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1
Costs and Benefits of High Skilled Immigration
March 31, 2009
copies of this presentation can be found atwww.antolin-davies.com
2
How significant is immigration?
• All production has its roots in technology, capital, materials, and labor.
• Technology, capital, and materials are created by labor.
Labor is the root of all production.
3
Source: 2009 Yearbook of Immigration Statistics, Office of Immigration Statistics, US Department of Homeland Security.
The immigration rate has almost doubled since 1970.
4
Source: Statistical Abstract of the US, Bureau of the Census.
Immigration has grown from 20% of net births in 1970 to 68% in 2006.
Immigrants are a huge source of new Americans.
5
Whence do immigrants come and where do they go?
• Mexico
• California
6
Source: Statistical Abstract of the US, Bureau of the Census.
The number of Mexican immigrants is more than three times the number from China and India combined.
7
Foreign Born Workers (2005)
0%
5%
10%
15%
20%
25%
30%
35%
40%C
alifo
rnia
New
Yor
kN
ew J
erse
yF
lorid
aN
evad
aH
awai
iT
exas
Ariz
ona
Dis
tric
t of
Col
umbi
aM
assa
chus
etts
Mar
ylan
dR
hode
isla
ndIll
inoi
sC
onne
ctic
utW
ashi
ngto
nV
irgin
iaG
eorg
iaC
olor
ado
Ore
gon
New
Mex
ico
Nor
th C
arol
ina
Del
awar
eA
lask
aU
tah
Min
neso
taM
ichi
gan
Idah
oN
ebra
ska
Okl
ahom
aT
enne
ssee
Kan
sas
Iow
aW
isco
nsin
Pen
nsyl
vani
aN
ew H
amps
hire
Loui
sian
aV
erm
ont
Ken
tuck
yIn
dian
aS
outh
Car
olin
aO
hio
Ark
ansa
sM
aine
Mis
sour
iW
yom
ing
Ala
bam
aS
outh
Dak
ota
Mis
siss
ippi
Mon
tana
Nor
th D
akot
aW
est
Virg
inia
Fra
cti
on
of
Civ
ilia
n L
ab
or
Fo
rce
Source: Current Population Survey, 2005, Minnesota Population Center.
8
Source: Office of Immigration Statistics, Department of Homeland Security.
Indians comprise the majority of H-1B applicants.
9
What is the impact of immigration on jobs and incomes?
• Unemployment rate?
Conventional wisdom: Immigrants take jobs away from Americans thereby increasing the unemployment rate.
• Income distribution?
Conventional wisdom: Immigrants represent an influx of lower income people thereby worsening the distribution of income.
10
Immigration has no apparent impact on the unemployment rate.
Source: Statistical Abstract of the US, Bureau of the Census.
11
Immigration has a possible impact on the distribution of income. (But, worsening income distribution does not mean that the poor are poorer.)
Source: Statistical Abstract of the US, Bureau of the Census.
Eq
ualit
y
In
eq
ualit
y
1989 – 1992
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
< $
15,0
00
$15,0
00 -
$25,0
00
$25,0
00 -
$35,0
00
$35,0
00 -
$50,0
00
$50,0
00 -
$75,0
00
$75,0
00 -
$100,0
00
> $
100,0
00
% o
f H
ou
seh
old
s
1980
Income Distribution for 1980 (in 2003$)
Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2006.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
< $
15,0
00
$15,0
00 -
$25,0
00
$25,0
00 -
$35,0
00
$35,0
00 -
$50,0
00
$50,0
00 -
$75,0
00
$75,0
00 -
$100,0
00
> $
100,0
00
% o
f H
ou
seh
old
s
1980 2003
Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2006.
Income Distribution for 2003 (in 2003$)
14
Foreign workers in U.S.
Higher skilled labor
Lower skilled labor
Foreign Nationals
Entrepreneur Filter
Minimum Wage
Quality Higher Education
Immigration is a Filter
15
Factors influencing influx of foreign unskilled labor
• Supply effect: Increase in the minimum wage increases the attractiveness of U.S. jobs to potential immigrants.
