Will Immigration Reform Overlook America’s Need for Skilled Labor?

Following the electoral earthquake in November 2012, the prospects for immigration reform are looking favorable.¹ Republicans are increasingly concerned about alienating America's biggest and most rapidly growing minority group while Democrats feel obligated to deliver the goods to the Hispanic voters who have been part of a loyal electoral bloc in the two last presidential elections. President Obama sees comprehensive immigration reform as a way of splitting the Republican Party just as he did with the fiscal cliff negotiations over the new year.

At least five issues should be included in "comprehensive" immigration in reform in America:

•  Border security; critically important in Southwestern border states.
• Cracking down on employers' hiring illegal immigrants; a related issue concerns the political requirement for more enforcement of prohibitions against employers hiring illegal immigrants. This seems likely to lead to the creation of more comprehensive federal registration of both employers (like E-Verify) and employees (a national US ID card anyone?).
•  Legal status of existing illegal immigrants; probably the single most important overall political issue for the Hispanic community, though there is a distinction between legalization of status and a pathway to citizenship. The former would likely be most important for the Hispanic community and generate the biggest economic effects by taking large numbers of people out of the shadow economy, whereas the latter might lead to increases in the number of voting Hispanic Americans. Consequently, Republicans will probably be most resistant on granting an easy way to citizenship.
• The need for low-skilled workers in the US economy, especially relevant to the agricultural sector and some services sectors, where labor shortages persist despite a high overall unemployment rates.
• The need for high-skilled workers in the US economy; this is particularly relevant for the US high-tech industries and the tertiary educational sector, where more opportunities for foreign graduates from US universities will be sought.

Unsurprisingly, the different Senate constituencies and the White House have different priorities on these elements. The Senate "gang of eight" (Senators Schumer, McCain, Durbin, Graham, Menendez, Rubio, Bennet, and Flake) in their Bipartisan Framework for Comprehensive Immigration Reform took up four of them by focusing on:

1. Creating a Path to Citizenship for Unauthorized Immigrants Already Here that is Contingent On Securing the Border and Combating Visa Overstays. The specifics are unclear on this proposal, but the sequencing is evident, with new border control measures preceding any potential changes in the legal status of existing illegal immigrants.
2. Improving the Legal Immigration System and Attracting the World's Best and Brightest. The only concrete proposal under this heading is the no-brainer of awarding a green card to immigrants with a PhD or master's degree in science, technology, engineering, or math from an American university.
3. Strong Employment Verification. Under this heading, the federal government would create an effective employment verification system preventing identity theft and ending the hiring of future unauthorized workers. It would require prospective workers to demonstrate both legal status and identity, through non-forgeable electronic means prior to obtaining employment.
4. Admitting New Workers and Protecting Workers' Rights. Here the senators propose to let businesses hire lower-skilled workers in a timely manner when Americans are unavailable or unwilling to fill those jobs. The program would be tailored for the agricultural and dairy industries. This element would be cyclically adjusted to allow more low-skilled immigrants to enter the United States when the economy is creating jobs and fewer when it is not.

Details on these objectives remain extremely vague, suggesting difficulties that lie ahead and the haste that the senators felt in launching their bipartisan proposals ahead of President Obama's big speech in Las Vegas on the topic the next day. Clearly the agricultural lobby was more influential than the high-tech lobby among the eight.

The opposite is the case among the Senate gang of four (Senators Hatch, Klobuchar, Rubio, and Coons²), which has introduced the only new piece of immigration legislation focusing exclusively on high-skilled immigration. The immigration Innovation (I2) Act of 2013 proposes to do numerous things for both temporary high-skilled visa holders, student visa holders, and high-skilled permanent immigrants;

Employment-Based Temporary H-1B Visas Would:

• increase the H-1B cap from 65,000 to 115,000;
• establish a market-based H-1B escalator, so that the cap can adjust—up or down—to the demands of the economy (with a 300,000 ceiling on the ability of the escalator to move);
  • If the cap is hit in the first 45 days when petitions may be filed, an additional 20,000 H-1B visas would be made available immediately.
  • If the cap is hit in the first 60 days when petitions may be filed, an additional 15,000 H-1B visas would be made available immediately.
  • If the cap is hit in the first 90 days when petitions may be filed, an additional 10,000 H-1B visas would be made available immediately.
  • If the cap is hit during the 185-day period ending on the 275th day on which petitions may be filed, an additional 5,000 H-1B would be made available immediately.
• uncap the existing US advanced degree exemption (currently limited to 20,000 per year);
• authorize employment for dependent spouses of H-1B visa holders;
• increase portability of high-skilled foreign workers by removing impediments and costs of changing employers, and establishing a clear transition period for foreign workers as they change jobs;
• restore visa revalidation for E, H, L, O, and P nonimmigrant visa categories.

