Becoming American: Why Immigration Is Good for Our Nation's Future (14 page)

Immigration laws can both benefit and damage the economy, and in the case of Arizona, its laws have drastically damaged its economy since mid-2007, according to an analysis by the Cato Institute. The Legal Arizona Workers Act (LAWA or employer sanctions) was the first such law, and it tried to regulate unauthorized workers out of the market. Its chief tool is E-Verify, an electronic employment eligibility verification system used to weed out unauthorized immigrants when they apply for a job. The E-Verify program scared a lot of investors and businesses out of the state. It was largely responsible for a business formation rate
decline
of 14.3 percent in the third quarter of 2007 in Arizona, while rates of business formation in California and New Mexico
increased
over the same time. Proponents of Arizona’s new immigration laws claim that E-Verify will force unauthorized immigrants out of jobs so Americans can fill them. In reality, however, some unauthorized immigrants are forced out of jobs that mostly remain unfilled.

In the immigrant-heavy farming industry, crop production employment dropped by 15.6 percent in the first four years after LAWA was passed. American workers did not fill the gaps. In neighboring New Mexico and California, crop production employment
increased
over the same time period. E-Verify can explain much of that difference.

Yet we often hear the real economic issue is immigrants create a drain on the federal government budget, but taxes paid by immigrants and their children—both legal and illegal—exceed the costs of the services they use. In fact, a 2007 cost estimate by the Congressional Budget Office found a path to legalization for unauthorized immigrants would increase federal revenues by $48 billion but would only incur $23 billion of increased costs from public services. This would produce a surplus of $25 billion for government coffers. According to the Social Security Administration Trustees’ report, increases in immigration have also improved Social Security’s finances.

Many government expenses related to immigrants are associated with their children. From a budgetary perspective, however, the children of immigrants are just like other American children in that they are expensive when they are young because of the costs of investing in children’s education and health. Those expenses are paid back through taxes received over a lifetime of work. The consensus of the economic literature is that the taxes paid by immigrants and their descendants exceed the benefits they receive.

Even with undocumented immigrants, the Internal Revenue Service estimates they paid almost $50 billion in federal taxes from 1996 to 2003. These taxes include payroll and Social Security (about $8.5 billion per year), property (directly, or as part of rental payments), and sales taxes. Nonetheless, about 40 percent of undocumented immigrants currently work off the books and consequently pay lower taxes.
²
Yet the purchasing power alone of undocumented immigrants sustains hundreds of thousand of U.S. jobs.

Meanwhile, it is astonishing to also note that immigrants are 30 percent more likely to start new businesses than U.S.-born citizens.
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About 10 percent of native-born Americans own a business. Koreans and Iranians living in the United States, in particular, are more than twice as likely to own a business than native-born Americans.
⁴
The traits needed to uproot yourself from your home—bravery, perseverance, diligence—are much like the traits you need to start a business.

Greg Fairchild, associate professor of Business Administration at the University of Virginia’s Darden School of Business, says, “Even if [immigrants] have a college degree from a home country, people don’t know those schools in the U.S. They have credentials and knowledge and drive but they’re not recognized by typical employers. They begin by hiring themselves.” 
⁵

Such investments in new businesses and in research may provide spillover benefits to U.S.-born workers by enhancing job creation and by increasing innovation among their U.S.-born peers. Over the last three decades, startup companies less than five years old created forty-four million new jobs, and they account for all net new jobs created in the United States during that time.
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Because there is such a large entrepreneurial gap between immigrants and U.S.-born workers, it makes sense to harness this untapped source of growth and to develop sound economic policy around it.

In some states, the immigrant contribution to the general economy is substantial. About 30 percent of all businesses in California are immigrant owned, as are 25 percent of businesses in New York and 20 percent of businesses in New Jersey and Florida. Across America, immigrants helped to start 25 percent of the new technology and engineering companies of the past decade. Where skilled immigrants congregated the impact was even more profound. During 1995 to 2005, immigrants helped to launch 39 percent of the new high-tech companies in California, 38 percent of the new companies in New Jersey, and 29 percent of the new companies in Massachusetts. Researchers estimated in 2005 that immigrant-founded companies were generating $52 billion in sales and employing 450,000 people.
⁷

According to a 2010 study by the Fiscal Policy Institute, Mexico has the most small business owners in the United States for any one country’s immigrants, with over one hundred thousand immigrants, followed by India and Korea. Iran came in eighth and Poland tenth, with over seventeen thousand immigrants. 
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Noncitizens make up one-quarter of all international patent applications from the United States, and college-educated immigrants have been found to be twice as likely to register patents as their U.S.-born counterparts. Furthermore, evidence shows that foreign-born university graduates are important contributors to U.S. innovation. Among people with advanced degrees, immigrants are three times more likely to file patents than U.S.-born citizens. Indian and Chinese immigrants and their descendants are also thought to be overrepresented among inventors, accounting for 14 percent of U.S. patents. The foreign-born make up 27 percent of the U.S. workforce with a doctoral degree, despite the fact that they only represent 13 percent of the U.S. population. It is mind-boggling to consider that it is the immigrant who is the source of our past, and potentially future, economic success.

