Seeking Immigration Reform That Would Boost Entrepreneurialism

With the budget standoff, debt ceiling, and Syria moved at least slightly away from the top of the agenda and with Democrats and President Obama desperate to replace the healthcare.gov rollout debacle with something more positive for the news to focus on, immigration reform supporters are striving hard to move this issue to the policy forefront. As Democrats resume their push for amnesty, Republicans are very unsure of what, if any, immigration reform they should support.

The Senate has passed an immigration reform bill that provides amnesty for most of the millions of illegal immigrants in the U.S. They would get immediate legalization and eventual citizenship in exchange for some fines and some waiting for the citizenship. There would also be increased funding for border security. The House has made little progress on its version of immigration reform, but there is talk of possible committee votes in the next few weeks.

Personally, I am very conflicted on many aspects of immigration reform. Rewarding people for breaking the law is wrong and encourages future lawbreaking. The proof of this is the fact that we have done immigration amnesty before, quickly followed by a new round of illegal immigrants. Millions of people around the world have correctly and legally applied for immigration visas to the U.S. Some of these prospective immigrants have been waiting for a decade or longer for their turn. Giving amnesty to those who broke the law is very unfair to those who followed the rules.

However, while fairness and respect for the legal system argue against granting amnesty, practicality favors it. The immigrants that are here have learned their way around, often have jobs, and are acclimatized to the U.S. already. If we deport all the illegal immigrants and replace them with people who have followed the rules and waited, there will be significant adjustment costs involved in replacing millions of experienced workers with ones who will be new to America. Our economy, at least in the short run, will be more efficient if we allow the immigrants already here to stay.

While the question of what to do with the millions who have come here illegally is certainly a difficult one, there are some features that should be part of any immigration reform legislation regardless of where one stands on the issues mentioned above. A good immigration reform package should include changes to current law to ensure that our immigration policy favors high-skill workers and entrepreneurs.

The current immigration system awards the vast majority of visas to people based on either their country of origin or some familial connection to somebody already in the U.S. Importantly, such visas are issued without any consideration of the value that person might bring to America. Why should we choose immigrants without any regard for their skills and what they might contribute to their new country?

Under today's immigration law, tens of thousands of foreign students who come to the U.S. and earn graduate degrees in our universities are then required to leave the country, taking their cutting-edge skills with them. Some manage to stay through a few special programs under which U.S. companies can apply for visas for such students if the companies can show that they cannot find an equally qualified American worker. The obvious question is why do we make it easy for low-skill workers to enter the country (both legally and illegally) while forcing high-skill students to leave the country just as they are ready to become productive workers?

The CEOs of many high tech companies have complained repeatedly about the foolishness of allowing unlimited low-skill workers to enter the country and work illegally while simultaneously deporting thousands of high-skill workers who were educated here and would love to stay. Over 100 CEOs sent Congress a letter stating this position back in the spring, asking for an expansion of the H-1B visa program that grants work permits to high-skill workers and other legislative reforms to allow them to hire more foreigners.

Over the past two decades wages have failed to rise faster than inflation for lower and middle income earning workers. Given this real wage stagnation, adding more low-skill workers to the labor force does not make sense, other than to provide businesses which use low-skill workers with a source of cheap labor. In contrast, high skill workers have not faced stagnant real wages and unemployment rates for those with college and graduate degrees remain quite low.

As of the October employment report, workers without a high school degree have a 10.9 percent unemployment rate, high school graduates face a 7.3 percent unemployment rate, and those with a college or graduate degree report only a 3.8 percent unemployment rate. An unemployment rate of 3.8 percent is about as low as can ever be expected just due to workers changing jobs and new entrants. Looking at the differences in these different labor markets it is clear which type of worker the labor market and economy would benefit from right now.

One program that the U.S. does have that considers what the potential immigrant would bring to the U.S. economy is the EB-5 visa program. Under this section of the immigration law, foreign entrepreneurs who invest $1 million in a U.S. business and create at least ten jobs are eligible for permanent resident status.

This is the sort of policy we need given the current high rate of unemployment. If not on a permanent basis, then certainly when unemployment is high, why not lower the qualifications so that people can immigrate to the U.S. if they will invest $500,000 and create five jobs?

Members of Congress and the President have all said they want to focus on jobs. Immigration reform that tilts the flow of immigrants toward entrepreneurs and job creation instead of on labor supply and keeping wages low would be a positive reform. Given the very low unemployment rate for college graduates and that many high tech companies have expressed a need for more qualified workers, allowing foreign students who graduate from U.S. colleges to become legal residents with a work permit automatically upon graduation would be another positive reform.

Immigration reform that provides amnesty for immigrants who are not legally in the U.S. is controversial. What should be less controversial is to reform immigration law to make immigration easier for highly educated, high-skill workers and entrepreneurs with capital to invest in creating jobs. That turning away people who will improve our economy makes no sense should be obvious to everyone.