Difficult to measure because legal immigration is capped.
Look at supply of illegal immigrants as a proxy for the supply of unskilled immigrants.
16
Source: Department of Homeland Security and Bureau of Labor Statistics
Supply effect: Increases in the minimum wage make US jobs more attractive to foreigners.
2002 – 2007
17
Source: Department of Homeland Security and Bureau of Labor Statistics
2002 – 2007
Supply Effect
Pre 9/11 10% increase in minimum wage 7% increase in immigration.
Post 9/11 10% increase in minimum wage 5% increase in immigration.
18
Factors influencing influx of foreign unskilled labor
• Demand effect: Increase in the minimum wage forces employers to favor more productive workers over less productive workers.
Difficult to measure because differences in productivity are hard to measure.
Look at unemployment of educated vs. uneducated as a proxy for preference for more productive vs. less productive workers.
19
Source: Statistical Abstract of the United States, and Bureau of Labor Statistics
Demand effect: Minimum wage has no impact on unemployment among higher skilled workers.
20
Source: Statistical Abstract of the United States, and Bureau of Labor Statistics
Demand effect: Overall, there is a slightly positive relationship between the minimum wage and unemployment.
21
Source: Statistical Abstract of the United States, and Bureau of Labor Statistics
Demand effect: Minimum wage is associated with significant unemployment among lesser skilled workers.
A 10% increase in the minimum wage is associated with a 2.3 percentage point increase in the unemployment rate.
22
Summary: Factors influencing influx of foreign unskilled labor
• Supply effect
Higher minimum wage increase in supply of unskilled immigrants.
• Demand effect
Higher minimum wage increase in demand for more productive workers.
(via entrepreneurial filter and on average, unskilled immigrants will be more productive than unskilled domestic workers).
23
Factors influencing influx of foreign high-skilled labor
• Supply effect: High quality of U.S. higher education attracts top foreign students who then want to stay on in the U.S.
• Demand effect: Increases in technology require higher skilled workers for R&D and implementation.
75% of F-1 graduate students surveyed stated that they wanted to reside in the U.S. following their studies.
Fiscal year 2009 quota of H-1B visas was reached April 2008.
24
Source: Survey of Current Business, Bureau of Labor Statistics.
Supply effect: Quality of U.S. higher education attracts top foreign students.
Value of Net Exports
25
How do high-skilled H-1B approvals alter U.S. demographics?
26
Source: Office of Immigration Statistics, Department of Homeland Security.
Age
27
Source: Office of Immigration Statistics, Department of Homeland Security; Statistical Abstract of the United States, Bureau of the Census.
H-1B approvals are in the prime of their earning years.
US Population H-1B Applicants
Age
28
Source: Office of Immigration Statistics, Department of Homeland Security.
29
Source: Office of Immigration Statistics, Department of Homeland Security; Statistical Abstract of the United States, Bureau of the Census.
H-1B approvals are highly educated.
US Population H-1B Applicants
30
Are H-1B approvals a drain on Social Security?
31
Source: Office of Immigration Statistics, Department of Homeland Security; Statistical Abstract of the United States, Bureau of the Census; Social Security Administration
Present value of expected contributions = $318,000
Present value of expected benefits = $62,000
32
Source: Office of Immigration Statistics, Department of Homeland Security; Statistical Abstract of the United States, Bureau of the Census
Present value of expected contributions = $52,000
33
Are H-1B approvals a drain on Social Security?
The median H-1B who remains in the country contributes a net positive of more than $250,000 to Social Security.
The median H-1B who leaves the country when the visa expires contributes a net positive of more than $50,000 to Social Security.
34
What do H-1B’s contribute in income taxes?
35
According to a recent study by the Technology Policy Institute:
Relaxation of H-1B and Green Card restrictions over the period 2003 – 2007 would have resulted in $8 billion in additional Federal income tax revenues.
