Trump thought immigrants harm American workers. Economists and the Courts disagreed.
Tejas & Kalpana examine President Trump’s 2020 bans on immigrants that are rooted in economic and labor market justifications. They interview Professor Giovanni Peri, the Director of the Migration Research Cluster at the University of California in Davis, and Divey Gulati, an entrepreneur and co-founder of a successful logistics company called ShipBob.
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Tejas: Hi Everyone, my name is Tejas Shah and I am an immigration attorney based in Chicago.
Kalpana: And I’m Kalpana Peddibhotla, and like Tejas I too am an immigration attorney, and I am based out of the San Francisco Bay Area. Welcome to our 2nd Episode in our series, “Immigration Chats with Tejas and Kalpana.”
Tejas: In our 1st Episode, we discussed the U.S. President’s Authority to regulate immigration and to bar certain groups of immigrants.
In that Episode we discussed Travel Ban 3.0, the Supreme Court decision in that case entitled “Trump v. Hawaii,” and President Trump’s Proclamations to bar immigrants in the wake of COVID-19. We primarily focused on a president’s justification for barring immigrants where there is a stated national security interest for doing so.
Kalpana: In a parting shot President Trump extended his Proclamation barring immigrants based upon economic justifications. In this episode we will explore whether immigrants truly harm the US economy and whether a president should use their executive authority to bar immigrants using this justification.
In this episode, we examine Presidential bars of immigrants on economic grounds. And whether such restrictions represent good public or economic policy.
American history contains multiple examples of such restrictions. For example, President Herbert Hoover essentially suspended immigration into the U.S. by expanding public charge guidelines in 1931 as the Great Depression raged on. His Administration also played a significant role in deporting or encouraging the repatriation of approximately half a million Mexican workers.
Herbert Hoover’s executive order in the early 1930s set a major precedent for executive action in immigration. The Hoover administration would only issue visas to people who could self-support themselves in the U.S. In 1931, for the first time in U.S. history, the outflow of residents going to other countries from the U.S. was higher than the influx of immigrants.
Of course this executive order had mixed results. Instead of mitigating the recession and high unemployment, historians have concluded that the executive order at best had a neutral impact and at worst harmed Americans’ wages and job opportunities.
Further, President Hoover’s executive order posed a direct contradiction to established immigration law, something that has been a theme in recent years.
Kalpana: This economic justification by the Hoover administration is remarkably similar to President Trump’s proclamations in 2020 to bar certain immigrants on the claim that their entry during COVID-19 and the economic fallout would harm US workers.
As a reminder to our listeners, President Trump issued a proclamation on April 22, 2020 seeking to restrict family reunification, claiming that doing so would protect U.S. jobs. In addition, on June 22, he issued another proclamation suspending the entry of immigrants in the H-1B, H-2B, J, and L visa categories along with their dependent family members. And in the final days of his administration, these restrictions were extended by President Trump on Dec. 31, 2020
Tejas: Yes and so we see this recurring idea that decreasing immigration will protect U.S. jobs. It actually has a name, this theory, it is referred to as the “lump of labor” fallacy, and it’s this belief that there is a set or finite limit on the amount of work available in a society. Most economists though do not support this theory.
Kalpana: I love that term - the lump of labor fallacy. It seems like that concept was used by President Trump for his 2020 immigration bars. So, as you may recall from our first podcast, the Supreme Court decided in the travel ban litigation that “rational basis” was the test for analyzing the President’s ban on immigrants. In that case, the Supreme Court stated that the President need only demonstrate that his action is rationally related to a legitimate government interest.
Tejas: And I think that is precisely the issue to be debated - whether President Trump’s 2020 bars on immigrants such as high tech workers, educators, multinational executives, managers, and certain family members of U.S. citizens, including their elderly parents, is rationally related to his Administration’s stated aim of protecting the U.S. labor force and growing the economy.
So for this question, let's turn to an expert on the impact of immigration on our economy, Professor Giovani Peri from the University of California at Davis.
Prof. Peri: Thank you Tejas. Good morning, and thank you for having me here talking to you. My name is Giovanni Peri and I am professor of economics at University of California at Davis. I have been doing research for about 20 years focusing on the determinants and the consequences, the impacts of immigration on the US economy on European economy. And I am the founder and director of the UC Davis Global Migration Center, which is a multi-disciplinary center with people doing research and policy relevant advice and research on topics of migration, immigration, immigration policies. And we have been also conducting research on these themes for the last 6 years with the Global Migration Center.
