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Costs and Benefits of High Skilled Immigration March 31, 2009

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Costs and Benefits of High Skilled Immigration March 31, 2009 copies of this presentation can be found at www.antolin-davies.com. How significant is immigration? All production has its roots in technology, capital, materials, and labor.

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slide1
Costs and Benefits of High Skilled Immigration

March 31, 2009

copies of this presentation can be found at

www.antolin-davies.com

slide2
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.
slide3
The immigration rate has almost doubled since 1970.

Source: 2009 Yearbook of Immigration Statistics, Office of Immigration Statistics,US Department of Homeland Security.

slide4
Immigration has grown from 20% of net births in 1970 to 68% in 2006.

Immigrants are a huge source of new Americans.

Source: Statistical Abstract of the US, Bureau of the Census.

slide6
The number of Mexican immigrants is more than three times the number from China and India combined.

Source: Statistical Abstract of the US, Bureau of the Census.

slide8
Indians comprise the majority of H-1B applicants.

Source: Office of Immigration Statistics, Department of Homeland Security.

slide9
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.
slide10
Immigration has no apparent impact on the unemployment rate.

Source: Statistical Abstract of the US, Bureau of the Census.

slide11
Immigration has a possible impact on the distribution of income. (But, worsening income distribution does not mean that the poor are poorer.)

1989 – 1992

Equality Inequality

Source: Statistical Abstract of the US, Bureau of the Census.

slide12
Income Distribution for 1980 (in 2003$)

Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2006.

slide13
Income Distribution for 2003 (in 2003$)

Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2006.

slide14
Minimum Wage

Entrepreneur Filter

Quality Higher Education

Immigration is a Filter

Foreign Nationals

Foreign workers in U.S.

Lower skilled labor

Higher skilled labor

slide15
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.

slide16
2002 – 2007

Supply effect: Increases in the minimum wage make US jobs more attractive to foreigners.

Source: Department of Homeland Security and Bureau of Labor Statistics

slide17
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.

Source: Department of Homeland Security and Bureau of Labor Statistics

slide18
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.

slide19
Demand effect: Minimum wage has no impact on unemployment among higher skilled workers.

Source: Statistical Abstract of the United States, and Bureau of Labor Statistics

slide20
Demand effect: Overall, there is a slightly positive relationship between the minimum wage and unemployment.

Source: Statistical Abstract of the United States, and Bureau of Labor Statistics

slide21
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.

Source: Statistical Abstract of the United States, and Bureau of Labor Statistics

slide22
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).
slide23
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.

slide24
Value of Net Exports

Supply effect: Quality of U.S. higher education attracts top foreign students.

Source: Survey of Current Business, Bureau of Labor Statistics.

slide26
Age

Source: Office of Immigration Statistics, Department of Homeland Security.

slide27
H-1B approvals are in the prime of their earning years.

Age

Source: Office of Immigration Statistics, Department of Homeland Security; Statistical Abstract of the United States, Bureau of the Census.

US Population

H-1B Applicants

slide29
H-1B approvals are highly educated.

Source: Office of Immigration Statistics, Department of Homeland Security; Statistical Abstract of the United States, Bureau of the Census.

US Population

H-1B Applicants

slide31
Present value of expected contributions = $318,000

Present value of expected benefits = $62,000

Source: Office of Immigration Statistics, Department of Homeland Security; Statistical Abstract of the United States, Bureau of the Census; Social Security Administration

slide32
Present value of expected contributions = $52,000

Source: Office of Immigration Statistics, Department of Homeland Security; Statistical Abstract of the United States, Bureau of the Census

slide33
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.

slide35
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.

slide36
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.

slide37
H-1B’s are paid commensurately with other faculty.

Source: Office of Immigration Statistics, Department of Homeland Security; Chronicle of Higher Education

slide39
25% of engineering and tech firms founded between 1995 and 2005 were founded by immigrants.

Source: America’s New Immigrant Entrepreneurs, UC Berkeley and Duke University, 2007.

slide40
How many jobs do they occupy?

