Immigration Policy in the Time of Trump
President Trump recently signed on to an immigration bill proposed by Senators Tom Cotton and David Perdue that would slash legal immigration by half and would shift immigration policy from an emphasis on family reunification to an emphasis on skills in determining who is allowed to immigrate to this country. The New York Times characterized the bill as "senseless." Let's take a look at the facts and the issues.
First the facts. This is hardly the time to cut the number of immigrants. Women have fewer children as they get better educated and their families earn more money. That phenomenon has led to lower and lower birth rates in the advanced industrial countries, with many now experiencing more deaths than births. At the same time, people in the advanced industrial countries are living longer. The combination of these two trends means that an ever smaller number of workers in the advanced industrial countries has to support a growing number of older people. That becomes even harder as the cost of end-of-life care increases with advances in medical technology. That is exactly where the United States would be were it not for the fact that, at least up to now, we have welcomed many more immigrants to our shores than many of the other advanced industrial countries.
On this point, then, the New York Times is dead right. It makes no sense at all to cut the number of immigrants—much less to cut the number by 50 percent. That policy will bring us no advantage I can think of. The Wharton School at the University of Pennsylvania has estimated that the Cotton-Perdue bill would cost the country a decline in GDP of 2 percent and a loss of 4.6 million jobs by 2040.
That leaves the question of who should be admitted to our country. That is a more complicated issue.
Again, the facts matter. First, under current policy, the proportion of immigrants who have a bachelor's degree or higher when admitted has been steadily growing in recent years, from a little more than one in ten in 1970 to a slight majority in 2015. With no change in policy, we can expect this trend to continue. The question is whether it ought to be accelerated.
I laid out the whole argument for a skills-based immigration policy in a blog I did years ago, long before Donald Trump decided to run for President. What I presented in that blog was a line of logic. I have just received a report from the OECD titled "OECD Skills Outlook 2017" that backs up that logic line with a great deal of data. In this blog, I will summarize the points made in the earlier blog in support of a skills-based immigration policy, show you how the OECD data backs up that argument and respond to critics.
The essence of the argument for a skills-based immigration policy is very straightforward. Global competition and advancing digital technologies are a creating world in which, for both individuals and countries, economic rewards are increasingly a function of education and skills. All over the world, what you make increasingly depends on what you know and can do. It follows that countries with higher proportions of highly skilled people will do better economically than countries with less skilled people. To increase the proportion of highly skilled people in any given country, policy makers have three choices: They can increase the skills of the people who already live in that country; import highly skilled people through immigration; or do both at once.
If the people coming into the country don't have the skills that are needed, the people already in that country will have simply added to the burden they would have faced without opening their country to immigration by adding to the number of adults and children who need income support, social services and at least basic education and job training.
Many Americans—and I am one of them—have looked with admiration at Canada's immigration policies. While the United States has been closing its borders to refugees, Canada has been opening its borders to the same people. But it is important to remember that Canada is the world leader in skills-based immigration policy. Canada's policies do not just confer an advantage in the immigration process to people with higher degrees. They were looking for people who would contribute to the Canadian economy and their research showed that the relationship between years of education and value added to the economy was a little shaky. It turned out that some people with just a bachelor's degree contributed more to the economy than some people with post-graduate degrees, and some with less than four years of college contributed more than those with four-year degrees. The kind of training and the occupations trained for accounted for these differences and the policies the Canadians came up with reflected these differences. My colleague, former U.S. Secretary of Labor Ray Marshall, calls such policies Value-Added Immigration Policies.
The OECD report I cited above is subtitled "Skills and Global Value Chains." It was written jointly by the OECD's economic team and its education team. In the report, the OECD researchers describe what they see as the second stage of globalization. In the first stage, countries with very low wages and very low skill levels hired themselves out to countries that invested capital in the low-skill, low-wage countries to produce mostly manufactured goods that were then sold in the wealthier countries. But, as the OECD team points out, it is now much more complicated than that. Most countries now have much more varied kinds of skills and much more varied levels of skills. The wealthiest countries are not just selling goods in their own countries; they are selling them all over the world, and, in increasing volumes, to developing countries. But what they are selling is made from components sourced all over the world. Similarly, the developing countries are sourcing their own products from components made in other countries and selling them all over the place, to rich and poor alike.
As the OECD analyzed this emerging picture, what they saw, though, was that the economic rewards in this much more complex picture still went to those with the higher skills, within and across countries. In economists' terms the economic rewards went to those countries, firms and individuals that could add the most value to the components, products and services they made.
Recall that Ray Marshall's term for Canada's immigration policy is Value-Added Immigration Policy. The table below is from the OECD report and it shows where each OECD country stands on its capacity to add value to the world's global value chains. In a nutshell, the United States does very well in concentrating our economic efforts on technologically advanced industries, but not very well on increasing productivity or improving social outcomes. They attribute that to "insufficient skills.
The OECD report has little to say directly about immigration. But the message here should be clear. It will do us little good economically to be a world leader in highly advanced industries if our people lack the skills needed to add the value they need to add to participate in stage two of the global economy. Logic will tell you that, in such circumstances, the Americans directly engaged in the high-tech, high-value-added industries will do very well indeed and the much larger group of Americans who are not part of that portion of the economy, who don't fit into the high-value-added part of the global value chain, will be left out. And that, of course, is just what is happening. That gulf will be widened, not closed, by an immigration policy in which family affiliation still plays a very important part.
Birthrates are now highest among those segments of the population that tend to face more challenges with respect to education. We still have high rates of immigration among people who come with very little education and whose children are among the hardest to educate to the standards now demanded in the workplace. It is hard to imagine a moment when the United States would be more in need of a Value-Added Immigration Policy than it is right now.
But immigration policies based on skills are not without their critics and the fact that Donald Trump is embracing such policies appears to have increased the stridency of the critique. I have seen arguments to the effect that my grandparents came to this country with only a high school education or even less and look at where I am now! It is the Great American Story. But it is a very different world now than it was in your grandparents' day.
When my grandparents arrived in this country in the first few years of the 20th century, there was plenty of work for people with very little education, very few skills and very little English who were willing to work hard. But that is not the case anymore. There are far fewer such jobs available and automation of all kinds is steadily reducing their number. The career ladders that immigrants used to use to improve their lot are missing more and more steps at the bottom now. It is long past time for the United States to adopt a Value-Added Immigration Policy if we care at all about the well-being of our economy and the people who are supposed to be served by it.
I have no use for nativist policies as the basis of immigration policy. And it is clear that our Constitution will not permit an immigration policy based on religion or ethnicity or race. This country has long prided itself with good reason as a beacon for the people of the world who see us as a refuge from autocrats and dictators, war and pillage and just plain old savagery. We have built one of the most remarkable countries the world has ever seen from people other countries just wanted to get rid of. We should—we must—continue to do that. But I hope that, as we do that, we give plenty of weight to the skills the applicant brings to our party. We need that now more than ever.