Yes, there is such thing as a free lunch: it's called immigration

Boss Tweed/Flickr

Immigration Rally in Washington Square Park, New York City, May 1, 2007

The pathetic American economy could use a boost right now. But everything being considered in Washington comes with a high price tag. Bold tax cuts could goose growth, but depending on how they are structured might also worsen the debt picture. More "stimulus" spending threatens the same. Aren't there any free lunches out there?

"Yes. Kick open the nation's doors to high-skilled immigrants. There isn't a bigger no-brainer move than this."--Nick Schulz

For too long the nation's immigration policy has been stuck. The pursuit of a "comprehensive" immigration reform that would also address concerns about the country's porous border with Mexico has gotten nowhere. As a result, little has been done to improve the country's approach to skilled immigrants.

Put aside concerns about low-skilled immigration for a moment. There is wide consensus among those who have studied the issue that skilled immigrants are a net positive for the receiving country.

As Barry Chiswick, the editor of "High-Skilled Immigration in a Global Labor Market" and one of America's deans of immigration research, notes, " High-skilled immigrants expand the productive potential of the economy in which they reside, thereby increasing the growth rate of total-factor productivity. High-skilled immigration to the United States, therefore, enhances the international competitiveness of the U.S. economy and attracts foreign capital to the country. High-skilled immigration adds workers to the labor force who tend to pay more in taxes than they receive in public benefits… As a result, they tend to have a positive net fiscal balance."

Chiswick's empirical case is particularly compelling given current economic and political realities. New York Mayor Michael Bloomberg delivered a rousing speech in Washington this week at an event sponsored by the National Chamber Foundation. He captured the political logic of welcoming more skilled immigrants when he said of the current economic mess, "We have to grow our way out – and to do that, we need a new approach… we really need an approach that allows business to grow, that expands our markets overseas, that spurs innovation, that increases the number of entrepreneurs who start businesses here, and that creates jobs for Americans on every rung of the economic ladder.

"Now, what if I were to tell you that there's a way we could do all of those things at no cost to the taxpayers. Not one penny. Well I think if told you that in the process we could raise revenue and we could use either that revenue to pay for tax cuts or to pay for essential services like national defense, I suspect all of you would say, ‘Great, what are we waiting for?'"

Some might object that with high unemployment, now is not the time to let more workers in. But skilled immigrants are job creators. For example, they are more likely to start high-growth companies. And as research from the Kauffman Foundation shows, new firms are responsible for the vast majority of net new jobs in the U.S.

Current policy is turning away or thwarting these job creators. Research from Vivek Wadhwa and others shows that skilled immigrants – tired of bureaucratic hassles in their quests to become permanent residents, coupled with growing opportunities in their native countries — are increasingly leaving the U.S. to work and start businesses elsewhere.

Skilled immigrants studying in America's great technical and research universities are good candidates to create new U.S. companies when they graduate. But they can't. If they want to stay in the U.S., they have to jump through considerable hoops, after which they might be able to go to work for an established U.S. company.

And so they might go to work for Microsoft and Intel and Ingersoll-Rand and other titans of American industry. These firms need more of these graduates, which is one reason we should allow more foreign-born students to study in the U.S. We need to empower established companies to recruit and hire the talent they need.

But it might also be better for everyone if some of those students with an entrepreneurial bent were permitted to start new companies.

So what should we do?

Two terrific ideas are floating around right now. The first is a bill sponsored by Rep. Jeff Flake of Arizona called the STAPLE Act. The idea originated with legendary venture capitalist John Doerr who famously said at a conference in 2008 “I would staple a Green Card to the diploma of anyone that graduates with a degree in the physical sciences or engineering in the United States.” The Flake bill would “exempt foreign students who have earned a Ph.D. degree in science, technology, engineering, or mathematics from a U.S. university and have a job offer in the U.S. from visa quotas,” thus expanding the American talent pool.

Another idea is the Startup Visa, which would enable foreign entrepreneurs to get a visa to start a company, provided they have funding from U.S. investors. Entrepreneur-investors Paul Graham and Brad Feld deserve credit for pushing this idea that now enjoys bi-partisan backing.

These ideas don't require a comprehensive reform of the nation's immigration system. Congress and the White House can act now.

Pia Orrenius is an economist with the Federal Reserve Bank at Dallas and the co-author of an important new book about immigration, “Beside the Golden Door.” Speaking at the Bloomberg event in Washington she noted, “economists typically don't think that free lunches exist; but permitting more skilled immigrants to enter and stay is about as close as you can get to a free lunch.”

Who's hungry?

Nick Schulz is the DeWitt Wallace Fellow at AEI.

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