1. 1 Costs and Benefits of High Skilled Immigration March 31, 2009 copies of this presentation can be found at www.antolin-davies.com

2. 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. 3 Source:2009 Yearbook of Immigration Statistics, Office of Immigration Statistics, US Department of Homeland Security. The immigration rate has almost doubled since 1970.

4. 4 Source:Statistical Abstract of the US, Bureau of the Census. Immigration has grown from 20% of net births in 1970 to 68% in 2006. Immigrants are a huge source of new Americans.

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

6. 6 Source:Statistical Abstract of the US, Bureau of the Census. The number of Mexican immigrants is more than three times the number from China and India combined.

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

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

9. 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. 10 Immigration has no apparent impact on the unemployment rate. Source:Statistical Abstract of the US, Bureau of the Census.

11. 11 Immigration has a possible impact on the distribution of income. (But, worsening income distribution does not mean that the poor are poorer.) Source:Statistical Abstract of the US, Bureau of the Census. Equality Inequality 1989 – 1992

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$)

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

15. 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. 16 Source:Department of Homeland Security and Bureau of Labor Statistics Supply effect:Increases in the minimum wage make US jobs more attractive to foreigners. 2002 – 2007

17. 17 Source:Department of Homeland Security and Bureau of Labor Statistics 2002 – 2007 Supply Effect Pre 9/1110% increase in minimum wage  7% increase in immigration. Post 9/1110% increase in minimum wage  5% increase in immigration.

18. 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. 19 Source: Statistical Abstract of the United States, and Bureau of Labor Statistics Demand effect:Minimum wage has no impact on unemployment among higher skilled workers.

20. 20 Source: Statistical Abstract of the United States, and Bureau of Labor Statistics Demand effect:Overall, there is a slightly positive relationship between the minimum wage and unemployment.

21. 21 Source: Statistical Abstract of the United States, and Bureau of Labor Statistics 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.

22. 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. 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. 24 Source:Survey of Current Business, Bureau of Labor Statistics. Supply effect:Quality of U.S. higher education attracts top foreign students. Value of Net Exports

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

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

27. 27 Source:Office of Immigration Statistics, Department of Homeland Security; Statistical Abstract of the United States, Bureau of the Census. H-1B approvals are in the prime of their earning years. US PopulationH-1B Applicants Age

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

29. 29 Source:Office of Immigration Statistics, Department of Homeland Security; Statistical Abstract of the United States, Bureau of the Census. H-1B approvals are highly educated. US PopulationH-1B Applicants

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

31. 31 Source:Office of Immigration Statistics, Department of Homeland Security; Statistical Abstract of the United States, Bureau of the Census; Social Security Administration Present value of expected contributions = $318,000 Present value of expected benefits = $62,000

32. 32 Source:Office of Immigration Statistics, Department of Homeland Security; Statistical Abstract of the United States, Bureau of the Census Present value of expected contributions = $52,000

33. 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. 34 What do H-1B’s contribute in income taxes?

35. 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. 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. 37 Source:Office of Immigration Statistics, Department of Homeland Security; Chronicle of Higher Education H-1B’s are paid commensurately with other faculty.

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

39. 39 Source:America’s New Immigrant Entrepreneurs, UC Berkeley and Duke University, 2007. 25% of engineering and tech firms founded between 1995 and 2005 were founded by immigrants.

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

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

42. 42 CompanyFounderCountry of OriginEmployees IntelAndy GroveHungary86,300 SunBechtolsheim/KhoslaGermany/India34,900 YahooJerry YangTaiwan13,600 GoogleSergey BrinRussia20,222 eBayPierre OmidyarFrance16,200 Jobs created by H-1B’s (as of 2008)

43. 43 Source:Office of Immigration Statistics, Department of Homeland Security; SEC filings of the indicated companies Combined direct job creation (as of 2008): Intel, Sun, Yahoo, Google, eBay

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

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

46. 46 CompanyFounderCountry of OriginMarket Cap IntelAndy GroveHungary$86 billion SunBechtolsheim/KhoslaGermany/India$6 billion YahooJerry YangTaiwan$18 billion GoogleSergey BrinRussia$110 billion eBayPierre OmidyarFrance$17 billion Wealth created by H-1B’s (as of 2008)

47. 47 Source:Office of Immigration Statistics, Department of Homeland Security; SEC filings of the indicated companies Combined market value (as of 2008): Intel, Sun, Yahoo, Google, eBay

48. 48 Increasing H-1B labor reduces outsourcing.

49. 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. 50 Source: Balance of Payment Statistics Yearbook, IMF

51. 51 Source: Balance of Payment Statistics Yearbook, IMF

52. 52 Source: Balance of Payment Statistics Yearbook, IMF

53. 53 Summary Immigration is an Entrepreneurial Filter Immigration is a filter that favors those with entrepreneurial talents. H-1B Immigrants Are Net Contributors to Social Security Each H-1B immigrant adds the equivalent of $250,000 to the Social Security budget.

