Rx for worker shortages: smart immigration

Instead of rejecting skilled foreign workers, U.S. immigration programs should embrace more of them. We propose a four-point “smart” immigration plan as a supplement to existing legal immigration programs. Our plan would: 1) promote significant economic growth, 2) fill job openings, 3) protect existing American jobs and 4) generate new jobs. Skilled foreign workers who can fill open positions at U.S. enterprises would help create many more American jobs. Attracting them will not be easy, as the United States now faces stiff competition from a number of countries for this immigrant talent. Our program is intended to strike a balance, to protect current American workers and to help attract these foreign workers.

David Edstam

In contrast with our recommendation, President Donald Trump recently endorsed the Cotton-Perdue (RAISE) bill to cut lawful immigration by half: to about 550,000 persons per year. The bill would reportedly apply a “skills-based” points system to about 140,000 worker immigrants, cap refugees at 50,000 per year and reduce or eliminate certain other immigration categories. In addition, the Trump administration has announced it will wind down DACA beginning in six months, thereby potentially removing 800,000 “dreamers” from the U.S. workforce — unless Congress acts promptly. At the same time, the Homeland Security and Justice Departments continue their efforts to remove other undocumented immigrants.

Based upon our prior published estimates, we believe Trump’s combination of policies has the potential to cut GDP growth by roughly 15 percent below its projected long term level, if not more. To be clear, we agree with the administration’s expressed desire to help American workers, but we believe its immigration policies are shortsighted.

Worker shortages

Steve Carlson

As many economists and business people have been saying, the U.S. labor market is already tightening. The national unemployment rate was 4.4 percent in August (seven million persons), and in Minnesota it was only 3.7 percent in July (the latest data). A reduction in foreign-born workers would damage the economy as noted. We described this situation generally last April in MinnPost (“Immigrants are essential for U.S. economic growth — and we need more of them”). Our basic thesis is that because of the slow growth of our American workforce, we need more foreign-born workers to keep the economy moving forward at this stage of the economic cycle.

Our aging population, with its declining rates of births and labor participation, is unable or unwilling to fill available job openings — currently 6.2 million — and will be unable to fill many future jobs. Tepid rates of productivity growth have not provided relief. (See, for example, “Workers’ Pace Dents Growth” in the Wall Street Journal on Aug. 10.) As a result, U.S. economic growth has been below historical experience since the Great Recession in 2008 and will remain so if the workforce does not expand.

Not only are jobs currently going unfilled nationally, but significant worker shortages are also occurring in Minnesota. Nationally, there are shortages in the research, manufacturing, health care, technology, construction and agriculture sectors, among others. In Minnesota, agriculture, construction, health care and manufacturing have been reported to be hard hit this year. Labor shortages can create bottlenecks that hurt employment directly and indirectly, by restricting the growth of Minnesota businesses and delaying projects that could otherwise be completed sooner.

As reported in the Star Tribune, academics, farmers, business people and the state Chamber of Commerce all agree with immigrant advocates that a reduction in foreign-born workers will harm Minnesota’s economy (“Stretched for workers, Minnesota businesses lament immigration pushback,” Sept. 5). The article cites Minnesota’s Department of Employment and Economic Development (“DEED”) as concluding: “More than half of Minnesota’s labor force growth since 2010 has been driven by foreign-born workers.”

Health care and social assistance form a large part of Minnesota’s economy (about 475,000 workers and nearly 16 percent of our workforce, as of June, as reported by DEED). This sector is also adversely affected by labor shortages. It is not only rural doctors who are in short supply. Skilled med-tech workers, nurses, nurses’ aides and other positions are, too.

Paula Norbom, head of a search firm that assists Minnesota health technology companies, spoke about the problem in March with respect to med-tech workers, as reported in the Star Tribune. She indicated that “colleges and universities are not producing enough skilled med-tech workers.” Without sufficient med-techs, Minnesota’s hospitals and otherwise strong medical technology companies will be unable to grow or to maintain some existing services. These positions currently provide average total compensation of $117,000 per year. Not only are the economic benefits of those payments lost when the jobs are unfilled, but other jobs that are directly and indirectly related are also lost. The Star Tribune reported, for example, that the 67,000 workers employed in Minnesota’s health technology companies create jobs for another 100,000 persons.

A need not filled is economic growth lost. In a small business, the impact of a shortage of a skilled worker can be even more dramatic. Consider a technology company with 10 employees. Several of the positions are specialized and not redundant with the others, but all are needed in order to keep the business operational. If one uniquely skilled worker retires or otherwise departs, the jobs of the nine other workers are at risk. “Stuff would not get done.” All 10 jobs could be lost, as well as those of the 15 other people indirectly connected with the business (based on the ratio noted above). Even less stuff would get done, all because of one missing skilled worker.