Student Visas Would:

• allow dual intent for foreign students at US colleges and universities to provide the certainty they need to ensure their future in the United States.

Immigrant Visas and Green Cards Would:

• enable the recapture of green card numbers that were approved by Congress in previous years but were not used;
• exempt certain categories of persons from the employment-based green card cap: Dependents of employment-based immigrant visa recipients; these would include US STEM (Science, Technology, Engineering, Mathematics) advance degree holders; persons with extraordinary ability; and outstanding professors and researchers;
• provide for the roll-over of unused employment-based immigrant visa numbers to the following fiscal year so future visas are not lost as a result of bureaucratic delays;
• eliminate annual per-country limits for employment-based visa petitioners and adjust per-country caps for family-based immigrant visas.

US STEM Education & Worker Retraining Initiative Would:

• reform fees on H-1B visas and employment-based green cards, so that businesses already employing more than 25 full-time equivalent employees in the US pay a $1,250 fee per H-1B visa application and $2,500 if employing more than 25, as well as introduce a $1,000 fee for each work-based green card application;
• Use money from these fees to fund a grant program to promote STEM education and worker retraining to be administered by the states.

These legislative proposals strike me as sensible and good for the US economy. The overall number of H-1B high-skilled is increased, and a degree of contingent cyclical upward adjustment is introduced, alleviating the risk of potential employment bottlenecks. Completely removing the 20,000 H-1B cap for advanced degree recipients is a constructive step, and would affect students also outside the STEM fields. Streamlining the green card system by exempting key groups from caps and removing per-country limits is similarly far sighted, though it is not clear whether the new proposed fees replace or add to existing high-skilled visa fees.

Meanwhile, President Obama in his speech on immigration reform focused on four topics;

• Continuing to Strengthen Border Security; aiming to improve border security infrastructure, crime fighting and the immigration court system.
• Cracking Down on Employers Who Hire Undocumented Workers; proposing a mandatory phased-in electronic employment verification system managed by the federal government.
• Pathway to Earned Citizenship; enabling undocumented immigrants to register and become eligible for provisional legal status and potential lawful permanent resident status, as well as reintroducing the DREAM (Development, Relief, and Education for Alien Minors) act to make young undocumented people eligible for earned citizenship
• Streamlining Legal Immigration; introducing a potpourri of different proposals, including many of the same Green Card system proposals listed by the gang of four. Also proposed were the issuing of Green Cards to STEM graduates, taken from the gang of eight; start-up visas for job-creating entrepreneurs, more investor visas and a new visa category for employees of federal national security science and technology laboratories

A substantial overlap exists between the different Senate gangs and President Obama about the general direction and even some of the specifics of a new US immigration reform, so success seems reachable in 2013.

Even so, "comprehensive immigration reform" is not the same as "fundamental immigration reform" in America. All of proposals tinker at margins of the existing immigration system, which would remain skewed towards family-based immigration even as the access to employment-based temporary and permanent migration increases. The US is thus not embracing the wholesale shift towards a more skill/employment based immigration system that other industrialized countries have adopted in recent years. As a result the United States will not go the way of other traditional immigration destinations—such as Canada, Australia, or the United Kingdom.

This will likely continue to make the United States an outlier in the OECD [Organization for Economic Cooperation and Development], the club of leading industrial democracies, whose members have increasingly shifted away from family-based immigration towards employment-based migration. This is illustrated with the latest available data in figure 1.

