Immigration

Trump's New Immigration Pause Will Kill Prospects of a Quick Economic Recovery

Banning foreign workers will result in the outsourcing of jobs from America.

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The temporary 60-day pause that President Donald Trump declared on legal immigration in mid-April after the coronavirus hit was not so temporary after all. Starting tomorrow, Trump will extend this pause until the end of 2020. But that's not all. He is also expanding the scope of the ban to cover even more categories of immigrants.

Trump is justifying all this as an effort to save American workers from foreign competition. But if America's past experience with restrictionist policies is any indication, the ban will backfire and end up hurting, not helping, American workers, its intended beneficiaries, while crimping America's economic recovery.

Trump's new proclamation extends his April ban on new green cards for anyone other than children and spouses of American citizens because, it maintains, lawful permanent residents get instant "'open-market' employment authorization documents" that allows them to immediately "compete for almost any job in any sector of the economy" with American citizens. In addition, it will also impose a moratorium on temporary work visas including H-1Bs for foreign techies, H-2Bs for low-skilled non-agricultural work, J visas for summer jobs, and L visas for intra-company transfers. All of these, he says, "present a significant threat to employment opportunities for Americans" given that the "overall unemployment rate in the United States quadrupled between February and May." (None of this explains why he banned H-4 visas for the spouses and dependents of foreign techies, something that will cruelly split families. He is poised to cancel the work authorization for H-4 visa holders so there won't even be the theoretical possibility of any of them competing with American labor.)*

It would be possible to take Trump's economic rationales for slamming America's door shut now more seriously if he hadn't also been trying to do the exact same thing when the unemployment rate was at a record low. Indeed, his labor interventionism shows that he is as hostile to letting the free market regulate economic decisions as the socialists he reviles.

There are already significant obstacles built into labor and immigration law that make it far more time consuming and costly for businesses to hire foreign workers. So businesses already automatically prioritize American workers over foreign workers. As Sen. Lindsey Graham (R–S.C.) tweeted after Trump's announcement: "Work visas for temporary and seasonal jobs covering industries like hospitality, forestry, and many economic sectors can only be issued AFTER American workers have had a chance to fill the position."

The fact of the matter is that American employers only hire immigrants to fill niches at the top and the bottom end of the labor spectrum where qualified Americans aren't available or willing to take jobs. Restrictionists like White House aide Stephen Miller, the real architect of Trump's immigration pause, claim that starving businesses of foreign workers will force them to invest in training domestic workers and/or paying them more, resulting in more jobs and higher wages for Americans.

But this is the flawed logic of central planning. It ignores the fact that there are limits to the price increases that a market can bear. Businesses will automate functions that can't be performed abroad and will outsource other functions to keep a lid on the costs of a key input—all of which will hurt, not help, American workers.

American businesses did the first after President John F. Kennedy posthumously succeeded in killing the bracero program in 1964 that had allowed American farmers to hire around half a million Mexican guest workers on a seasonal basis. Did American workers see any windfall due to that? No. A study by Michael Clemens and Hannah Postel of the Centre for Global Development and Ethan Lewis of Dartmouth College found that the end of the program did not result in more jobs or higher wages for Americans in states that had relied on it. There was a small rise in native employment and wages for a short while before it all evaporated as farmers that relied on braceros switched to machines.

Interestingly, Trump's immigration ban does not extend to H-2A visas for farm workers. In fact, that's the one category of visas that has expanded on his watch. Why? Because agriculture is the mainstay of many red state economies whose leaders have indicated that they would not take kindly to being cut off from a key source of labor. Trump has also carved a very narrow exemption for foreign workers "involved with the provision of medical care to individuals who have contracted COVID-19" and who are "currently hospitalized."

But high-skilled foreign workers that blue states like California, Washington, and New York depend on are out of luck. What is likely to happen in these states? Will they rush to hire Americans with big bucks in hand? Not really.

For starters, there just aren't enough high-skilled Americans sitting around to be hired. The unemployment rate last month—the peak of the pandemic—for computer jobs was 2.5 percent compared to the overall rate of 13.3 percent for all jobs, according to an analysis by the National Foundation for American Policy.

So as high-tech companies are choked off from hiring foreign workers, they'll start outsourcing more operations abroad. This is what happened in 2004 when Congress slashed the H-1B cap from 195,000 to less than half, according to research by Wharton School of Business professor Britta Glennon.

She examined the operations of multinational companies after the reduced cap and found that they increased employment in their existing affiliates abroad and also were more likely to open more affiliates. The trend was most pronounced among R&D intensive firms and computer software industries whose services were more easily outsourced.