Tejas: Great, well thank you so much for that introduction Professor Peri. And one of the research pieces that you are well known for is your research publication on STEM workers, H-1B Visas, and Productivity in US Cities. You also address certain misconceptions in this research publication and some of your subsequent research and writings. So, I was hoping you could tell me a little more about this publication and the notions that people are often taken with.
Prof. Peri: Yes, so in this publication, I look at the impact on the U.S. economy and on U.S. jobs of skilled foreign workers who are mainly working in STEM, Science, Technology, Engineering, and Math, type of jobs. And I tackle head on the idea that people have that immigrants coming will take away job from natives. The idea is that there is a fixed number of jobs in the American economy and that if you have another person taking them, a foreigner taking them, there are not enough jobs for Americans. This idea is wrong. It is scientifically very misguided. Because, key point, jobs are not in a fixed amount in an economy. But most importantly these highly skilled immigrants are really crucial in helping and stimulating innovation, technological progress, in the U.S. Because a large part of them work in science, engineering and innovation. Because when you innovate you generate new things. You generate new ways to make things. You generate new product, new ideas, that open up new market that didn’t even exist before.
So highly skilled immigrants coming in generate what economists call a “job multiplier” at the local level; generate opportunities for other jobs. And so, not only the economy is not a fixed sum game, but when these people come in they in fact expand and generate opportunities for others.
Tejas: Where does this misguided concept come from?
Prof. Peri: Yes, this idea is very simple. And I think its appeal comes from how easy it is. And it comes from the fact that makes you think that jobs are like chairs. They are out there in a room and when more people come in the room, if this number of chairs is fixed, some people are going to be left standing, because there are not enough of them. Now this concept we call “lump of labor” is not taught in any econ class because it is not correct. Because an economy does not have a fixed number of jobs given that it is growing continuously and firms and employers are generating jobs.
Because immigrants first and foremost come and generate opportunity for jobs, generate demands for jobs, how? As I said before, they’re consumers, they’re inventors, most importantly they are innovators, they are people who push the frontier of technology, generate opportunities. More often than not, you see that immigrants have a net positive effect on jobs. And certainly, highly skilled immigrants have a significant positive effect on jobs because they increase demand for labor on top of being an increase in supply.
Kalpana: President Trump issued the 2 proclamations we’ve been discussing claiming that they would protect US workers and the economy.
However, multiple lawsuits were brought against these proclamations claiming the exact opposite. The second of these was brought by the U.S. Chamber of Commerce and the National Manufacturing Association, both of which have traditionally aligned themselves with the Republican Party.
This lawsuit claimed that the President’s “justifications were contradicted by all established economic research. [and] appeared to have been created out of whole cloth and without any consideration of the issues.”
Further, they argued that the temporary visa categories for H, L, and J visas already included several safeguards aimed at protecting U.S. workers while allowing American businesses the liberty to grow and remain competitive by securing global talent.
A Federal District Court in Northern California agreed with the plaintiffs and blocked the government’s restriction. While the Court’s decision extended only to the plaintiffs in that lawsuit, the court’s decision specifically distinguished the President’s wide-ranging authority over immigration policy involving foreign policy interests from actions involving purely domestic considerations. The Federal District Court concluded that unlike the Muslim Ban, which was the subject of our previous podcast, this Proclamation did not involve American foreign policy interests and the President could not entirely suspend the immigration law scheme that Congress had created. The Court’s decision affirmed that the President is not a monarch and his actions violated the separation of powers.
Since H-1Bs sometimes get a bad reputation, I think it is helpful to review how the legislation came about.
The H-1B visa has its roots in the H1 visa of the Immigration and Nationality Act of 1952. Its present form though was created by the Immigration Act of 1990 with Bipartisan Support (something you don’t hear too much of these days). Let’s listen to what Republican Congressman Ham Fish, and Democratic Congressman, Chuck Schummer, who both sponsored the bill in the House, had to say.
Ham Fish, R, NY: It has the support of Republicans as well as Democrats in committee.
Chuck Schummer: This bill is based upon a premise. And that is that immigrants are good for America. They give a lot more to America than they take. And as we enter the 21st century and as we are in an era of economic competition with friendly rivals like Germany and Japan, we need the vitality, the intelligence, and the special skills that immigrants bring to our country and have brought to for the last 200 years. ...