54. 54 Summary H-1B Immigrants Create Jobs Jobs directly created by just five H-1B founded firms outnumber all the jobs occupied by a year’s worth of H-1B immigrants. H-1B Immigrants Create Value Value of just five H-1B founded firms is 20 times the wages paid to all H-1B immigrants over the past decade.

55. 55 Summary Immigrants Are Future Americans The more H-1B immigrants we have, the more Americans we will have who are highly skilled in science, technology, engineering, and mathematics.

56. 56 Warning Entrepreneurial Spirit is a Function of the People If we don’t admit these highly qualified and entrepreneurial people or we adopt economic policies that disincent entrepreneurs, this wealth of talent will go elsewhere. H-1B immigrants will contribute to economic growth. The question before us is, will they do that in the U.S. or elsewhere?

57. 57 Costs and Benefits of High Skilled Immigration March 31, 2009 copies of this presentation can be found at www.antolin-davies.com

58. 58 H-1B labor and outsourcing are simply forms of trade in which labor is imported. The money paid for the labor comes back as increased exports of US goods to foreigners. In general, what is the impact of trade?

59. 59 Ignoring the specifics of what is traded, what is the impact of trade on national incomes?

60. 60 Luxembourg Belgium Ireland Netherlands Japan US Bahrain Source: International Financial Statistics, International Monetary Fund Per-capita income (2001, US$ PPP)

61. 61 Suriname Lithuania Samoa Russia Colombia Peru Guyana Source: International Financial Statistics, International Monetary Fund Per-capita income (2001, US$ PPP) Low and Low-Middle Income Countries

62. 62 Ignoring the specifics of what is traded, what is the impact of trade on income distributions?

63. 63 US Switzerland Ireland Finland Cyprus Netherlands Singapore Hong Kong Norway Denmark Sweden Austria Canada Germany Israel France Slovenia Gabon South Africa Malaysia Source:International Financial Statistics, IMF; Measuring Income Inequality: A New Database, Deininger, Klaus, and Lyn Squire, World Bank Gini Coefficient (2002, 0=equitable 100=inequitable)

64. 64 Thailand Lithuania Fiji Ukraine Source:International Financial Statistics, IMF; Measuring Income Inequality: A New Database, Deininger, Klaus, and Lyn Squire, World Bank Gini Coefficient (2002, 0=equitable 100=inequitable) Low and Low-Middle Income Countries

65. 65 Ignoring the specifics of what is traded, what is the impact of trade on health measures?

66. 66 US Botswana India Source:International Financial Statistics, IMF; World Development Indicators, World Bank Life expectancy (2002)

67. 67 India Sierra Leone Congo Lesotho Low and Low-Middle Income Countries Source:International Financial Statistics, IMF; World Development Indicators, World Bank Life expectancy (2002)

68. 68 US Gabon Botswana South Africa Ivory Coast Azerbaijan Source:International Financial Statistics, IMF; World Development Indicators, World Bank Infant Mortality per 1,000 Live Births (2002)

69. 69 Myanmar US Hong Kong recommended Source:International Financial Statistics, IMF; World Development Indicators, World Bank Caloric Intake (2002)

70. 70 Ignoring the specifics of what is traded, what is the impact of trade on social equality?

71. 71 Yemen Oman Morocco Libya Myanmar Haiti Source:International Financial Statistics, IMF; World Development Indicators, World Bank Female Adult Literacy Rate (2002, relative to males)

72. 72 US Myanmar Oman Botswana Ivory Coast Azerbaijan and Albania GDI measures equality of quality of life (longevity, education, literacy, income). Source:International Financial Statistics, IMF; World Development Indicators, World Bank Gender Related Development Index (2002, 0=low 1=high)

73. 73 GEM measures the proportion of women in legislatures, among senior officials, and holding technical and management positions as well as gender differences in income (as a proxy for economic power) Source:International Financial Statistics, IMF; World Development Indicators, World Bank Gender Empowerment Measure (2002, 0=low 1=high)

74. 74 US Hong Kong Sierra Leone Burundi Gabon Botswana Source:International Financial Statistics, IMF; World Development Indicators, World Bank Children 10-14 in the Labor Force as % of Age Group (2002)

75. 75 Source:International Financial Statistics, IMF; World Development Indicators, World Bank Human Development Index (2002, 0=low 1=high)

76. 76 Ignoring the specifics of what is traded, what is the impact of trade on U.S. unemployment and earnings?

77. 77 Source: Bureau of Labor Statistics, and Bureau of Economic Analysis

78. 78 Source: Bureau of Labor Statistics, and Bureau of Economic Analysis