The chief beneficiaries of the outsourcing boom, unsurprisingly, were China and India, the main donor countries for high-skilled foreign talent. But Glennon also found that Canada became a hot destination for multinational companies. Given its immigrant-friendly policies and proximity to the United States, many companies opened affiliates in America's northern neighbor, often to hire the very same foreign techies who could not land H-1Bs in the United States.

Although Glennon's research was limited to multinational companies, she believes that many American companies at the time also formed partnerships with companies abroad, a trend she expects will accelerate in the wake of the new H-1B restrictions.

This will be bad news for American workers. As University of North Florida professor Madeline Zavodny has found, a 1 percentage point increase in the share of H-1B workers in an occupation reduces the unemployment rate in that occupation by about 0.2 percentage points and boosts the earnings growth rate by about 0.1 to 0.26 percentage points. Indeed, each H-1B supports around 1.83 native jobs overall.

The more Trump tries to turn America into a fortress, the louder will be the sucking sound of jobs fleeing overseas, to use the immortal words of failed presidential candidate Ross Perot.

There will be other economic downsides too. Measured by the number of patents, Glennon found that innovation increased in the foreign affiliates of multinational companies, benefiting the countries where they were located. Likewise, economist Charles I. Jones found that the increase in the share of scientists and engineers explains about half of total factor productivity gains in the U.S. in recent decades.

It is never a good idea to spurn foreign talent of any kind, low skilled or high. But it is a particularly bad time to do so right now given that the generous unemployment benefits that Congress handed Americans in the wake of the pandemic have already dried up the domestic source of workers for employers wishing to reopen. With another source of labor cut off, many more businesses will be forced to shut down, making the quick economic recovery that Trump so desperately wants that much less achievable.

A savvy businessman would understand that.

*The original wording erroneously stated that H-4 authorization had already been cancelled.

 

 

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  1. Why shouldn’t Microsoft, Google, and Twitter hire racial minorities instead of H1B visa Indians?

    1. Your comment makes no sense. Are you suggesting that these companies are preferentially hiring people from India? But only for positions that would be held by minority US citizens. I think that Microsoft, Google, and Twitter are looking for skilled people and only go outside the country when they can not fill domestically. You are suggesting they don’t wish to hire minorities.

      1. “I think that Microsoft, Google, and Twitter are looking for skilled people”

        Fuck you racist.

        1. “I think black people are just as good as skilled people” – Biden

          1. I quit working at shoprite and now I make $65-85 per/h. How? I’m working online! My work didn’t exactly make me happy so I decided to take a chance on something new…GDe after 4 years it was so hard to quit my day job but now I couldn’t be happier.

            Here’s what I do…………….new Income Opportunities

      2. Google uses python for programming, skill is a deficit when programming in python

      3. “Are you suggesting that these companies are preferentially hiring people from India? ”

        They prefer immigration policy to cater to their needs because they don’t want to pay market prices for *American* workers.

        They prefer to have their search for foreign labor subsidized with the right to live and work in the US.

        They especially prefer to have indentured servants who can lose their right to live and work in the US at their discretion.

      4. The companies are using the H1B as cheap labor. I’d much rather see minorities hired than someone from another country. H1B being “necessary” is bullshit. There are plenty of out of work engineers and scientists to take these roles. Corps just want the cheap labor and fuck the Americans who are subsidizing them with low taxes and all sorts of other benefits.

    2. Because they’ve learned to virtue signal with big fat checks to the right people in charge of black people outrage.

  2. Cue the hatred…

    1. Remember when you asked me out and I crushed your soul by laughing at you?

      Everyone else does too.

      1. I remember

      2. Pepperidge Farms remembers too.

  3. When the unemployment rate skyrockets in a matter of weeks due to a pandemic, that’s literally the best possible time to implement our benefactor Charles Koch’s immigration agenda. Any competent Koch-funded economist will tell you this.

    Otherwise the economy will suffer and Mr. Koch’s net worth will tragically stagnate at only around $50,000,000,000. Unacceptable!

    #OpenBorders
    #(EspeciallyDuringAPandemic)

    1. Unlimited migration should be curtailed during a pandemic unless it is required by major corporations, such as Koch Industries. Corporations are basically people but with more rights!

    2. Hey loser, you do realize parentheses don’t work in a hashtag right? Not that you’ve ever convinced anyone anyways.

      1. Hey shreek, remember that time you welched on your bet and then posted kiddie porn because you’re a child predator who likes to fuck little kids?