How many jobs do they create?

slide41
Jobs occupied by H-1B’s…

Source: Office of Immigration Statistics, Department of Homeland Security

slide42
Jobs created by H-1B’s (as of 2008)

CompanyFounderCountry of OriginEmployees

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

slide43
Combined direct job creation (as of 2008): Intel, Sun, Yahoo, Google, eBay

Source: Office of Immigration Statistics, Department of Homeland Security; SEC filings of the indicated companies

slide44
How much do we pay them?

How much wealth do they create?

slide45
Income earned by H-1B’s…

Source: Office of Immigration Statistics, Department of Homeland Security

slide46
Wealth created by H-1B’s (as of 2008)

CompanyFounderCountry of OriginMarket 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

slide47
Combined market value (as of 2008):

Intel, Sun, Yahoo, Google, eBay

Source: Office of Immigration Statistics, Department of Homeland Security; SEC filings of the indicated companies

slide49
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.
slide53
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.

slide54
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.

slide55
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.

slide56
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?

slide57
Costs and Benefits of High Skilled Immigration

March 31, 2009

copies of this presentation can be found at

www.antolin-davies.com

slide58
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?

slide59
Ignoring the specifics of what is traded, what is the impact of trade on national incomes?
slide60
Luxembourg

Belgium

Ireland

Netherlands

Bahrain

Japan

US

Per-capita income (2001, US$ PPP)

Source: International Financial Statistics, International Monetary Fund

slide61
Low and Low-Middle Income Countries

Suriname

Lithuania

Samoa

Guyana

Russia

Peru

Colombia

Per-capita income (2001, US$ PPP)

Source: International Financial Statistics, International Monetary Fund

slide62
Ignoring the specifics of what is traded, what is the impact of trade on income distributions?
slide63
Singapore

Hong Kong

Ireland

Netherlands

Switzerland

Norway

Denmark

Austria

Sweden

Finland

Canada

Germany

France

Israel

Slovenia

Malaysia

Cyprus

US

Gabon

South Africa

Gini Coefficient (2002, 0=equitable 100=inequitable)

Source: International Financial Statistics, IMF; Measuring Income Inequality: A New Database, Deininger, Klaus, and Lyn Squire, World Bank

slide64
Low and Low-Middle Income Countries

Lithuania

Fiji

Thailand

Ukraine

Gini Coefficient (2002, 0=equitable 100=inequitable)

Source: International Financial Statistics, IMF; Measuring Income Inequality: A New Database, Deininger, Klaus, and Lyn Squire, World Bank

slide65
Ignoring the specifics of what is traded, what is the impact of trade on health measures?
slide66
Botswana

US

India

Life expectancy (2002)

Source:International Financial Statistics, IMF; World Development Indicators, World Bank

slide67
Low and Low-Middle Income Countries

Congo

Lesotho

India

Sierra Leone

Life expectancy (2002)

Source:International Financial Statistics, IMF; World Development Indicators, World Bank

slide68
US

Gabon

Botswana

South Africa

Azerbaijan

Ivory Coast

Infant Mortality per 1,000 Live Births (2002)

Source:International Financial Statistics, IMF; World Development Indicators, World Bank

slide69
Hong Kong

recommended

US

Myanmar

Caloric Intake (2002)

Source:International Financial Statistics, IMF; World Development Indicators, World Bank

slide70
Ignoring the specifics of what is traded, what is the impact of trade on social equality?
slide71
Oman

Libya

Morocco

Yemen

Haiti

Myanmar

Female Adult Literacy Rate (2002, relative to males)

Source:International Financial Statistics, IMF; World Development Indicators, World Bank

slide72
Oman

Botswana

US

Ivory Coast

Azerbaijan and Albania

Myanmar

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

Gender Related Development Index (2002, 0=low 1=high)

Source:International Financial Statistics, IMF; World Development Indicators, World Bank

slide73
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)

Source:International Financial Statistics, IMF; World Development Indicators, World Bank

slide74
Hong Kong

US

Botswana

Gabon

Burundi

Sierra Leone

Children 10-14 in the Labor Force as % of Age Group (2002)

Source:International Financial Statistics, IMF; World Development Indicators, World Bank

slide75
Human Development Index (2002, 0=low 1=high)

Source:International Financial Statistics, IMF; World Development Indicators, World Bank

slide76
Ignoring the specifics of what is traded, what is the impact of trade on U.S. unemployment and earnings?
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