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Despite Setback, Immigration Can Favor Economic Growth

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Despite Setback, Immigration Can Favor Economic Growth

June 28, 2018

With the latest Republican immigration bill failing to pass the House, the current dysfunctional immigration system continues. But a few simple regulatory and legislative tweaks, such as reducing paperwork and raising visa caps could have substantial benefits for the economy.

Immigration is so convoluted that even in 2003, when the system was not as complex as today, Second Circuit Judge José A. Cabranes wrote for the court in Drax v. Reno (2003):

“This case vividly illustrates the labyrinthine character of modern immigration law-a maze of hyper-technical statutes and regulations that engender waste, delay, and confusion for the Government and petitioners alike…”

A system with 217 different visa types is not a simple task for a lawyer or layman, whether native-born American or immigrant. Additionally, the operating and compliance costs for the government reach into the tens of billions of dollars.

The United States Customs and Immigration Services has a budget of $4.5 billion, and many other federal agencies such as the Departments of Labor, Defense, Homeland Security, and State are involved in immigration procedures. Combined, these agencies employ tens of thousands of employees that perform immigration-related tasks, and thousands more work in the private sector to attempt to comply with these procedures. The immigration system also imposes costs by restricting the entry of many immigrants, both skilled and unskilled, whose work would benefit the economy.

For example, the Immigration and Nationality Act caps the number of EB-5 visas at 10,000 per year. The EB-5 visa is awarded to immigrants who agree to invest either $500,000 in high-unemployment areas or $1 million in other regions, and create at least 10 full-time jobs for Americans. The law also caps H-1B work visas for highly-skilled immigrants with bachelor’s degrees or higher levels of education at 85,000 per year. Similarly, H-2B visas for temporary non-agricultural guest-workers are limited to 66,000 per year. The Department of Homeland Security can issue more H-2B visas, but it only issued 15,000 more this year. Consequently, demand constantly outpaces supply for EB-5, H-1B, and H-2B visas and once the cap is reached USCIS randomly awards available visas to employers.

Firms must prove that no available U.S. worker holds the skills of the potential immigrant in order for the firm to qualify for visas. With an unemployment rate lower than 4 percent, this is not difficult to show.  Hence, these visa caps now reduce GDP growth and native-born American employment, since some American firms are reducing their operations due to lack of workers.

Another substantial opportunity cost is the many immigrants who choose to work, attend university, or visit countries other than the United States due to the complexity, high costs, and limits of the American system. Paperwork, fees, and visa caps make it less likely that immigrants will come to America and find jobs for themselves as well as create jobs for Americans. In today’s economy with 6.7 million vacancies and 6 million unemployed, the lack of high-skilled immigration and temporary guest-workers reduces growth since employers cannot find workers with the right skills. Moreover, out of the approximately 1.1 million immigrants who became permanent residents in 2016, two-thirds achieved the status based on family ties and only 12 percent based on employment or investment.


Source: USCIS Yearbook of Immigration Statistics 2016.

Fortunately, politically feasible solutions to the costs, complexity, and limitations of the system exist. Regulatory simplification rather than a change in the law can be used for temporary work authorizations, status extensions for tourists, and other procedures that now require detailed forms to be sent to USCIS. President Trump could mandate that USCIS forms be digitalized to save time and resources. Additionally, the Secretary of Homeland Security Kristen Nielsen could authorize even more H-2B visas than the 15,000 extra visas the department issued over the cap this year.

Although Congress has not passed an immigration bill, the failure largely focused on issues such as a border wall, chain-migration, and legalizing illegal immigrants. The next time an immigration bill comes to the floor, Congress could focus on less-controversial but useful reforms such as consolidating the 217 visa classes into fewer than 10 and removing or raising the cap on EB-5, H-1B, and H-2B visas to make the immigration system more employment-based and pro-growth.

Enforcement and security can be handled at the same time as eliminating complexity, needless paperwork, and limits to investor, high-skilled, and temporary immigration. Both executive and legislative actions are needed so America can have a pro-growth immigration system.

Daniel Di Martino is a contributor to Economics 21. Follow him on Twitter @DanielDiMartino

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