Costs and Benefits of High Skilled Immigration March 31, 2009

1. Costs and Benefits of High Skilled Immigration March 31, 2009 copies of this presentation can be found at www.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. The immigration rate has almost doubled since 1970. Source: 2009 Yearbook of Immigration Statistics, Office of Immigration Statistics,US Department of Homeland Security.

4. 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.

5. Whence do immigrants come and where do they go? • Mexico • California

6. 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.

7. Source: Current Population Survey, 2005, Minnesota Population Center.

8. Indians comprise the majority of H-1B applicants. Source: Office of Immigration Statistics, Department of Homeland Security.

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.) 1989 – 1992 Equality Inequality Source: Statistical Abstract of the US, Bureau of the Census.

12. Income Distribution for 1980 (in 2003$) Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2006.

13. Income Distribution for 2003 (in 2003$) Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2006.

14. Minimum Wage Entrepreneur Filter Quality Higher Education Immigration is a Filter Foreign Nationals Foreign workers in U.S. Lower skilled labor Higher skilled labor

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. 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

17. 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

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. 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

20. 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

21. 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

22. 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).

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. 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.

25. How do high-skilled H-1B approvals alter U.S. demographics?

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

27. 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

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

29. 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

30. Are H-1B approvals a drain on Social Security?

31. 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

32. 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

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. H-1B’s are paid commensurately with other faculty. Source: Office of Immigration Statistics, Department of Homeland Security; Chronicle of Higher Education

38. What do high-skilled H-1B workers do besides work?

39. 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.

40. How many jobs do they occupy? How many jobs do they create?

41. Jobs occupied by H-1B’s… Source: Office of Immigration Statistics, Department of Homeland Security

42. 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

43. 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

44. How much do we pay them? How much wealth do they create?

45. Income earned by H-1B’s… Source: Office of Immigration Statistics, Department of Homeland Security

46. 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

47. 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

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. Source: Balance of Payment Statistics Yearbook, IMF