Source: The Budgetary Effects of High-Skilled Immigration Reform, Arlene Holen, March 2009.
36
Are U.S. employers taking advantage of H-1B’s by paying them a lower wage?
Look at wages paid at colleges and universities because higher education is exempt from many of the H-1B hiring restrictions.
37
Source: Office of Immigration Statistics, Department of Homeland Security; Chronicle of Higher Education
H-1B’s are paid commensurately with other faculty.
38
What do high-skilled H-1B workers do besides work?
39
Source: America’s New Immigrant Entrepreneurs, UC Berkeley and Duke University, 2007.
25% of engineering and tech firms founded between 1995 and 2005 were founded by immigrants.
40
How many jobs do they occupy?
How many jobs do they create?
41
Source: Office of Immigration Statistics, Department of Homeland Security
Jobs occupied by H-1B’s…
42
Company Founder Country of Origin Employees
Intel Andy Grove Hungary 86,300
Sun Bechtolsheim/Khosla Germany/India 34,900
Yahoo Jerry Yang Taiwan 13,600
Google Sergey Brin Russia 20,222
eBay Pierre Omidyar France 16,200
Jobs created by H-1B’s (as of 2008)
43
Source: Office of Immigration Statistics, Department of Homeland Security; SEC filings of the indicated companies
Combined direct job creation (as of 2008): Intel, Sun, Yahoo, Google, eBay
44
How much do we pay them?
How much wealth do they create?
45
Source: Office of Immigration Statistics, Department of Homeland Security
Income earned by H-1B’s…
46
Company Founder Country of Origin Market Cap
Intel Andy Grove Hungary $86 billion
Sun Bechtolsheim/Khosla Germany/India $6 billion
Yahoo Jerry Yang Taiwan $18 billion
Google Sergey Brin Russia $110 billion
eBay Pierre Omidyar France $17 billion
Wealth created by H-1B’s (as of 2008)
47
Source: Office of Immigration Statistics, Department of Homeland Security; SEC filings of the indicated companies
Combined market value (as of 2008):
Intel, Sun, Yahoo, Google, eBay
48
Increasing H-1B labor reduces outsourcing.
49
H1-B labor is similar to outsourcing with the exceptions:
• Workers spend money directly in the US rather than importing from the US.
More consumption and improved tax base.
• There are “spillover” effects in the form of community involvement and enrichment.
Diversity.
• The children of educated immigrant labor will tend to become educated themselves and to remain in the U.S.
More educated populace.
50
Outsourcing (2002)
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
Germ
any
US
Japan
Neth
erlands
Italy
Fra
nce
UK
India
Chin
a
Russia
Bil
lio
ns c
urr
en
t $
Source: Balance of Payment Statistics Yearbook, IMF
51
Source: Balance of Payment Statistics Yearbook, IMF
Outsourcing as Fraction of GDP (2002)
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Angola
Congo (
Rep.
of)
Mozam
biq
ue
Irela
nd
Vanuatu
India
Germ
any
Russia
Fra
nce
UK
Chin
a
Japan
US
Bil
lio
ns c
urr
en
t $
52
Source: Balance of Payment Statistics Yearbook, IMF
Insourcing less Outsourcing (2002)
($15,000)
($10,000)
($5,000)
$0
$5,000
$10,000
$15,000
$20,000
$25,000
UK
US
Hong K
ong
India
Sin
gapore
Chin
a
Fra
nce
Russia
Italy
Kore
a
Indonesia
Japan
Germ
any
Bil
lio
ns c
urr
en
t $
53
Summary
Immigration is an Entrepreneurial Filter
Immigration is a filter that favors those with entrepreneurial talents.
H-1B Immigrants Are Net Contributors to Social Security
Each H-1B immigrant adds the equivalent of $250,000 to the Social Security budget.
54
Summary
H-1B Immigrants Create Jobs
Jobs directly created by just five H-1B founded firms outnumber all the jobs occupied by a year’s worth of H-1B immigrants.
