Skilled immigrants and jobs

June 26, 2012
Machine Design readers are probably well aware of the controversy surrounding H1-B visas and the impact of foreign-born technical talent on U.S. engineering salaries. So it was interesting to see a recent column in the Wall Street Journal claiming that ...

Machine Design readers are probably well aware of the controversy surrounding H1-B visas and the impact of foreign-born technical talent on U.S. engineering salaries. So it was interesting to see a recent column in the Wall Street Journal claiming that skilled immigrants create jobs in the U.S. Of particular note was some of the bizarre logic displayed by its author, Matthew J. Slaughter, a professor and associate dean at the Tuck School of Business at Dartmouth.

Slaughter hauled out some of the usual anecdotes to support his claim that immigrant college graduates "will create jobs for Americans." Among them: a Duke study finding that 25% of all U.S. high tech firms established between 1995 and 2005 had at least one foreign-born founder; and a reference to a statement from Microsoft's Bill Gates saying that four non-immigrants are hired for every immigrant hire at that company.

Of course, if H1-B restrictions are relaxed, one might surmise that fewer non-immigrants will probably be hired at Microsoft for every immigrant hire. But never mind that now.

The truly strange part of the column comes later when Slaughter complains about the American Recovery and Reinvestment Act of 2009 which, among other things, restricted H1-B hiring at any U.S. company that received government support from either TARP (Troubled Asset Relief Program) or new Federal Reserve credit facilities. Note that companies in this category aren't manufacturers. They are banks and other financial entities that were dumb enough to load up on synthetic securities structured around sub-prime mortgages.

Slaughter laments that, "This act foolishly hurt hundreds of finance companies by limiting their talent pool precisely when they needed new talent the most."

One is tempted to make the observation that the net result of bringing a lot of highly-paid, hot-shot talent into the financial industry was a financial melt down in 2008. Can we really expect that bringing in more such talent, whether or not they hold H1-B visas, is going to lead to a different outcome?

Anyway, Slaughter continues his lament: "I saw the damage done by this misguided legislation firsthand. Within days of the president signing it into law, a number of U.S. banks reneged on job offers extended months earlier to foreign-born M.B.A. students......The long-term result? Lost ideas. Lost jobs. Lost taxes."

Lost taxes, perhaps. But hold on. Slaughter isn't talking about high-tech or manufacturing companies. He is talking about banks. And many would argue that big banks, the kind that can afford to hire the most promising M.B.A. students, have been able to engineer a favorable regulatory environment for themselves that has let them earn rewards entirely unrelated to any contribution they make to the country's total wealth or well-being. There is a term for this phenomena: rent seeking.

The rent seeking mentality of the financial industry may bring job growth. But it is unlikely to be productive job growth of the kind that promotes a healthy economy. The evidence is that it will mean more rent seekers. All in all, it is hard to see how depriving the financial industry of a few foreign-born M.B.A.s hurts us much.

Slaughter's column, "How Skilled Immigrants Create Jobs," is here: http://online.wsj.com/article/SB10001424052702303836404577475150586192134.html?mod=googlenews_wsj

And for a brush up on rent seeking, try Wikipedia: http://en.wikipedia.org/wiki/Rent_seekers

About the Author

Lee Teschler | Editor

Leland was Editor-in-Chief of Machine Design. He has 34 years of Service and holds a B.S. Engineering from the University of Michigan, a B.S. Electrical Engineering from the University of Michigan;, and a MBA from Cleveland State University. Prior to joining Penton, Lee worked as a Communications design engineer for the U.S. Government.

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