Former president Donald Trump thinks immigrants make the U.S. less prosperous. If re-elected, he would try to close the border and engage in a massive, expensive deportation program. He has the support of Republicans in Congress.
These misguided policies would slow the economy.
Vice President Harris has been less clear on what her immigration policies might be. She has not discussed immigration policy in her recent speeches. As vice president, she has worked to reduce migration by encouraging businesses to invest more in immigrant-source countries.
Better economic conditions in these countries would slow the flow of people into the United States. This might reduce the chaos at the border over time, but it would not improve the performance of the U.S. economy.
Lost in the immigration debate are the valuable economic contributions immigrants make. Instead of reducing the flow of immigrants, we should encourage people from other countries to come here, especially entrepreneurial and higher-skilled individuals. This option should have traction on both sides of the aisle and be easier to pass than a much-needed comprehensive immigration reform. Here’s why.
Foreign-born individuals make up 14 percent of the U.S. population. Yet, they start 25 percent of businesses. There are several reasons this happens. First, migrating to another country is a risky act. This suggests that immigrants have a higher tolerance for taking risks, an essential characteristic of entrepreneurs. Second, there is evidence that they are leaving countries that do not create an environment that promotes entrepreneurship, as compared to the United States. Third, once they are here, they may face discrimination. Starting a business is an important option. These new businesses create jobs and innovations.
Immigrants play a vital role in innovation. The educational mix of immigrants has changed over the 2000-2022 period. Today’s immigrants are more educated. To understand these changes, look at the largest sending countries: Mexico, India, Philippines and China. The percentage of high school graduate immigrants has increased for all four countries, and the rate with a bachelor’s degree or more has increased in these countries, except China. The change in the percentage rate with some high school education has increased only for Mexico and India.
Research shows immigrant college graduates produce more patents than native-born college graduates. The immigrant advantage narrows when we compare STEM graduates. Immigrant inventors make up 16 percent of inventors but produce about 23 percent of inventor output. Other research shows a 1 percent increase in immigrant college graduates per capita increases the number of patents per capita by between 9 percent and 18 percent.
This research shows patents by immigrants explain about one-third of U.S. productivity growth. Why such a significant effect on productivity growth? First, foreign inventors often have a different knowledge base. Second, foreign-trained inventors are complementary to native-born inventors. They have a significant positive effect on the research productivity of native-born inventors.
New ideas drive innovation and productivity. Entrepreneurs transform these ideas into products and services. They also use these ideas to find better ways of running a business or improving productivity. These changes can be disruptive for incumbent businesses but serve as the lifeblood of successful market economies.
Unfortunately, U.S. productivity growth has slowed from 2.3 percent annually from 1947 to 2005 to 1.3 percent since 2005. More immigrants can help change this.
One reform would be to expand the existing employer sponsorship permanent visa program. The government caps these visas at 50,000 yearly. These visas go to people with exceptional abilities as researchers in medicine and science. Another critical category includes foreign investors contributing $500,000 more to a U.S. business venture.
Harris talks about promoting small businesses and innovation in the United States. Rather than closing our doors to immigrants, she should propose increasing the number of employer-sponsored visas. Such a policy proposal would spur innovation and help stimulate the growth of new businesses without worsening the budget.
