FRB Dallas Report: America Needs More High-Skilled Workers

American immigration policy needs to change; on that much, most people would agree. Although consensus is elusive on the diagnosis – not to mention the treatment – of the ills plaguing our immigration system, there is a shared sense of frustration with the status quo. A new report by the Federal Reserve Bank of Dallas is both diagnostic and prescriptive, finding current U.S. immigration policy woefully out of step with the demands of a modern, knowledge-driven economy, and recommending fundamental changes to a system that still prefers family-based to employment-based immigration. (See From Brawn to Brains: How Immigration Works for America, by Pia Orrenius and Madeline Zavodny, 2010 Annual Report, Federal Reserve Bank of Dallas.)

Zavodny and Orrenius argue that our immigration system gives precious little help to the highly-educated immigrants we should be bending over backwards to attract and keep here. There is a burgeoning global market for the brains and talents of the world’s most desirable workers – the ones with advanced degrees in science, technology, engineering, and math. Simply put, these workers now have more choices in where they would like to work, and can go where they are wanted most. According to Zavodny and Orrenius, the U.S. immigration system is an artifact of earlier times, before other countries were equipped to compete with the attractions of the U.S. labor market. Now, countries like India and China are increasingly able to lure their best and brightest back home, with opportunities that didn’t exist until recently. “The U.S. immigration system, meanwhile, has not kept up,” Zavodny and Orrenius contend.

Zavodny and Orrenius found that immigrant workers are clustered at the extremes of the educational spectrum. According to their study, low-skilled immigrant workers tend to cluster in industries like landscaping, food prep, personal care, building maintenance, health care, and the like, while highly-skilled immigrants are a significant force in “skill-intensive” occupations like medicine, engineering, IT, architecture, higher education, accounting, and nursing. In both cases, the authors say, immigration brings economic benefits to the entire economy, by increasing total output and gross domestic product, building a larger customer base for businesses, and driving prices down for natives and immigrants alike. Furthermore, immigrants create new businesses at a higher rate than their native-born counterparts, and this boosts the economy for everyone.

The downside, according to Zavodny and Orrenius, is that low-skilled immigrant workers consume more in public services than they contribute in taxes, at least in the near term, but they point out that “high-skilled immigrants can offset the fiscal cost of low-skilled immigrants.” This point is repeated and amplified as they build up to their conclusion:

High-skilled workers, however, come with more benefits and fewer costs than low-skilled workers. And their skills are key to the vitality and growth of some of the nation’s most successful industries and to research and development.

The problem, Zavodny and Orrenius argue, is that our immigration system needlessly restricts the number of high-skilled workers who can come to the United States, instead skewing the distribution of green cards to favor family-based immigration.

The U.S. annually issues about 1.1 million green cards, allowing permanent legal residence. About 85 percent go to family members of U.S. citizens or permanent legal residents, people seeking humanitarian refuge and “diversity immigrants,” who come from countries with low rates of immigration to the United States. The remaining 15 percent go to people who are immigrating for work reasons – but half of these are for workers’ spouses and children, meaning a mere seven percent of green cards go to so-called principal workers, most of whom are high-skilled. No other major developed economy gives such a low priority to employment-based immigration.

The obvious answer, they say, is to expand employment-based immigration to increase our country’s human capital and make us more competitive with the dynamic emerging economies of Asia – especially India and China. More than ever, our productive capacity depends on the brains, not the brawn, of our workforce, and our immigration policy should reflect that, the authors contend. No argument here, as long as it’s fairly balanced against our need for a workable – and humane – family-based immigration system. Hats off to Zavodny and Orrenius for keeping this issue on the national agenda.