Alexis de Tocqueville correctly observed this in his 1835 book,
Democracy in America
, in which he writes that the English government considered “New England as a land given over to the fantasy of dreamers, where innovators should be allowed to try out experiments in freedom.” Freedom is the driver of prosperity, and “nowhere was this principle of liberty applied more completely than in the states of New England.”
⁹

Fast forward to today, and as Patricia A. Buckley, senior economic advisor to the U.S. Department of Commerce, explained before the House Judiciary Subcommittee on Immigration, “An important segment of the foreign-born are not in the United States to find a job—they are here to create jobs. . . . The high rates of entrepreneurship among the immigrant population contribute to the dynamic of the economy, fostering both investment and employment.”
¹⁰

Daniel Chu was born in Guizhou Province in China, but he came to the United States for high school and college. Prior to graduating from Penn State in 2013, he had some great opportunities in front of him. He had been offered an analyst position at the largest asset management firm in the United States and a developer position for Ryan Media Works, Inc., a tech startup focused on groups who have felt left behind by technology. Although accepting the analyst offer could have led to permanent residency, Chu chose to join the startup. He explains, “I have an interest and passion for entrepreneurship. As a recent graduate, I am at a point now where I am willing to take the risk. By joining the startup, I might be able to help create jobs.” Chu further adds, “As corny as it might sound, I believe in the American Dream and I love this country. Like the many foreign-born entrepreneurs before me, I hope that my effort to create a business will make America a better place and help others live the American Dream. I just wish it were a less complicated process to stay and be a part of the United States’ thriving startup community. Less red tape would enable me to focus more on my startups and less on bureaucracy.”

Chu had already previously cofounded another startup, Quipco, LLC, which makes clipboards for iPads and iPhones. All of Quipco’s products are made in the United States for the purpose of creating jobs in the country. 

Unfortunately, the United States’ competitive advantage in the global marketplace has been slipping in recent years. In the past five years, we have fallen from first to seventh place in the World Economic Forums’ Global Competitiveness Report. We no longer have the supply of talent to meet our current demands. The kind of talent that is driving the world’s knowledge-based economy in the STEM fields is no longer in great supply in the United States.

At the same time, we are lacking in this talent pool, we are similarly deficient in other skill sets. America has lost six million manufacturing jobs in the last decade, yet today six hundred thousand jobs go unfilled because manufacturers cannot find workers with the right skills.

Possibly one reason many of these jobs go unfilled is because many Americans, unlike immigrants, are hesitant to move from their homes. Contrast the forces at work for immigration, where people must cross borders and cultures, to the migration of American citizens within the country. As a nation, the United States is often portrayed as restless and rootless. Census data, though, indicate that Americans are settling down. Only 11.9 percent of Americans changed residences between 2007 and 2008, the smallest share since the government began tracking this trend in the late 1940s, according to a Pew Social and Demographic Trends survey.

This survey found that most Americans have moved to a new community at least once in their lives, although a notable number—nearly four in ten—have never left the place in which they were born. Asked why they live where they do, movers most often cite the pull of economic opportunity. Stayers most often cite the tug of family and connections. Both the survey and Census data indicate that the biggest differences in the characteristics of movers and stayers revolve around geography and education.

Analysts say the long-term decline in migration has occurred because the U.S. population is getting older and most moves are made when people are young. Among all respondents to the Pew Research Center survey, 57 percent say they have not lived outside their current state; 37 percent have never left their hometown; and 20 percent have left their hometown but not lived outside their current state. As of 2009, only about 22 percent of Americans even had passports, while in many Western European countries the number is much higher, reaching 71 percent in the United Kingdom. These statistics clearly show that Americans have tended to stay close to home. Yet jobs do not grow homogenously. As different industries crop up in different places around the world, they need employees who are willing to make the transition and to move. In today’s global community, the U.S.-born people are not leading when it comes to taking advantage of opportunities wherever they may arise.

Cue the eager immigrants: ready, willing, and able to take their turn to grab at that brass ring.

My parents were fortunate in qualifying for student visas to come to the United States to further their studies. Not only did they leave their native country, but also, while here, they lived both in Michigan, with its cold winters and industrial heritage, as well as Louisiana, with its swamps and Creole culture. They were one of the many immigrant pioneers of their day.

While my parents did not stay in the United States after their schooling, many foreign students do, and they in turn have a positive impact on the U.S. economy. Foreign students are often hardworking and entrepreneurial. They also help to build bridges between the United States and other countries, to bring global perspective, and to aid in U.S. innovation. Despite all of these benefits, U.S. immigration policy does not make it easy for students to stay, as it forces a large number of students to leave after graduation. In 2013, Mayor Bloomberg delivered Stanford University’s commencement address. In the speech, he pointed out that 30 percent of the graduating class would have to leave the United States after their student visas expired—30 percent of the brightest minds at one of America’s most elite universities. Bloomberg frankly stated, “We invite foreign students to study here, we subsidize the universities they attend (then) tell them to go somewhere else and work for one of our competitors. It’s the most backwards economic policy you could possibly come up with.”
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In Bloomberg’s eyes, a green card should be stapled to the diploma of every STEM graduate.

The United States should try to retain its international students. Having spent at least four years in the American school system, students have an idea of what being in the United States means and what opportunities are available to them. For a more explicit example, consider Yoon-shik Park, who came to the United States for graduate school. But Park did not leave the country after completing his studies at Harvard Business School. Quite the opposite happened; instead, he chose to start a family and a life in Massachusetts.