Outdated Immigration Policies Are Impeding Economic Growth

According to a recent Politico report, U.S businesses have expressed deep concern that outdated and broken immigration laws are “holding them back” from recovering from the COVID-19 pandemic. Let’s Move America Forward (FWD), held a broadly similar assessment, contending that the U.S. needs to double immigration levels to remain globally competitive.

Recognizing the importance of immigration to economic recovery and growth, Congress should pass immigration reform to ensure immigrants continue making vital economic contributions, such as paying taxes, innovating, and replenishing the U.S. diminished labor force.

Under present immigration laws, American companies have only two options to bring foreign talent to the U.S.

The first is an employment-based green card that allows employers to sponsor foreign talent for permanent resident status. However, the U.S. only issues 140,000 employment-based green cards annually, and only 7% of those green cards can go to individuals from a single country. As a result, the backlog for employment-based green cards for certain countries stands at 1.2 million applicants in 2020.

The H1-B visa is another way U.S. employers can bring foreign talent to the United States. Unlike the employment-based green card, recipients are only eligible to stay in the U.S. for six years. H-1B visas have been capped at 65,000 visas since 2004, despite over 200,000 applications regularly being submitted. Lack of congressional action on lifting the H-1B  visa cap has caused significant application backlogs due to overwhelmingly more applicants than visa availability.

According to a  report published this year, nearly half a million qualified applicants are waiting to receive an H1-B visa.

Rather than impeding foreign talent, Congress should lift the cap on employment-based green cards and H1-B visas, which allows skilled foreign workers to enter the U.S. and contribute to the U.S.’s economic productivity.

Contrary to populist beliefs that immigrants strain social services without contributing, studies have shown they make an important contribution to the tax system. In 2020 alone, it was estimated that H1-B visa holders contributed $85 billion in taxes. This significant revenue is especially important because the National Association of State Budget Officers estimate that state tax revenues are going to decline by $33.3 billion in the fiscal year 2021. To deal with this deficit, they will either have to reduce spending or raise taxes.

Reforming the U.S’ broken immigration system will allow states to generate an additional $11.64 billion in tax revenue annually. While this revenue will not single-handedly solve the state’s budget declines, the contributions of immigrants will allow states to make smaller cuts to services or raise taxes at a lower rate.

Foreign talent not only makes important contributions to tax revenues, but they are also needed to deal with a shortage of workers in the United States. According to the U.S. Bureau of Labor Statistics May 2021 job report, vacancies rose to 9.2 million. The worker shortage was particularly pronounced in the health care, education, and hospitality industries. This labor shortage has a significant impact on consumer welfare as shortage of workers disrupts the business supply chain, making it harder for companies to satisfy consumer demand.

Immigrants have also made significant strides for American innovation. Data from the Fiscal Policy Institute’s Immigration Research Center finds that while immigrants make up 13% of the U.S. population, they make up 18% of small business owners. Immigrants, for example, are responsible for founding Tesla, Google, and AT&T. Without immigrants, American consumers would not have access to sophisticated search engines, telecommunication systems, or environmentally friendly modes of transport.

This innovation also leads to job creation. For example, in 1979, Google co-founder Sergey Brin emigrated to the U.S. Today, Google employs nearly 135,301 people in the United States. Similarly, Tesla, founded by Elon Musk, employs over 70,000 Americans. Such figures illustrate that when immigrants are allowed into the U.S., they can also be job creators who provide economic opportunities for Americans.

While the U.S.’ outdated immigration laws have created barriers for skilled workers, Canada has been aggressively seeking the world’s most talented minds to replenish its workforce and stimulate its economy. Under its immigration plan for 2019-2021, Canada now plans to increase its target for foreign entry by up to one million by 2022. These immigrants will undoubtedly provide the Canadian government with increased tax revenue, access to labor, and innovation that enhances consumer welfare.

The example of Canada shows that lawmakers in Ottawa understand the importance of immigration for a healthy economy. Rather than creating unnecessary barriers to foreign talent, lawmakers in Washington should take concrete steps to incentivize the entry of foreign talent and workers to the United States. Failing to do so will deny states access to important tax revenue, extend the current worker shortage, and limit innovation.

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