Will immigration reform replace or create jobs?

Steve Pociask President, American Consumer Institute
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As the immigration bill is being debated in Congress, there is some resistance to increasing the number of H1-B visas for foreign skilled workers in fear that they are taking away precious jobs from US citizens at a time when the unemployment rate seems stuck on high. However, a closer look at the numbers suggests otherwise.

As background, there is a shortage of skilled high-tech labor in the US and H1-B visas are the principle way to chip away at the shortage. However, because the number of visas going to foreign skilled workers is capped in the US, there remains a shortage in the high-tech sector.

What is causing the shortage of workers in high-tech in the US?  There is immense worldwide demand for high tech products — information technology, software, biotech, and so on — but the US lacks the skilled labor to produce those goods here at home.

Although the US has a lot of college graduates each year, unfortunately, relatively few of them are in fields of science, technology, engineering and mathematics (STEM).

For example, computing and information science, engineering and technology, and science and mathematics account for only 2.8%, 5.9% and 7.5% of bachelor degrees, respectively, leaving the other 83.6% as non-STEM degrees.

Congressional testimony revealed that the US produces only 51,000 computer science jobs, but there are 122,000 openings — a 70,000 job gap in just this one job area.  Shortages mean that jobs aren’t filled, but it also means that investments are not made in the US.

Of course, there are other STEM fields beyond consumer science, which means that the shortages far exceed 70,000 jobs. Moreover, many STEM graduates are foreign students that must return home for employment.

However, for simplicity, let’s assume we are just talking about a 70,000 job shortage.  What is the ripple effect on the economy?

A lesson is economics shows that labor, capital and other inputs are paired to produce things. That said, an absence of labor in the US means that investments will go overseas, making the US economy the big loser in all of this.

Considering a conservative 70,000 job gap and using the US Bureau of Economic Analysis data for industry multipliers, the total effect on US jobs forgone would be nearly 300,000 and unrealized Gross Domestic Product (GDP) lost would amount to $24 billion. Of course, the economic impact is much higher when considering shortages in all of the STEM fields.

The fact is that high tech investments are lost, which means that jobs are lost – both direct and indirect. Yes, the investments still take place, but just not here in the US.

There are a number of examples of US firms needing to ship operations overseas because of labor shortages, such as when Microsoft opened a plant across the border of Canada, a country with no restrictions on skilled work permits. These high tech firms are major employers, as evidenced in the recent letter from corporate executives to Congress asking for an increase the number of H1-B visas.

While there are many reasons, the result of capping H1-B visas only contributes to the shift of operations from the US to overseas. What is produced overseas is, ironically, often transported back into the US and sold to American consumers.

What are potential the fixes?

Passing immigration reform can most immediately relieve the current shortage of skilled jobs, particularly in the high tech sector. Another policy solution would be to increase the number of graduates in the science, technology, engineering and mathematics (STEM) fields, but that approach will take considerable effort and time.

Both ideas will help reduce the shortage of high-tech workers, and it would encourage technology and investment here at home, as well as creating higher paying jobs. Dealing with the immigration bill, according to one professor’s estimate, could produce an estimated $1.5 trillion in GDP over the next 10 years.

The solution is simple. The current House bill deals with the broader immigration policy, raises the H1-B cap, and builds a pool to help fund additional STEM education in US colleges. This bill will create jobs in the US, not replace them.

Steve Pociask is president of the American Consumer Institute Center for Citizen Research, an educational and research nonprofit.