In short, the Minnesota med-tech industry further illustrates the point that restricting immigration to exclude foreign-born skilled workers can make the economic pie smaller for everyone. Absent necessary staff with appropriate training, large companies will shrink their Minnesota workforce and possibly move to other locations (potentially overseas) in order to compete. Small companies could stagnate or disappear. Minnesota would not benefit. A carefully constructed immigration policy would not have zero-sum results for workers, but would instead be additive to economic growth.

Four-point plan

We propose a four-point “smart” immigration plan that would stabilize our current foreign-born workforce and also add workers needed to fill jobs that would otherwise go unfilled:

1.  Enact federal legislation to resolve the status of undocumented immigrants, including the “dreamers,” permitting the retention of as many as can be agreed of the 8 million currently estimated to be in the U.S. workforce. Enforce other immigration laws in a thoughtful and sensible manner.
2. Retain current legal immigration programs that admit approximately 1 million persons per year, including family members of current lawfully admitted immigrants, as well as H-1B and other short-term foreign worker employment programs at their current levels.
3. Tighten the enforcement of rules surrounding existing temporary foreign worker programs to ensure that American workers get a fair opportunity to take such jobs before they are given to foreigners. 
4. Implement a new skilled worker immigration program with the following characteristics:

• certification by a U.S. employer that: a job remains unfilled after robust solicitation efforts, and that the compensation will be at prevailing wage rates and not less than compensation paid to the employer’s existing workers in similar jobs;
• requirement that the would-be U.S. employer make a binding offer of employment to the foreign worker to commence work in a short fixed period (e.g., 60 days); federal approval of the visa to be granted automatically, provided the background check to be completed in that period is satisfactory; permanent approval to be granted in 180 days;
• payment by the employer of a fee of $20,000 to Homeland Security for each admitted worker, together with an annual employment tax of 5 percent of the employee’s income, in addition to ordinary federal and state taxes payable by the employer and the worker;
• no particular requirements for admission beyond current screening standards;
• thus, no English language skills, age restrictions or other such limitations; (the fact that the employer is willing to hire the foreign-born worker is sufficient); however, each U.S. employer would be limited at all times to the greater of a) two skilled immigrant visa employees, and b) such employees constituting not more than 10 percent of the employer’s workforce; in each case with annual compensation not less than $75,000 (or $60,000 for recent graduates of U.S. educational institutions) subject to adjustment for inflation;
• a robust regulatory regime managed by the Department of Homeland Security (or Department of Labor) to prevent abuses of the program and to protect American workers;
• portability of the visa for the initial five years in the USA to permit work with a different employer that meets the certification and fee requirements;
• annual limitation on such visas, tied to the U.S. unemployment rate for skilled workers; initially not more than 500,000 per year, and to increase if the relevant unemployment rate drops below a threshold or to decrease if such unemployment rate increases; but immediate family members (excluding adult children) permitted to join the visa holder in the United States after some period (e.g., six months);
• recertification (as above) required by the original employer after five years, or immediately if the foreign worker wishes to accept another job, together with payment of another fee of $20,000; foreign workers not so certified would be subject to removal to their country of origin;
• eligibility of the foreign-born worker to apply for a green card after 10 years of cumulative employment and residency in the U.S. (although visa holders could apply at any time, as under current law); otherwise, the foreign-born worker would be required to leave the U.S. if the green card application is denied. (An exception process could exist for “critical” employees.) Such green card  applications would take priority over those of non-residents and would be exempt from geographic restrictions (which is critical to attract and retain top talent).

An immediate and lasting economic boost

New York Times columnist Bret Stephens recently observed that an excellent “measure of national greatness is the ability of nations to cultivate, attract and retain human capital.” He references the many foreign-born Americans who have started new businesses (e.g., AT&T, Google and Pfizer) or received Nobel Prizes. We fully agree that immigrants can make disproportionate contributions to the United States. We do not propose to change existing immigration programs, including DACA, which are yielding significant benefits. But in addition, we believe strongly that our “smart” immigration program would fill critical gaps and provide an immediate and lasting boost for the American economy and American workers.

We note, for example, that filling 500,000 open jobs that pay $100,000 each per year would increase GDP by $50 billion. With the multiplier factor referenced above, those jobs and the new ones directly and indirectly created would likely increase GDP by more than $100 billion. This would be about one half percent of GDP, currently about $19 trillion. That is a substantial boost to GDP growth (which is otherwise projected at only about 2 percent per year) and a massive improvement over the substantial GDP cut that we believe Trump’s proposed immigration policies would create.

Finally, space does not permit a discussion of domestic programs and incentives to improve work opportunities for Americans. We certainly recognize the importance of increased STEM education and vocational training programs, efforts to reduce opioid and other drug and alcohol addictions, more available child-care programs and many other needed initiatives to support American workers. Those need to be addressed, as well as a smarter, targeted supplemental immigration program for skilled workers to fill open positions.

David Edstam of Edina is a retired senior finance executive. Steve Carlson is a former Edina resident (now in Connecticut) and retired finance lawyer and former Minnesota deputy commissioner of commerce (2011-12).