This bill says that if you have a skill that America needs we’re going to accept you.
Kalpana: The 1990 Act had three major tenets related to immigration enforcement, the introduction of the Diversity Lottery to encourage foreign nationals from countries that are not significantly represented in the U.S. to immigrate, and finally it introduced the H-1B visa. It was ultimately signed into law by a Republican President, George Herbert Bush. In the next clip, we have excerpted President Bush Senior’s remarks from that day focusing on the aspects of employment based immigration contained in the Act.
George Bush’s signing ceremony in 1990
“Immigration is not just a link to America’s past, it’s also a bridge to America’s future.”
We welcome both it and the generations of future Americans it will bring in to strengthen our great country.
And now I am honored and please to sign into law the Immigration Act of 1990."
Tejas: Kalpana you alluded to the fact that, In the three decades since the creation of the H-1B visa, it has also developed a significant number of opponents. There are a few instances, widely reported in the news, where U.S. workers have alleged that employers have replaced them with H-1B workers, who they claim are paid a lower salary. One of the primary academics focusing on this issue is Professor Ron Hira at Howard University. Interestingly, Professor Hira is himself the son of first-generation immigrants to the U.S. from India. Let's have a listen to his testimony about the H-1B program to the U.S. Senate in 2014 when the Senate was considering, and subsequently passed, a comprehensive immigration reform bill.
Ron Hira Congressional Testimony.
Tejas: So, here we have it - the root of the issue is whether immigrants harm the U.S. economy by undermining wages or if they are innovators and gap-fillers who create opportunities for U.S. workers. Two very different points of view and clearly not a debate that is very new.
If I’m being completely up-front, I’ve seen individual instances that appear to support both of these points of view. Kalpana, what about you?
Kalpana: Well, I think Tejas, that this discussion might need to be re-framed though around our expectations for H-1B workers. Are they expected in every instance to be brilliant innovators? Shouldn’t we also acknowledge that some workers are performing at the lower rungs of the STEM fields, but that too serves a vital purpose by fulfilling a business need? And since Congress was trying to thread a balance between business priorities, job growth, and protecting U.S. workers, isn’t it to be expected that immigration would create some economic disruption wherein new jobs are created alongside the loss of some jobs for U.S. workers? After all, haven’t most major economic changes benefited some while hurting others.
But let's get back to what Professor Peri has to say on these points.
Tejas: I’m wondering if in your research, you have found any situation where the introduction of immigrants has resulted in a loss of jobs for US workers?
Prof. Peri: When you look at newspaper stories sometimes you read about specific companies that seemed to have laid off some natives in order to replace them with immigrants, in reality, if you look at all the data, these are much less frequent cases and not very usual. Certainly in some specific circumstances there could be some companies that have gone to hire immigrants and these have generated some displacement. But you have to look at it in a much more broader way. In particular, in many cases the fact that some immigrants come and take some occupation implies that in a dynamic way American workers will take slightly different careers. So if a company hires more immigrants in the role of technology and science then young American will take careers in law and business, and other, and economists say, complementary type of jobs. So very often if you follow the affect of the inflow of immigrants you see that Americans tend to specialize and direct themselves towards other types of jobs. And in aggregate, this generates a positive productivity effect. It allows a company to hire an immigrant with specific skill that they need that are specific and they are not easy to find sometimes, and allows other Americans to specialize in other skills. When you need a team of workers in a company you can find some of these skills locally in the U.S., but you will need to hire others from outside. So out of 10 workers if you can hire 3 immigrants with special skills then you can hire and value the productivity of the other 7 Americans who work with them and are highly productive.
So if you look at the aggregate and if you look at all the effects, it is very rare that you find really a displacement. You find complementarity, you find this effect changing somewhat of the career of the American. But even when we look at the local economy at the cities as we did with the data we don’t find at a city level that more immigrants generate less employment for the native in fact they generate maybe specialization in somewhat different areas.
Kalpana: Professor Peri provided us with a good framework for understanding the economic impact of immigrants to the U.S. At this point, it might be helpful for our listeners to focus on a case study. Tejas, let's turn to your recent interview of one of your clients.
