Costs and Benefits of High Skilled Immigration March 31, 2009

1

Costs and Benefits of High Skilled ImmigrationMarch 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


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

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New

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abor

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ce

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.


11

Immigration has a possible impact on the distribution of income. (But, worsening income distribution does not mean that the poor are poorer.)


Equa

lity

In

equa

lity

1989 – 1992

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

< $1

5,00

0

$15,

000

-$2

5,00

0

$25,

000

-$3

5,00

0

$35,

000

-$5

0,00

0

$50,

000

-$7

5,00

0

$75,

000

-$1

00,0

00

> $1

00,0

00

% o

f Hou

seho

lds

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%

< $1

5,00

0

$15,

000

-$2

5,00

0

$25,

000

-$3

5,00

0

$35,

000

-$5

0,00

0

$50,

000

-$7

5,00

0

$75,

000

-$1

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00

> $1

00,0

00

% o

f Hou

seho

lds

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 EffectPre 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


Demand effect: Overall, there is a slightly positive relationship between the minimum wage and unemployment.

21


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 effectHigher minimum wage increase in supply of unskilled

immigrants.

• Demand effectHigher 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


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


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 86,300Sun Bechtolsheim/Khosla Germany/India 34,900

Yahoo Jerry Yang Taiwan 13,600Google Sergey Brin Russia 20,222eBay 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 billionSun Bechtolsheim/Khosla Germany/India $6 billion

Yahoo Jerry Yang Taiwan $18 billionGoogle Sergey Brin Russia $110 billioneBay 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

Ger

man

y

US

Japa

n

Net

herla

nds

Italy

Fran

ce UK

Indi

a

Chi

na

Rus

sia

Billi

ons

curr

ent $

Source: Balance of Payment Statistics Yearbook, IMF

51


Outsourcing as Fraction of GDP (2002)

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

Ang

ola

Con

go (R

ep. o

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n

US

Billi

ons

curr

ent $

52


Insourcing less Outsourcing (2002)

($15,000)

($10,000)

($5,000)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

UK

US

Hon

g K

ong

Indi

a

Sin

gapo

re

Chi

na

Fran

ce

Rus

sia

Italy

Kor

ea

Indo

nesi

a

Japa

n

Ger

man

yBilli

ons

curr

ent $

53

Summary

Immigration is an Entrepreneurial FilterImmigration is a filter that favors those with entrepreneurial talents.

H-1B Immigrants Are Net Contributors to Social SecurityEach H-1B immigrant adds the equivalent of $250,000 to the Social Security budget.

54

Summary

H-1B Immigrants Create JobsJobs 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 ValueValue 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 AmericansThe 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 PeopleIf 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 ImmigrationMarch 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-c

apita

Tra

de (U

S$)

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-c

apita

Tra

de (U

S$)

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-c

apita

Tra

de (U

S$)

US

Switzerland

Ireland

Finland

Cyprus

Netherlands

Singapore

Hong Kong

NorwayDenmark

SwedenAustria

CanadaGermany

Israel FranceSlovenia

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-c

apita

Tra

de (U

S$)

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)


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-

capi

ta T

rade

(US

$, lo

gari

thm

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-c

apita

Tra

de (U

S$)

India

Sierra Leone

Congo

Lesotho



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-

capi

ta T

rade

(US

$, lo

gari

thm

ic s

cale

)

US GabonBotswana

South Africa

Ivory Coast

Azerbaijan


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

Per-

capi

ta T

rade

(US$

, log

arith

mic

sca

le)

Myanmar

US

Hong Kongrecommended


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)

Per-

capi

ta T

rade

(US$

, log

arith

mic

sca

le)

Yemen

Oman

Morocco

Libya

Myanmar

Haiti


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)

Per-

capi

ta T

rade

(US$

, log

arith

mic

sca

le)

US

Myanmar

OmanBotswana

Ivory Coast

Azerbaijan and Albania

GDI measures equality of quality of life (longevity, education, literacy, income).


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)

Per-

capi

ta T

rade

(US$

, log

arith

mic

sca

le)

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)


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 T

rade

(US

$, lo

gari

thm

ic s

cale

)

US

Hong Kong

Sierra Leone Burundi

GabonBotswana


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-

capi

ta T

rade

(US

$, lo

gari

thm

ic s

cale

)


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

Unem

ploy

men

t 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

Aver

age

Rea

l Hou

rly E

arni

ngs

(200

0$)

Source: Bureau of Labor Statistics, and Bureau of Economic Analysis

Costs and Benefits of High Skilled Immigration March 31, 2009

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