H-1B Immigrants Create Value
Value of just five H-1B founded firms is 20 times the wages paid to all H-1B immigrants over the past decade.
55
Summary
Immigrants Are Future Americans
The more H-1B immigrants we have, the more Americans we will have who are highly skilled in science, technology, engineering, and mathematics.
56
Warning
Entrepreneurial Spirit is a Function of the People
If we don’t admit these highly qualified and entrepreneurial people or we adopt economic policies that disincent entrepreneurs, this wealth of talent will go elsewhere.
H-1B immigrants will contribute to economic growth. The question before us is, will they do that in the U.S. or elsewhere?
57
Costs and Benefits of High Skilled Immigration
March 31, 2009
copies of this presentation can be found atwww.antolin-davies.com
58
H-1B labor and outsourcing are simply forms of trade in which labor is imported.
The money paid for the labor comes back as increased exports of US goods to foreigners.
In general, what is the impact of trade?
59
Ignoring the specifics of what is traded, what is the impact of trade on national incomes?
60
R2 = 0.56
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000
Per-capita Income (US$)
Per
-cap
ita
Tra
de
(US
$)
Luxembourg
Belgium
IrelandNetherlands
JapanUS
Bahrain
Source: International Financial Statistics, International Monetary Fund
Per-capita income (2001, US$ PPP)
61
R2 = 0.59
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500
Per-capita Income (US$)
Per
-cap
ita
Tra
de
(US
$)
Suriname
Lithuania
Samoa
Russia
ColombiaPeru
Guyana
Source: International Financial Statistics, International Monetary Fund
Per-capita income (2001, US$ PPP)
Low and Low-Middle Income Countries
62
Ignoring the specifics of what is traded, what is the impact of trade on income distributions?
63
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 55.0 60.0 65.0
Gini Coefficient (0 = equitable, 100 = inequitable)
Per
-cap
ita
Tra
de
(US
$)
US
Switzerland
Ireland
Finland
Cyprus
Netherlands
Singapore
Hong Kong
Norway
DenmarkSwedenAustria
CanadaGermany
IsraelFrance
Slovenia
GabonSouth Africa
Malaysia
Source: International Financial Statistics, IMF; Measuring Income Inequality: A New Database, Deininger, Klaus, and Lyn Squire, World Bank
Gini Coefficient (2002, 0=equitable 100=inequitable)
64
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 55.0 60.0 65.0
Gini Coefficient (0 = equitable, 100 = inequitable)
Per
-cap
ita
Tra
de
(US
$)
Thailand
Lithuania
Fiji
Ukraine
Source: International Financial Statistics, IMF; Measuring Income Inequality: A New Database, Deininger, Klaus, and Lyn Squire, World Bank
Gini Coefficient (2002, 0=equitable 100=inequitable)
Low and Low-Middle Income Countries
65
Ignoring the specifics of what is traded, what is the impact of trade on health measures?
66
R2 = 0.59
$1
$10
$100
$1,000
$10,000
$100,000
30.0 40.0 50.0 60.0 70.0 80.0 90.0
Life Expectancy (years)
Per
-cap
ita
Tra
de
(US
$, l
og
arit
hm
ic s
cale
)
USBotswana
India
Source: International Financial Statistics, IMF; World Development Indicators, World Bank
Life expectancy (2002)
67
R2 = 0.51
$1
$10
$100
$1,000
$10,000
30 35 40 45 50 55 60 65 70 75 80
Life Expectancy (years)
Per
-cap
ita
Tra
de
(US
$)
India
Sierra Leone
Congo
Lesotho
Low and Low-Middle Income Countries
Source: International Financial Statistics, IMF; World Development Indicators, World Bank
Life expectancy (2002)
68
R2 = 0.79
$1
$10
$100
$1,000
$10,000
$100,000
0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0
Infant Mortality (per 1,000 live births)
Per
-cap
ita
Tra
de
(US
$, l
og
arit
hm
ic s
cale
)
US Gabon
Botswana
South Africa
Ivory Coast
Azerbaijan
Source: International Financial Statistics, IMF; World Development Indicators, World Bank
Infant Mortality per 1,000 Live Births (2002)
69
R2 = 0.60
$1
$10
$100
$1,000
$10,000
$100,000
1,500 2,000 2,500 3,000 3,500 4,000
Daily per capita Supply of Calories
Pe
r-c
ap
ita
Tra
de
(U
S$
, lo
ga
rith
mic
sc
ale
)
Myanmar
US
Hong Kong
recommended
Source: International Financial Statistics, IMF; World Development Indicators, World Bank
Caloric Intake (2002)
70
Ignoring the specifics of what is traded, what is the impact of trade on social equality?
