South-Western College Publishing - Economics  
Let Us Keep Your Best and Brightest-It's the Poor Ones We Don't Want
Topic Labor Markets; Scarcity, Choice, and Opportunity Cost
Key Words Immigration, H-1B visa, technology, skilled workers.
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Reference ID: A145343020

News Story The news often shows illegal immigrants taking jobs from decent tax-paying Americans. But legal immigration is suffering mightily in the wake of immigration reform--and that could cost the U.S. dearly.

U.S. immigration policy inarguably needs reform. Depending on the industry, illegal immigrants reduce wages to some degree or another for everyone who works in the industry. However, a vital issue gets lost in the argument over illegal immigration: the reduction of legal immigrants to the U.S. and the skills that such legal workers can bring. In 2001, the U.S. government issued 200,000 H-1B visas - "green cards" - for highly skilled workers. In 2004, it issued only 65,000, claiming that the reduction was the result of increased attention to homeland security. But this reduction in H-1B visas will likely have unintended negative results.

An estimated thirty-some percent of all Silicon Valley technology firms established since the 1980s have been created by someone with either Indian or Chinese backgrounds. U.S. science and technology-oriented graduate schools teem with foreign students because U.S. schools provide so many advantages over their foreign counterparts. While some students stay in the U.S. after graduating, many other highly-trained entrepreneurs return home, fresh with the knowledge gained at U.S. institutions. The whole world benefits from such activities.

U.S. firms are discovering that if they want to hire workers from overseas, the wait for visas can now take 6 months or longer. So firms have found ways around the immigration laws. Microsoft, for example, has research facilities in four cities around the world - Bangalore, Beijing, Cambridge (England), and Seattle. An increasingly likely scenario shows U.S. firms beginning to outsource knowledge facilities - if you can't get the workers to come to your U.S. facilities, let the facilities go to the workers. And no economically savvy U.S. policymaker wants to lose that human capital--but no one seems to be mentioning it in the debates.

1. President Bush has suggested a "guest worker" program, in which workers may enter the U.S. to work, but must then return home when the work is finished, as a means to stem the illegal immigrant tide. Do you think that this is an appropriate strategy? Why or why not?
2. Australia and other countries have instituted a points-based immigration program, in which workers are assigned points based on skills sets. Visas are then granted to those individuals passing a particular threshold of points. Would such a program resolve the issues presented in the article? Why or why not?
Source "Brains and Borders." The Economist, May 04, 2006.
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