RAISEing Immigration Barriers and Lowering Economic Output

By James Duffy

Republican Senators Tom Cotton and David Perdue introduced the Reforming American Immigration for a Strong Economy (RAISE) Act in February.[1]  The RAISE Act attempts to raise American wages, generate domestic jobs, and limit the immigration of low-skilled workers.[2]  It does this by lowering the amount of legal immigration allowed to 400,000 per year, a roughly 50% decrease, and by instituting a point system which gives greater priority to high-skilled immigrants.[3]  The rationale behind this radical overhaul of the immigration system is that it would free up domestic jobs for American workers, eliminate a labor glut that depresses wages, and ensure that those immigrants entering the United States are high-skilled, educated, and clearly of value to the economy.[4]  However, the bill fails to carry out all but one of these objectives.

The bill halves the number of low-skilled immigrants entering the U.S., allowing higher-skilled immigrants to make up an estimated 75% of legal immigrants.[5]  But these numbers mask the fact that the bill does nothing to make immigration to the United States more attractive to high-skilled immigrants.[6]  While giving them greater preference in the overall immigration scheme, the pool of high-skilled immigrants is not increasing.  Instead, the existing pool simply becomes a greater share of legal immigration each year.  Thus, the RAISE Act halves the number of immigrants entering the country, without taking steps to attract a larger pool of educated immigrants to the country. Additionally, the RAISE Act makes no provisions or considerations of why American workers would suddenly take over jobs from low-skilled immigrants that have traditionally been unpursued by domestic workers.[7]  Rather, it seems to assume that once these jobs open, a flood of Americans will emerge to pick up the slack.  Recent budget and labor studies, however, say otherwise.  A study by the University of Pennsylvania projects that by 2027, RAISE will lead to a loss of 1.3 million jobs because the domestic employment rate will not rise fast enough to replace the jobs lost to the new restrictions.[8]  By 2040, jobs will fall by 4.6 million.[9]  Worse, the loss of these jobs also reduces the GDP of the U.S. by 2 percent by 2040.[10]

The only promise the RAISE Act is expected to deliver on is increased wages for American workers.  The sudden shock of losing such a large labor supply, and the subsequent decrease of how many workers remain in the U.S., would increase average daily wages for workers.  However, the increases are likely to be small, rising from $42.02 in 2017 to $49.40 in 2040, and the increased participation in the labor force is not expected to be enough to offset the losses in the GDP.[11]  Beyond lost jobs and economic shocks, the RAISE Act also has the potential to greatly increase the federal deficit.  For example, the loss of potential tax-payers reduces the wage-base that supports Social Security.  While fewer people would collect benefits, this decrease is not as large as the drop in the wage base supporting the program.[12]  Thus, a shortfall in funding by 2027 would increase the deficit.

To review, the Act is projected to fulfill one of its promises (poorly) while failing to deliver on higher domestic job growth or increasing the number of high-skilled immigrants coming to the United States.  The domestic technology industry, which would be a major benefactor from increased immigration of high-skilled labor, does not believe that this Act will help them.[13]  Their issue is that they cannot find enough employees with math, science, and engineering degrees to staff their industries.[14]  RAISE only limits overall immigration; failing to provide for more high-skilled immigrants to fill those vacancies in the technology industry.

To fulfill the minor increase in wages, the Act requires massive job loss and a shock to the labor pool that would result in dislocations to multiple industries.  It is likely to shrink overall GDP growth to 2 percent at best, and may even disrupt family unit among immigrants as the RAISE Act would make it hard for families to immigrate together into the U.S.[15]  While the immigration system needs an overhaul, this blunt force trauma is not the way to do it.  The main issues stem from its belief that simply by cutting back on immigration across the board it can encourage an increase in highly-skilled immigrants coming to the U.S.

The best way to accomplish their goal would instead be to provide incentives to highly-skilled immigrants on top of a points-based immigrant system that makes it easier for them to get their visas.  It would avoid the massive loss of labor, while also helping to bring in the educated immigrants that would help expand and revitalize domestic industries.  As it stands, the RAISE Act severely hampers the U.S. economy with little actual gain for the country in the long-term.  If the country wants to move forward and keep its edge over its rivals in the years to come, then this Act is certainly not the way to do it.

 

[1] Priscilla Alvarez, Can a Decades-Old Immigration Proposal Pass Under Trump?, THE ATLANTIC (Aug. 21, 2017), https://www.theatlantic.com/politics/archive/2017/08/can-a-decades-old-immigration-proposal-pass-under-trump/537138/ (last visited Aug. 27, 2017).

[2] Id.

[3] Kent Smetters, The Real Costs of the RAISE Act (Aug. 11, 2017), http://knowledge.wharton.upenn.edu/article/the-real-costs-of-the-raise-act/ (last visited Aug. 27, 2017).

[4] Id.

[5] Id. (explaining that there would be a larger proportion of higher-skilled immigrants but not a greater number than exists now).

[6] Id. (putting forth that a skill-oriented immigration system on its own does not attract more highly-skilled immigrants).

[7] The RAISE Act: Effect on Economic Growth and Jobs, UPENN EDU (Aug. 10, 2017),) http://www.budgetmodel.wharton.upenn.edu/issues/2017/8/8/the-raise-act-effect-on-economic-growth-and-jobs (last visited Aug. 27, 2017).

[8] Id. (listing domestic labor statistics that the surge of labor participation envisioned by the RAISE Act sponsors is unlikely).

[9] Id.

[10] Id. (explaining that the loss in active productivity and economic participation will greatly lower GDP growth).

[11] Id.

[12] Id. (listing statistics taken from current costs and pay-ins to the Social Security System).

[13] David Nicklaus, Immigration bill would be bad for the economy, STL TODAY (Aug. 21, 2017), http://www.stltoday.com/business/columns/david-nicklaus/nicklaus-immigration-bill-would-be-bad-for-the-economy/article_683c02b2-4d53-597b-a907-2cc006e50851.html (last visited Aug. 27, 2017).

[14] Id.

[15] Julia Gelatt, The RAISE Act: Dramatic Change to Family Immigration, Less So for the Employment-Based System, MigrationPolicy.org (Aug. 2017),) http://www.migrationpolicy.org/news/raise-act-dramatic-change-family-immigration-less-so-employment-based-system (last visited Aug. 27, 2017).

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