Indian software programmers were in high demand in 1999 and 2000. About 70,000 Indian professionals received temporary visas in 1999, which allowed them to work up to six years in the United States. Foreign workers accounted for half of all the new jobs created in system analysis, programming, and other computer-related occupations that year. Still, many high-tech and software industry leaders wanted more They successfully lobbied Congress to raise the yearly cap on this category of visas (H-1B) from 115,000 to 195,000.

The United States is not alone in looking for highly skilled workers abroad; other countries are trying to compete for the world's entrepreneurs, scientists, and high-tech specialists. The German government has begun a controversial program to offer five-year resident visas to 20,000 high-tech professionals from such places as India and Eastern Europe. Britain is also in the process of relaxing immigration controls to attract skilled workers. And even Japan, which has been relatively closed to foreign migration, signaled that it may ease entry rules for skilled foreigners.

These moves, and much of the discussion that has accompanied them, represent a departure from the recent past. In the United States, legislation reflected a less open attitude toward immigrants just a few years ago Voters in California approved Proposition 187 in 1994, denying social and medical services to undocumented immigrants; and, at the federal level, the 1996 Welfare Act - as originally passed - denied access to programs such as Food Stamps and Medicaid to all legal but non-naturalized immigrants.

The recent policy changes increasing the number of skilled immigrants are most likely a result of the global tightness in the market for information technology workers. But they might also be an indication of new trends U.S. immigration policy has been moving toward favoring highly skilled and highly educated immigrants. Changes made in 1990 (and expanded since) have increased the le gal opportunities for educated foreigners to enter the country. And some argue the United States should go further and reframe its permanent immigration policies around attracting the most skilled workers.

Though the shift in the tone and content of the U.S. immigration debate may seem radical to some, it is actually minor compared to the dramatic swings immigration policy underwent during the twentieth century Open gates were closed and opened again, and the admission criteria saw deep philosophical changes. Immigration arouses strong feelings even in a country that considers itself to be a nation of immigrants. Like population growth, immigration can exacerbate problems of congestion and raise the cost of services in areas where immigrants concentrate. Differences in culture and language tend to raise apprehension of cultural change. And, though many gain from the arrival of immigrants, those who are in most direct competition with them feel their position threatened - especially when the economy sours.

A shift toward admitting immigrants on the basis of their skills would potentially have wide-ranging effects on the American economy. It can generate new gains and losses for individual workers and firms. And the impact can extend to the countries from which immigrants come. But ultimately U.S. policymakers will have to ponder and balance considerations beyond the realm of economics.

HIGH-POWERED TEMPS

The U.S. immigration system currently allows foreigners to come here to work through two different channels They can move permanently by obtaining a 'green card.'Or they can acquire a temporary work permit, such as the H-1B. Over the last decade, much attention has been focused on the permanent immigration system as the number of immigrants moving to the United States reached levels not seen since the turn of the nineteenth century. During that time, the United States received up to a million and a quarter immigrants in some years, about one-third to one-half of the population growth. During the 1990s, the United States again granted about 750,000 green cards each year. (Plus, it received an estimated 200,000 to 300,000 illegal immigrants annually.) Because the natural rate of population growth among Americans has slowed, immigrants accounted for about one-third of the nation's population growth.

Much less noticed until recently has been the growth of skilled workers admitted on a temporary basis. The number of highly skilled temporary workers admitted in 1999 was five times greater than in the 1980s. Specialty occupation workers (H-1Bs) and intracompany transferees added up to about 160,000 in 1999, a number equivalent to between one-quarter and one-fifth of legal permanent immigrants. And these workers tend to be very highly educated Of the H-1B visas granted between October 1 and February 29 of 2000, more than 41 percent went to people who had a master's degree or higher, and 56 percent to people who had a bachelor's degree.

This growth in temporary work visas reflects increasing globalization Growing trade and foreign investment have created needs for international expertise in American firms and have widened access to pools of foreign talent. But it was also explained by the strength of the U.S. economy. Congress set an annual limit of 65,000 on H-1B visas for the first time in 1990, but under extremely tight labor markets the cap was expanded twice, to 115,000 in 1997 and to 195,000 in 2000 after seeing the prior cap reached before year's end for two years in a row.

Although workers hired under the H-1B visa program represent only a tiny fraction of the U.S. labor force of 133 million workers, they made up about 6 percent of its labor force growth in 1999. The impact was especially felt in computer-related occupations, where more than half of new H-1Bs were employed. But their presence was also noted in fields as far from the world of computers as fashion models (see the charts). Given that temporary foreign workers made up about 10 percent of the information technology (IT) workforce devoted to research and development, the National Research Council concluded that this sector would have been unlikely to grow as rapidly as it did without foreign workers.

Although no exact numbers are available by state, in Massachusetts, H-1B workers were an important source of labor among technology-intensive employers, according to Paul E. Harrington and Neeta P. Fogg at the Center for Labor Market Studies at Northeastern University. After surveying 310 Bay State firms that employ scientific, engineering, and technology workers, the researchers found that over 7 percent of their employees hired during April 2000 had H-1B visas. In biotechnology, almost one out of every five hires had an H-1B visa.

The temporary nature of these visas gives policymakers greater flexibility because they can postpone more difficult questions that come with the decision to admit someone as a permanent member of society. But it is important to remember that the distinction between temporary foreign workers and permanent immigrants is in some ways artificial, and thus changes in the temporary visa system can impact the composition of U.S. immigration. It has been estimated that as many as 30 percent of 'permanent' immigrants leave the United States within a decade or two of their arrival, while many of the skilled workers who come in under temporary visas desire to stay permanently. The Immigration Act of 1990 made it easier for H-1Bs to later apply for permanent residency by removing a clause that required them to prove they had a home abroad that they were not intending to abandon. The Act also doubled the number of employment-based green cards to 140,000 per year. 'At the time, Congress and the administration agreed that it [was] in the competitive interests of the United States to use the [H-1B] visa as a preemigration pool out of which we would choose our permanent immigrants,' says immigration expert Demetrious Papademetriou of the Carnegie Endowment for International Peace. But processing backlogs have limited the potential impact as the number of employment-based green cards awarded has fallen short of the quota.

SHOULD WE CARE ABOUT SKILLS?

Whether or not we care about the skill level of immigrants depends on the goals we are trying to achieve through immigration. Historically, immigration policy has addressed economic goals ranging from filling labor shortages in specific industries to longer-term economic development. It has also been aimed at political objectives such as settling the West, allowing for family reunification, and providing a refuge from persecution to people from around the world.

Today's H-1Bs are meant to serve mostly a temporary economic role, helping to meet workforce needs in times of labor market tightness. In that sense, they are similar to past programs under which temporary immigration was intended (whether or not it worked that way) as a short-term solution to meet a specific and immediate labor market need. The Bracero program - which brought Mexican laborers to U.S. farms - for instance, was started to alleviate an acute shortage of agricultural labor in the middle of World War II.

Temporary foreign workers tend to respond most closely to U.S. economic conditions, according to Papademetriou. As such, they may help moderate business cycles. A growing supply of foreign labor when the economy is growing rapidly could extend the expansion by relieving bottlenecks and moderating wage increases. Similarly, in downturns, a decreasing pool of foreign workers could mean less downward pressure on the wages of domestic workers.

The trick in setting the appropriate policy is to balance the short-term needs of employers, while ensuring that existing U.S. workers will have adequate job opportunities (especially if they are coveted jobs). Opponents to the expansion of the cap on H-1B visas have argued that increasing the availability of foreign workers would allow firms to hire foreigners for less pay, at the expense of retraining older workers, training younger ones, or recruiting native-born minorities. To counter this, employers are now being charged a $1,000 fee for each visa request that will be used for job training, low-income scholarships, and grants for technical courses for U.S. workers.

But because of their high level of education, these foreign workers could have other economic impacts, especially if the H-1B program serves as a gateway to permanent immigration. In fact, Harvard economist George Borjas has recommended that U.S. immigration be reformed along the lines of the Canadian immigration system to select permanent immigrants according to their skill and education levels. Skilled workers accounted for at least 50 percent of immigrants to Canada in 1999, while family immigrants accounted for 29 percent. Canada uses a 'points' test that evaluates each applicant's education, skills, experience, age, and language proficiency to determine who will be allowed in. Applicants are also awarded higher points if their occupation is one that is deemed to be in high demand.

Changing the U.S. immigration system along these lines could potentially affect the size of the economic pie, how it is distributed, and the contributions to and drains from public coffers. To understand this, it helps to think about why immigrants choose to move in the first place. While people move to another country for all sorts of reasons - ranging from family ties to persecution - in economic terms, they move to where they can be most productive. The whole world gains from such migrations, as they increase the efficiency with which labor and other inputs are used in production. Thus, when European immigrants first settled in what became the United States, they left countries where land was relatively scarce and workers abundant for a place where land was plentiful. They gained from their move in that they could earn more from working with more land - and in the process they also made the land more productive and increased the demand for the goods that American workers produced.

But nations that are setting their immigration policies rarely care about whether migrations benefit the world as a whole. They are more concerned with whether the policy is going to benefit those already in the country. It is difficult to say whether admitting less skilled or more skilled immigrants would do a better job of improving the lot of domestic workers. Some argue that because the U.S. population is on average more educated than the populations of developing countries, admitting less educated immigrants to work as nannies or gardeners or in other service jobs would allow U.S. workers to use their education most efficiently. Others counter that admitting highly skilled workers would better complement the skills of American workers, as their presence could facilitate the invention and diffusion of new technologies and ideas - thus making skilled American workers more productive. And perhaps their presence could also benefit less skilled U.S. workers if their coming here increases the demand for relatively unskilled jobs by requiring more production workers or increasing demand for support services.

Favoring a particular type of immigrant may also affect the country's income distribution. Immigrants are most likely to compete with the American workers who are most like them. If immigrants are mostly unskilled, then - although the size of the total economic pie may increase - less educated American workers might see their wages fall relative to the more skilled. In contrast, immigration of highly skilled workers would presumably help reduce inequality (unless their presence makes educated American workers so much more productive that their wages increase).

The skill level of immigrants might have a 'fiscal impact' as well, depending on whether immigrants demand more in public services than they contribute in taxes. If immigrants are selected on the basis of their fiscal contributions, highly skilled immigrants might be preferred to the less skilled. They are more likely to pay more in taxes and less likely to depend on welfare; and because they received their education abroad, the United States would get a free ride in that it can benefit from the fruits of their labor without having made the initial investment in their education or training.

But, unless the total number of immigrants increases, setting immigration policy to meet demands for skilled workers would in the end mean limiting the opportunities for family reunification or for humanitarian assistance.

THE EVIDENCE

While many of the discussions for and against immigration - and favoring one type of immigrant over another - are based on theoretical arguments, the actual effects are hard to measure. For instance, the fiscal impact of immigrants depends on factors that are difficult to estimate, such as whether less skilled immigrants are more likely to return to their home countries. If they are, then contrary to the argument presented above, less skilled immigrants could actually be a fiscal plus since they would contribute to programs such as Social Security from which they would never actually receive any benefits.

Many economists suspect that increasing immigration of less skilled workers to the United States after 1965 depressed the wages of less educated native workers and contributed to rising wage inequality. But there is no agreement on the size of this impact, as increased trade with lower-wage developing countries and an increased demand for educated workers (thanks to technological change) surely played roles as well. 'Although many researchers have tried, it has proved surprisingly difficult to document that immigration has a sizable adverse effect on native workers,' writes economist George Borjas.

Even on the most basic question, what is the 'right' number of immigrants, the evidence provides few guidelines. 'The academic literature is not at the point where one can estimate the relevant costs and benefits with any reasonable degree of confidence, and then use these estimates to grind out a magic number,' says Borjas. (This is also true for foreign workers on temporary visas. The National Research Council found 'no analytical basis on which to set the ‘proper' level of H-1B visas. Thus, the decisions to reduce or increase the cap on H-1B visas are fundamentally political.' )

Part of the problem is that knowing whether immigrants helped the economy grow, or whether their presence affected the wages of a particular native group, requires knowing what would have happened if the immigrants hadn't come. This can be difficult even when you look just at the short-term impact of temporary workers. For example, recent studies have been unable to quantify the impact of H-1B workers on wages in the IT sector where so many are employed. The newness of their arrival and lack of adequate data contribute to the measurement difficulties. But the larger problem is that it is hard to know how much more slowly the IT sector would have grown without these workers.

Perhaps the wages of programmers would have risen enough to stimulate a much greater investment in training by both firms and individuals. But perhaps also, the rising costs of labor would have stimulated use of more capital-intensive technologies. Alternatively, increasing difficulty in finding and hiring qualified workers could have led to more shifting work abroad.

Another issue that makes it difficult to assess the impact of immigration is that labor markets adjust to immigration flows through mechanisms that go beyond changes in wages. A good example comes from Israel, which received a massive inflow of very highly educated immigrants from the former Soviet Union in the early 1990s. By the end of 1993, the influx of Russian engineers and medical doctors amounted to almost double the number of native Israelis in those professions.

In spite of the size of the shock, researchers have concluded that any impact on the employment or wages of native engineers or doctors was modest at best. According to Professor Yoram Weiss at Tel Aviv University, the effect was cushioned by the fact that immigrants adapted gradually to the Israeli labor market as they learned the language and the system. Many educated immigrants found their first jobs in low-skill occupations, such as working at cleaning jobs, gas stations, and on plant floors, or at the bottom rung of their profession. This may have allowed Israeli workers to scale up into higher-paying occupations. For instance, Russian physicians initially found jobs as generalists at the lower end of the pay scale in hospitals, while native Israelis were promoted to fill the higher-paying ranks in the expanding health-care system. An investment boom and the entry of additional capital to the country also played an important role in limiting the impact of the inflow, according to Weiss. And the inflow of skilled immigrants coincided with a world-wide change toward production technologies that increased demand for skilled workers and also dampened any downward pressure on skilled Israeli wages, write economists Neil Gandal, Gordon Hanson, and Matthew Slaughter. Still, the impact of this immigration is likely to have consequences into the future The share of Israeli undergraduates majoring in engineering and medical fields fell substantially, while the share majoring in law, a field with almost no Russians, rose, according to economist Rachel Friedberg at Brown University.

