering around the best and brightest in the field.

The city-based focus of the authors’ research could be seen by immigration advocates as reason to decentralize immigration from the federal government. With Congress dragging its feet on comprehensive immigration reform, cities and states in need of economic growth are looking to break the status quo on immigration.

One such state is Michigan, where Republican Governor Rick Snyder requested 50,000 special federal immigration visas over five years to attract foreign professionals to Detroit. The city has lost over 1 million residents in the past 60 years, and 50,000 STEM immigrants would boost the struggling city’s population, wages, and productivity, all without harming locals.

Massachusetts Democratic Governor Deval Patrick proposed the Global Entrepreneur in Residence Program, which would allow some foreign students who studied in Massachusetts to work at a participating university. Colleges and universities are exempt from the arbitrary H-1B visa caps and can employ as many H-1B employees as they desire. Though it would be preferable for these immigrants to have more private sector options, the Global Entrepreneur in Residence Program would allow them to remain in the country and increase their chances of future H-1B sponsorship through private employers.

The current H-1B visa cap of 65,000 foreign nationals, plus 20,000 more for those with advanced degrees, is insufficient. The limit was reached a week after applications for 2015 were open on April 1, 2014. The Border Security, Economic Opportunity, and Immigration Modernization Act of 2013, passed out of the Senate last June with bipartisan support, would keep the yearly H-1B cap but increase it significantly to 205,000. The Act is flawed in several ways, but would still represent an improvement on the status quo.

It is becoming increasingly clear that America’s restrictive immigration laws are holding back the U.S. economy. While Congress slow-walks this exceptional economic opportunity for immigration reform, states are taking matters into their own hands. The latest NBER study provides yet another reason for taking action now and expanding the number of legal visas.

Jason Russell is a research associate at Economics21 at the Manhattan Institute for Policy Research. You can follow him on Twitter here.

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