Tejas: Absolutely. So I did interview one of my clients. What was remarkable about the interview is that I did not share any of Professor Peri’s commentary with him in advance of the interview. However, so much of what he said was spot on and consistent with Professor Peri’s feedback. Lets listen:
Tejas: Welcome Divay Gulati, thanks so much for joining us today for this podcast recording. You are one of the co-founders of ShipBob, a successful logistics company. Can you give us some more background about your company?
Divay: So, I'm Divay. I'm one of the co-founders of ShipBob. We work with small to mid-size e-commerce merchants. So these are small businesses that have maybe 1 employee up to I would say 20 to 50 employees. So these are really small businesses who’ve invented a product or created a product and then successfully found this niche audience that actually likes that product. They are creating a brand for themselves. So think of this as the small business revolution 2.0. So initially all of these small businesses would come up with a really crafty ideas and open a storefront and will try and go and let’s say have their products in Walmarts, Targets, and Whole Foods of the world. But now, because of the rise of Instagram, Facebook, SnapChat, it’s much easier to connect with your consumers. So these brands have actually started growing pretty dramatically over the past few years. So we’re helping these e-commerce entrepreneurs grow even further, because now we’re solving for their logistic problem.
Tejas: How does immigration and specifically the H-1B program benefit your company in solving these logistics problems?
Divay: The H-1B program benefits and has benefited us in a lot of ways. “A”, both the founders are immigrants. So H-1B helped us to at least stay in the country and get the company started, which was great. And that H-1B visa gave us the American Dream of even dreaming big enough essentially to start a company ourselves. And then, to this date, we are employing H-1B employees in very specific, highly technical roles. So mostly in technology and science, which is data science for us, and mathematics is also in data science. So within STEM we actually are able to utilize a lot of folks graduating out of universities with a lot of work experience in the engineering and data science fields, and that’s where we have the most amount of highly skilled labor on H-1B within the company.
Tejas: Yeah, and it seems that you have anywhere from 5 to 10 H-1B workers at any given time. How is your company different from a run of the mill warehouse or logistics company?
Divay: One key differentiator between us and a warehouse in the middle of the country is the number of customers we are able to serve. These warehouses have existed for decades, if not centuries, and they’ve been dealing with entrepreneurs and businesses that are shipping product. But what they do is they only typically with the top, let’s say 100 e-commerce companies of the world, because they just don’t have the technology. So for them to scale they onboard large costumes, they customize their offering for these customers, and that’s why the big e-commerce companies like tommyhilfiger.com, macys.com, they were able to outsource very easily.
But when we me and my co-founder started our company, we just couldn’t outsource the logistics. Because it was too hard for these warehouses to customize an offering for such a small company lie ours. But with technology, we were able to automate a lot of these onboarding steps, and we’re able to onboard 500 new e-commerce merchants any given quarter or any given month at least. So what that does is we have made the onboarding so simple through technology.
Tejas: How difficult would it be for you to build and maintain this technology without access to highly skilled workers?
Divay: I would say it’s almost impossible. There are very few resources in the fields that we are hiring for. And these are highly technical skills and highly technical roles that we are hiring for. So we need to have that talent base to pull from for these roles, and it just so happens to be, even within the universities, a lot of these folks are immigrants or international students that are really sharp, so we need that talent base to continue building and even maintaining what we built, in terms of the analytical platform and software.
Kalpana: That was a really interesting interview, Tejas. Both interviews suggest that the President’s actions stifled innovation and caused more harm than benefit to the economy. President Trump justified both his proclamations barring immigrants in the wake of COVID-19 as measures to protect U.S. workers. The Northern California District Court’s decision to block President Trump’s 2020 Proclamation acknowledges some limitations on the scope of wide-ranging executive authority in this area. However, the limitations of presidential power over immigration based upon economic justifications has yet to appear before the U.S. Supreme Court. Thus, we don’t know how this issue may one day ultimately be decided. And with the new Biden Administration, we are unlikely to face this issue, at least not in the next few years.
Tejas: Certainly the arc of history appears to show repetition - and the actions taken by the Trump administration could be repeated in some form by a future administration with similar erroneous justifications.
In our next episode, we focus on DACA and explore the roots of the concept of deferred action. We interview two DACA recipients and Professor Shobha Wadia, a national authority on prosecutorial discretion and deferred action.
Thanks once again for tuning into “Immigration Chats with Tejas and Kalpana”.
Some additional interesting links: