Almost one-third of Americans consider immigration the most important “problem” that the United States faces, according to a new Gallup poll. And yet, companies say they need far more workers than the current system allows.
Some business leaders say that visa restrictions remain too tight on visas for skilled and unskilled labor. Either way, immigration will be a critical issue during the US election season. The carefully negotiated bipartisan bill that failed in the House of Representatives earlier this year highlights the thorny climate surrounding this complex system.
Harvard Business School experts discuss the current quandary and potential policy and corporate solutions.
William Kerr: Untangling migration and employment
The immigration system to the United States is very complex. We have many people coming at many different skill levels for differing durations of stay. We seek to achieve diverse national goals (employment needs, family reunification, humanitarian) with different types of visas. And many people move across skills or visa categories during their stay.
Employment-based migration focuses on providing workers with specific skills to firms that need them. Most applicants hold a bachelor’s degree or higher and there are minimum salaries that must be met for positions.
Visas are requested by the employer for a specific individual. Microsoft, for example, is the lead actor when it makes an H-1B application. Built into this approach is that Microsoft already has a job identified for the migrant, and they are approaching the immigration system in a strategic manner. Often, the main constraint is gaining access to the scarce visa supply—there are so many applications for H-1B visas that a lottery system is used to allocate them.
Family-based migration makes up the bulk of the US system. In this case, the migrant is the lead actor in their efforts to come to the US, and a firm is not involved. Upon migration, the individual enters into a general population of workers from which firms draw talent. Hiring firms will be building a set of skills for their company and drawing upon native and foreign talent as befits their local situation.
While the employment-based and family reunification pathways are distinct, the tight labor market makes them more alike. Whether it’s very high- or lower-skilled work, companies all over are frequently decrying the lack of talent and saying, “Gosh, we need to find more workers.” The unemployment rate is still less for computer programmers than it is for workers who take jobs in fast food restaurants, but both unemployment rates are at historic lows.
Many organizations are starting to think about access to labor as their primary revenue constraint. In some settings, like fast food, migration will impact this talent access mainly by increasing the general pool of local workers. In other settings, like computer programmers, employment-based visas allow firms to target specific individuals (including foreign students graduating from US schools who need a work visa).
What about refugees, who are becoming more common globally? Research finds that refugees assimilate at an even faster rate into the economy and the workplace than general migrants when they are allowed to engage in work. That latter caveat is important, as in many settings, refugees face severe restrictions on how they can participate in the local economy.
When you have a lower- or mid-skilled (non-refugee) migrant coming for US work opportunities, their motivation may be temporary. For instance, “This is a great way for me to earn extra money for my family for 10 years. I’m going to send a lot of money back home in the form of remittances. I’m going to live very frugally. And then, someday, I’m going to plan to go back home.”
Refugees often do not share this perspective. They are fleeing bad conditions, and they instead want to stay and really put down significant roots. If refugees desire to stay in the country permanently, they make different investments—for their own workplace opportunities and for their children. This can boost their long-term integration into the economy.
William Kerr is the D’Arbeloff Professor of Business Administration at HBS and co-director of Harvard’s Managing the Future of Work initiative.
Marco Tabellini: One negative scenario and one positive for firms
Given the current political climate, it’s unlikely the US Congress will relax immigration restrictions. Instead, the two most plausible scenarios are:
- A more stringent cap on immigration regardless of education and skills.
- A tougher approach on undocumented immigration, with enhanced border security and possibly a tougher limit on the number of unskilled immigrants, but a more flexible and less stringent approach to regulate high-skilled immigration.
The first scenario will harm US firms by reducing the supply of workers in a tight market. The impact will be worse in sectors that are growing faster and where immigrants’ skills are more important, such as the semiconductor industry.
The effects of labor scarcity are likely to be heterogeneous: Large firms may be better able to either automate or offshore (or both). Small firms, instead, might be forced to shut down their production. It is thus possible that tighter immigration restrictions will result in more concentrated markets, with possibly negative consequences for US consumers, who may end up paying higher prices.
Restrictions on unskilled immigration might be particularly harmful for sectors like hospitality or agriculture, where immigrant labor cannot be easily replaced because US-born workers typically do not want to take these jobs or because tasks cannot be automated.
The second scenario may be more positive for US firms. Businesses will have easier access to high-skilled workers, who often bring new ideas and increase dynamism as well as innovation. In addition, a more flexible quota system—for example, linked to business-cycle conditions—would allow US firms to find workers more easily at times of high labor demand, while shielding US-born workers from labor market competition during recessions.
Not all firms will benefit from a scenario in which high-skilled immigrants replace unskilled ones. Reducing the number of unskilled immigrants will likely hurt US firms that employ less-educated workers and those that have a harder time hiring US-born individuals, such as hospitality and agribusiness.
A complete and sudden removal of all immigration restrictions is neither politically feasible nor economically desirable. Yet, further tightening the current immigration regime would be a major mistake.
The US economy would instead benefit from a more flexible, counter-cyclical system that depends on the conditions of labor markets. Relaxing the quotas currently in place for high-skilled immigrants would likely result in higher growth and dynamism.
Marco Tabellini is an assistant professor in the Business, Government, and International Economy Unit at HBS.
Raj Choudhury: The US gains when it welcomes skilled migrants
My research focuses on the migration of skilled workers. When the US lets in skilled migrants, it gains in terms of innovation outcomes, and in many ways.
Here are three:
Knowledge is shared and then recombined. Knowledge is transferred from the home countries of the migrants to the US, we found in a study we did with data from US pharmaceutical companies. And then there’s a subsequent effect, which is the knowledge transferred from the home countries is combined with local knowledge in the US to create new formulations, which are new to the world.
That’s something we call knowledge recombination. From the standpoint of innovation, it is extremely important, in my view and given my research, that the US continues to attract the best and the brightest from all over the world. And the implication for US companies is that attracting skilled talent from around the world is imperative for innovation and knowledge production.
Second, H1-B visa restrictions negatively affect companies and workers. We have a paper that looks at both the H1-B restrictions and the executive orders that Donald Trump issued in April 2017. We found that led to an erosion of $100 billion of valuation for US companies.
Finally, the US is losing a policy battle related to visas being issued for remote work. Since the pandemic, there’s been a revolution in almost all remote worker visas around the world. The digital nomad visa is now being issued by close to 75 countries, including Mexico and Canada, Portugal, the United Arab Emirates, Brazil, and many other countries, with the notable exception of the US, where the immigration debate in Congress has been clogged into stasis. And the problem is, US policymakers have not been able to separate the semi-skilled and unskilled immigration policy reform from skilled reform.
For that reason, they’ve not been able to come up with the digital nomad, remote worker visa. Almost every other developed country around the world has done it. And that’s a huge missed opportunity for the US.
Prithwiraj (Raj) Choudhury is the Lumry Family Associate Professor at HBS.
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