      2. Wow, imagine Nuttplug having the gall to call someone else a loser.

    3. on Saturday I got a gorgeous Ariel Atom after earning $6292 this – four weeks past, after lot of struggels Google, Yahoo, Facebook proffessionals have been revealed the way and cope with gape for increase home income in suffcient free time.You can make $9o an hour working from home easily……. VIST THIS SITE RIGHT HERE
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  4. Economic predictions are worth zero. Economic predictions motivated by someone’s personal preferences or biases are worth even less.

    1. We really do need to start invoicing Reason for Shikha and maybe ENB’s articles.

      1. Shikha is overall decent, mostly it’s funny how she makes you Peanuts squirm, but what the hell could you possibly dislike ENB for? That she doesn’t constantly fellate the Orange Clown’s misshapen mushroom stipe and take his tiny loads down her throat like the rest of your mongoloid butt buddies?

        1. Imagine what kind of an absolutely fucking pathetic sub-epsilon simp you would have to be to white knight for ENB. Her 40 year old roastie cunt lips will never envelope your micropenis in their shoeleather folds, bro.

          1. Yikes wanna try that again? My mother always taught me that if you don’t have something nice to say, better to say nothing at all, “bro”. You may think it looks cool to say such nasty things but really you just come off daft.

            1. Nuttplug forgets to read his own comment in this very thread, where he spouts nasty things and comes off as a spaz.

              1. Okay ‘Mother’s Lament’ I’ll bite, where did I say one nasty thing? Comments about Dear Leader don’t count.
                It’s amazing how the Peanuts here will defend the most powerful man in the entire world and then destroy an innocent journalist degrading her in unthinkable ways. In your sick twisted fantasy world that somehow makes sense. Imagine if she read your comments. Liz is a human being, which is more that can be said for most around here. Just because she’s not a perfect 10 doesn’t give you the right to proverbially hate-fuck her every day and night.

                1. You’re a child molester. No one gives a fuck what you think. Now go kill yourself.

        2. Btw, her beating off on Twitter about NYT doxxing Scott Alexander and forcing his blog off the internet because of a 3 year old grudge when he called her out for trying to get a guy doxxed and fired from his job for telling her to make him a sandwich is just the latest in a litany of reasons to hate that worthless piece of subhuman shit used up cunt who is still bitter that she couldn’t even make it as a sugarbaby. Now that I think about it, you two would actually make a great couple. Just so long as you’re OK with passing the camcorder back and forth with her cuck hubby while you guys watch her get railed by BLM crackheads.

          1. Last week I talked to a New York Times technology reporter who was planning to write a story on Slate Star Codex. He told me it would be a mostly positive piece about…

            Stop right there. Anybody who talks to a NYT reporter, let alone one who promises to write a “mostly positive piece”, is a fool and deserves whatever happens as a consequence.

        3. “but what the hell could you possibly dislike ENB for? That she doesn’t constantly fellate the Orange Clown’s misshapen mushroom stipe and take his tiny loads down her throat like the rest of your mongoloid butt buddies?”

          Like with everything else, when the Left complains about “objectification of women”, it’s *all* projection.

  5. Why not just outsource now with or without the changes if there is no other price to pay?

    1. Exactly. These articles always ignore that. If these jobs could be easily outsourced they already would be. Unlike immigration the government places no limit on outsourcing (unless it’s ITAR or something like that). The salary differences between here and India are huge and would easily make it worth it if it was doable. So you have to assume it isn’t. Thus, any cut to immigration would result in higher wages to the people already here doing that work.

  6. Man, Dalmia is churning out the….words. I hesitate to label it “Writing” or “thought pieces”

    1. I prefer “world’s most eloquent voice for billionaire-funded open borders advocacy.”

      1. I doubt it. You can be sure that those billionaires have far more capable PR agencies and lobbyists on their payroll as well. Shikha is third rate low wage labor for them.

      2. I like that too!

    2. She did put some words into sentences. Can’t argue with that.

    3. Well, there are thought pieces and then there are conscious thought pieces.

      1. Then, there are just pieces….of shitty Shreika writing. She is in a class of her own.

  7. Why doesn’t India just open its borders to the Chinese Troops that are trying to get in?

    1. Silly, they ran out of room when they opened them to the Pakistanis

      1. Such open armed welcoming people.

  8. So you are telling me that companies will move production to other counties on the basis of cost? Okay,

    Now do tariffs and explain why production would never shift back to the US if tariffs made production inside the US costly but somehow will shift overseas if they can’t get HB1 VISA workers.

    1. Because you are being raysis or something.

  9. Nice try but I literally watched American engineers with good salaries get replaced by H1B Indian engineers paid much less. I have seen jobs offshored and outsourced to foreign countries. Do that thing where you justify trashing people’s careers for the sake of cost savings.