Only about 15 percent of US permanent immigrants in 2010 arrived for work and related reasons,³ compared to 50 percent for the OECD as a whole, 45 percent for the European Union (excluding intra-EU free labor movements) and up to 75 to 80 percent in Denmark, Spain, and Ireland. Even a doubling of the relative share of US employment based permanent migration would therefore still leave the United States with a considerably more family-based migration system than pretty much any other advanced economy. And it is a mistake to think that the percentage data in figure 1 masks huge differences in the gross number of permanent migrants coming to the United States and the European Union. In 2010, 1.04 million permanent migrants came to the United States, while 1.17 million came to the European Union.⁴

To what degree the United States wishes to shape its immigration system based on family or employment objectives is of course a political decision. But the assumed limited focus on employment as an objective raises doubts about the United States' ability to enter into far reaching new services-oriented trade agreements in the future.

The North American Free Trade Agreement (NAFTA)⁵ and previous US free trade agreements (FTAs), such as the US-Australia FTA with its E-3 visa,⁶ and the US-Chile and US-Singapore FTAs with their carve-outs of H1-B visas,⁷ have included provisions relating to US immigration law. But future services-oriented free trade agreements would probably have to go beyond such piecemeal approaches, even with the larger number of H-1B visas potentially available under the gang of four proposals.

Accordingly, US free trade proponents should use the coming political window of opportunity for "comprehensive immigration reform" to make sure that reform includes a revamped high-skilled immigration system more attuned to the needs of a global services economy. The goal should include creation of new US high-skilled visa categories, such as a "GATS (General Agreement on Trade in Services) visa"⁸ or other types of explicitly trade related visas.

More broadly, the United States should use its policy on visas and entire visa as a bargaining chip in negotiations with other countries favoring such changes and potentially willing to compensate the United States in return. As illustrated above, such quid pro quos have occurred on a limited scale in some FTAs. But a much bolder approach would help exploit the potential economic benefits to the United States in the global services economy (see Jensen 2011). Market access abroad for US services firms will expand with greater visa access to the citizens/residents of negotiating partners. One example would be the widely discussed EU-India FTA, in which the EU has signaled a readiness to grant more visas for high-skilled Indians in return for improved market access for EU firms in India. Media reports suggest 40,000 to 50,000 such new visas may be part of an EU-India FTA.

Given American political sensitivities, visa categories to be included in FTA negotiations would probably have to be tied to the US business cycle (as is also the case in the gang of four H-1B proposals). Such arrangements might also have to subject to trade enforcement actions and sanctions, including a 10 percent reduction in the number of visas available if the agreements are not implemented.

Given the intensity of the immigration issue, Congress will not likely want to revisit immigration for some time after reform is adopted in 2013. America's free trade advocates should therefore engage fully in the coming immigration reform debate and ensure this vital visa bargaining chip is a part of FTA negotiations.

Jacob Funk Kirkegaard is author of The Accelerating Decline in America's High-Skilled Workforce: Implications for Immigration Policy.

Notes

1. The author is currently residing in the United States on an employment-based green card sponsored by the Peterson Institute and has previously been a temporary H-1B and O-1 visa holder also sponsored by the Peterson Institute.

2. Senators Blumenthal, Flake, Heller, Hoeven, Shaheen, and Warner are identified as original cosponsors of the bill.

3. The "Free Movement" category covers migrants moving under freedom of labor movement rules in place inside the European Union/European Economic Area (EEA) and between Australia and New Zealand.

4. OECD International Migration 2012, table I.1.

5. NAFTA contains provisions in mode 4 concerning the so-called TN or Trade NAFTA visa, which allows Canadian and Mexican citizens to take up professional occupations on the NAFTA Professional Job List in the United States, provided that several specific provisions are met. The NAFTA visa is valid for one year, but can in theory be renewed indefinitely.

6. See http://canberra.usembassy.gov/e3visa/qualifying.html

7. Nationals from Chile and Singapore have first access to a total of 6,800 out of the currently legislated 65,000 annual H1-B visas. Unused numbers in this pool are made available for H-1B use for the next fiscal year.

8. This proposal by Indian trade negotiators originally made during the Uruguay Round of global trade negotiations, meant to introduce a new class of visa with more streamlined application procedures, and more flexible conditions, to facilitate the movement of people covered by a country's mode 4 GATS commitments.