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
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
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orid
aN
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aH
awai
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Ariz
ona
Dis
trict
of C
olum
bia
Mas
sach
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and
Rho
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land
Illin
ois
Con
nect
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Was
hing
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Virg
inia
Geo
rgia
Col
orad
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ew M
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olin
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are
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Neb
rask
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klah
oma
Tenn
esse
eK
ansa
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wa
Wis
cons
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enns
ylva
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New
Ham
pshi
reLo
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ana
Ver
mon
tK
entu
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Indi
ana
Sou
th C
arol
ina
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oA
rkan
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Mai
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uri
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onta
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orth
Dak
ota
Wes
t Virg
inia
Frac
tion
of C
ivili
an L
abor
For
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.
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.
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
00,0
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
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 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
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 86,300Sun 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
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%
Ang
ola
Con
go (R
ep. o
f)
Moz
ambi
que
Irela
nd
Van
uatu
Indi
a
Ger
man
y
Rus
sia
Fran
ce UK
Chi
na
Japa
n
US
Billi
ons
curr
ent $
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
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)
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-
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
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-
capi
ta T
rade
(US
$, lo
gari
thm
ic s
cale
)
US GabonBotswana
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
$100,000
1,500 2,000 2,500 3,000 3,500 4,000
Daily per capita Supply of Calories
Per-
capi
ta T
rade
(US$
, log
arith
mic
sca
le)
Myanmar
US
Hong Kongrecommended
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
$100,000
30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%
Female Adult Literacy Rate (relative to male)
Per-
capi
ta T
rade
(US$
, log
arith
mic
sca
le)
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
$100,000
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
Gender Related Development Index (0 = low gender adjusted HDI, 1 = high gender adjusted HDI)
Per-
capi
ta T
rade
(US$
, log
arith
mic
sca
le)
US
Myanmar
OmanBotswana
Ivory Coast
Azerbaijan and Albania
GDI measures equality of quality of life (longevity, education, literacy, income).
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
$100,000
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
Gender Empowerment Measure (0 = low empowerment, 1 = high empowerment)
Per-
capi
ta T
rade
(US$
, 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)
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 T
rade
(US
$, lo
gari
thm
ic s
cale
)
US
Hong Kong
Sierra Leone Burundi
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-
capi
ta T
rade
(US
$, lo
gari
thm
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
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