71
R2 = 0.41
$1
$10
$100
$1,000
$10,000
$100,000
30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%
Female Adult Literacy Rate (relative to male)
Pe
r-c
ap
ita
Tra
de
(U
S$
, lo
ga
rith
mic
sc
ale
)
Yemen
Oman
Morocco
Libya
Myanmar
Haiti
Source: International Financial Statistics, IMF; World Development Indicators, World Bank
Female Adult Literacy Rate (2002, relative to males)
72
R2 = 0.80
$1
$10
$100
$1,000
$10,000
$100,000
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
Gender Related Development Index (0 = low gender adjusted HDI, 1 = high gender adjusted HDI)
Pe
r-c
ap
ita
Tra
de
(U
S$
, lo
ga
rith
mic
sc
ale
)
US
Myanmar
OmanBotswana
Ivory Coast
Azerbaijan and Albania
GDI measures equality of quality of life (longevity, education, literacy, income).
Source: International Financial Statistics, IMF; World Development Indicators, World Bank
Gender Related Development Index (2002, 0=low 1=high)
73
R2 = 0.58
$1
$10
$100
$1,000
$10,000
$100,000
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
Gender Empowerment Measure (0 = low empowerment, 1 = high empowerment)
Pe
r-c
ap
ita
Tra
de
(U
S$
, lo
ga
rith
mic
sc
ale
)
GEM measures the proportion of women in legislatures, among senior officials, and holding technical and management positions as well as gender differences in income (as a proxy for economic power)
Source: International Financial Statistics, IMF; World Development Indicators, World Bank
Gender Empowerment Measure (2002, 0=low 1=high)
74
R2 = 0.54
$1
$10
$100
$1,000
$10,000
$100,000
0 10 20 30 40 50
Children 10 to 14 in the Labor Force (as % of age group)
Per
-cap
ita
Tra
de
(US
$, l
og
arit
hm
ic s
cale
)
US
Hong Kong
Sierra LeoneBurundi
GabonBotswana
Source: International Financial Statistics, IMF; World Development Indicators, World Bank
Children 10-14 in the Labor Force as % of Age Group (2002)
75
R2 = 0.80
$1
$10
$100
$1,000
$10,000
$100,000
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
Human Development Index (0 = low human development, 1 = high human development)
Per
-cap
ita
Tra
de
(US
$, l
og
arit
hm
ic s
cale
)
Source: International Financial Statistics, IMF; World Development Indicators, World Bank
Human Development Index (2002, 0=low 1=high)
76
Ignoring the specifics of what is traded, what is the impact of trade on U.S. unemployment and
earnings?
77
Source: Bureau of Labor Statistics, and Bureau of Economic Analysis
January 1975 to June 2006
0%
2%
4%
6%
8%
10%
12%
12% 14% 16% 18% 20% 22% 24% 26% 28% 30%
Trade (imports plus exports) as % of GDP
Un
emp
loym
ent
Rat
e
78
January 1975 to June 2006
$12.00
$12.50
$13.00
$13.50
$14.00
$14.50
$15.00
12% 14% 16% 18% 20% 22% 24% 26% 28% 30%
Trade (imports plus exports) as % of GDP
Av
era
ge
Re
al H
ou
rly
Ea
rnin
gs
(2
00
0$
)
Source: Bureau of Labor Statistics, and Bureau of Economic Analysis