The Russian migration to Israel was to a large extent an accident of history. When countries decide to change policies to actively favor highly skilled immigrants, whether or not they can attract and retain them will depend on the larger forces that push people out of their native countries and pull them to new lands. In spite of Canada's efforts toward attracting highly skilled foreigners, the country has seen a growing gap in the wages immigrants earn compared to natives and increasing immigrant participation in income transfer programs. And it also sees large numbers of better-educated, higher-income Canadian earners move to the United States.

BEYOND OUR BORDERS

One might also care about the effect of a 'brain drain' on the source countries. Interestingly, the brain drain has been a concern for developing countries even without policies in immigrant-receiving nations that admit immigrants on the basis of their skills.

For the most part, it is not the poorest or least educated of workers who leave developing countries. For example, International Monetary Fund economists William J. Carrington and Enrica Detragiache looked at the education of U.S. immigrants from 61 developing countries and found that, for most countries, individuals with more than 12 years of education were the most likely to migrate. (Mexico, due to its close proximity, was an exception A large share of Mexican immigrants had lower levels of schooling.) This brain drain was quite significant for some countries, particularly in the Caribbean, Central America, and Africa, where 30 percent of their residents with over 12 years of schooling had migrated to the United States. In a few countries such as Jamaica, more than 60 percent of workers with more than 12 years of education were to be found abroad.

Many developing countries invest in education precisely because they believe it will lead to faster rates of growth and higher income levels. If a country has a limited number of citizens who achieve higher levels of education, their departure may adversely affect the country's rate of growth. Moreover, when educated workers leave those countries, they take with them their government's investment without paying back in taxes. In the 1970s, Columbia University economist Jagdish Bhagwati, proposed that immigrants pay taxes to their home countries or alternatively that industrialized nations pay a sum equivalent to the benefit that they were receiving by the inflow of educated foreigners, in order to alleviate the problem. The proposals led to a major international conference on the subject but never generated concrete action.

Here, too, however, it is hard to know with certainty the actual impact on developing countries. Should they bar the migration of their educated citizens? Probably not. For one, the possibility of emigrating and thus attaining higher returns to education can potentially increase educational incentives. Then, if not everyone emigrates, the overall level of education of the country might be higher than if countries simply forbid educated workers to leave.

A more clearly positive effect of the outmigration of educated workers comes from the business links they can establish. Knowing both countries, immigrants can recognize opportunities and serve as a bridge for employment and investment. Examples abound of Indian immigrants moving to the United States who subsequently invested in India and went there for software outsourcing needs. Migrants also often send money back to their home countries. The sums can be substantial; they accounted for around 10 percent of the GDP of countries such as Jamaica and El Salvador in 1995; they are big even for countries such as Greece, where they accounted for close to 3 percent of the GDP.

In the end, it is the migrants themselves who gain most directly from immigration. Their improved welfare, however, is usually not counted in the calculations of the benefits of immigration - either in their home country or in the country to which they chose to move.

RECRUITING CITIZENS

Immigration policy tends to be very emotionally charged and has been subject to wide swings and dramatic changes of direction, not only in the United States but also in countries around the world. Immigrants often become the targets of blame during economic downturns, despite sparse evidence of any adverse impact. Cultural and language differences can magnify these feelings.

Globalization and increasing contact between nations is raising both the number of skilled workers who want to come to the United States and the number of employers who want to hire them. The nation's knowledge-intensive industries that trade globally, such as many of those that deal with information technology, argue that their competitive edge depends on having access to the best brains in the world. And perhaps adopting a policy to increase the number of highly skilled immigrants would help prevent inequality from widening further in the United States, as skilled immigrants would be less likely to harm the opportunities of the American workers at the lower end of the wage distribution.

But in the end, how a country designs its immigration policy depends on its goals and objectives, and these are not always based on economics. For the United States, immigration policy has long been formulated to meet humanitarian and social concerns as well as economic needs. And while a points test can observe a foreign individual's education, other traits such as ambition, drive, and endurance are not easily registered by such tests and yet they may be just as important in an immigrant's capacity to contribute to society.

The discussion of whom to let in is partly a discussion of who should be allowed to become an American, and perhaps the way we go about recruiting workers should be different from the way we recruit new citizens. But it is also a debate about the value of family ties Choosing to increase the number of visas granted on the basis of skills means either increasing the overall immigration flow or limiting those visas granted for family reunification. And it is a discussion that touches deep ethical and moral responsibilities about who should be allowed the opportunity to better his or her condition. The inscription on the Statue of Liberty does not read 'Give me your educated, your skilled... the well fed of your teeming shores.'

Source: U.S. Department of State