    Yeah- that’s why there are no elected libertarians around.

    1. A curry in every pot and every man a Maharaja!

    2. Labor is economic magic. It is quite literally the only transactable good or service whose price is unaffected by supply and demand.

    3. This replacement will continue to happen after the ban. The only difference is that the foreign workers will now spend their salaries in their home countries as they work from home. Previously, that money would have been pumped into the American economy.

      Which do you prefer?

  10. Yes, it’s best for our economy to continue to pay citizens to sit around while we import foreign workers. This is Krugman-level brilliance

  11. “Banning foreign workers will result in the outsourcing of jobs from America.”

    This seems like a ‘heads I win, tails you lose’ statement.

    1. If outsourcing is a better option than H-1B workers, why don’t companies already do it? She’s saying that it’s costly to hire H-1B workers (true), but that removing them from the workforce will be very costly for businesses who will consequently outsource to save money. Huh?

  12. Glennon also found that Canada became a hot destination for multinational companies. Given its immigrant-friendly policies and proximity to the United States electrical contractor rochester mn

    1. Thank God the Rochester electricians are there to guide us through these troubled times.

  13. I have heard this bs that we don’t have enough engineers since I finished college in the 80’s as a reason to hire lower wage usually at that time Indian workers. This author needs to have a little more factual evidence that we don’t have the folks for tech jobs. At one major fortune 50 company I worked for the entire data analytics debt was indian all paid much less which they were not happy about…and if we need “tech workers’ which today really means coders..you don’t have to go to college to code..companies can set up their own coding schools for employees just like Ross Perot did at EDS 50 years ago. Time American companies step up …

    And lets be frank..not all immigration was good for the republic. 110 years ago we allowed millions of socialists, communists, bolsheviks into the country from central and eastern europe and they have been aggetating for socialism, statist, and war ever since..where do you think the neocons came from…bolsheviks..

  14. In 2018, the top 10 agricultural producing States in terms of cash receipts were (in descending order): California, Iowa, Texas, Nebraska, Minnesota, Illinois, Kansas, North Carolina, Wisconsin, and Indiana.

    So this is chum for deep red states with booming agricultural industries… like California, and Illinois, and Wisconsin, and Minnesota. Guess she didn’t have access to Google.

  15. Only if the government keeps “stimulating” people into not working.

  16. “Trump’s New Immigration Pause Will Kill Prospects of a Quick Economic Recovery”

    You see where it says “Free Minds and Free Markets” under “Reason”. Real libertarians are still clear on the point that people who claim to more than the markets about what’s happening are invariably full of shit. Markets convey information that the participants within those markets do not possess. Do you know why Canadian geese fly in a “v” formation? No, it isn’t because they developed and understood the principles of aerodynamics thousands of years before Newton. They’re bird brains. The reason they behave AS IF they possessed knowledge they could not possibly possess is basically because they’re reacting to market forces. Flying in that formation maximizes their returns for the least amount of effort.

    Point being, the idea that Dalmia knows more about the prospects of a quick economic recovery than the market does is absurd. There is no question that giving companies more flexibility to choose from an array of more workers is better for economic growth, but the markets continued to rise on Wall Street today–led by technology shares on the NASDAQ–and continued to do so long after the Trump administration made its announcement about H1-B visas, etc. Overplaying our hand on immigration isn’t likely to change anyone’s mind about anything. We just end up looking like the proverbial boy who cried wolf . . . or even worse, we end up looking like Tony.

    1. “There is no question that giving companies more flexibility to choose from an array of more workers is better for economic growth,”

      That woukd be true in a free labor market, but we don’t have that. In our current system, it is far from clear that this is so.

      Furthermore, The government’s job is not to maximize economic growth, it use to maximize the economic well being of voters. Those are two very different objectives.

      Finally, the stock market isn’t the same as the market of our market economy; don’t confuse the two.

  17. There is no domestic or global free market in labor. That’s why appealing to free markets in immigration policies is nonsense.

  18. I always find it amusing when people talk about states or cities as red or blue.

    Looking around. Mine is…green. None of the people are red nor blue.

    Collectivist thinking buys into this democrat/Republican way of looking at the world as if those were the only choices an individual could make.

    1. I quit working at shoprite and now I make $65-85 per/h. How? I’m working online! My work didn’t exactly make me happy so I decided to take a chance on something new…SWa after 4 years it was so hard to quit my day job but now I couldn’t be happier.

      Here’s what I do…………………………..► Click here

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