How the Immigration Ban Will Impact U.S. Businesses

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Wharton's Mike Useem and Robert Meyer, and Howard University's Ronil Hira discuss the immigration ban.

The impact of President Donald Trump’s executive order last Friday, which stalls the U.S. refugee program for four months and bans for 90 days the entry of citizens from seven predominantly Muslim countries, could undermine the reputation of the U.S. as a reliable place to do business, according to experts.

The order has garnered widespread criticism from religious and humanitarian groups and from business leaders, even as the Trump administration defended it as a necessary move to protect the U.S. from the threat of terrorism. Thousands of protestors gathered at airports across the country over the weekend to show support for travelers from those countries who were being detained. On Monday night, Trump fired acting U.S. Attorney General Sally Yates after she instructed the Justice Department not to defend the order.

Among those who have publicly spoken out against the order are Facebook CEO Mark Zuckerberg, Google CEO Sundar Pichai and Lloyd Blankfein, the chief executive at Goldman Sachs. Their comments are the visible signs of widespread fears within the business community that the ban could hurt their ability to attract and retain talent, and that it may spur people or companies to discount the U.S. as a place to pursue business and investment  opportunities.

Experts at Wharton and Howard University discussed the longer-term implications of the travel ban on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)

Below are key takeaways from their discussion:

A Tougher Place to Do Business? “The order cuts to the heart of what we stand for — who we are — in ways that many people find unacceptable,” said Michael Useem, Wharton management professor and director of the Center for Leadership and Change Management. “In particular, [it is impacting] companies that are doing business with people who are in this category…. So many companies hire refugees, people who are on special visas. It’s just who we are, and this seems to knock the air out of us.”

The order comes in the context of Trump’s proposal for a 20% tariff on imports from Mexico and “other issues about free trade and possible restrictions coming up,” Useem added. These issues would make many company executives concerned about America’s reputation as a business-friendly country, and ask themselves, “Is this going to be a tougher place to do business with?” he pointed out.

Public certainty about policy has also suffered, Useem said, noting that the order initially appeared to apply to U.S. green card holders but was then verbally walked back by Trump administration officials. “We want policies that are thought-out and don’t have to be modified or walked back,” he said. “We saw a good bit of that over the weekend. It raises doubts on whether, as these huge decisions are being made, there is an ability to effectively execute around them.”

Ronil Hira, a political science professor at Howard University, pointed out that Trump’s action was not aimed specifically at H-1B visas or workers in the tech industry — which many analysts predict will suffer greatly under the policy. Rather, it was to fulfill a commitment he made to his supporters during the campaign. For the administration, “it really is a broader issue of national security,” he said.

Heightened Risks over the Long Term: Companies that do risk analysis could not have anticipated this “wholesale ban” on people arriving from certain other countries, said Robert Meyer, Wharton marketing professor and co-director of the Risk Management and Decision Processes Center. “It shows how important low-probability risk planning is for a lot of companies.”

Meyer pointed to the forewarnings contained in the 2017 Global Risks Report published by his center for the World Economic Forum. He noted that this year, a top worry for companies globally is “profound social instability and failure of national governance,” apart from migration issues. Because it is “unprecedented in scale,” the presidential order — along with the resulting protests — “suddenly puts a monkey wrench” in how unsettled the future appears to be for many companies. “Massive amounts of uncertainty are not good for business,” he added, noting the the resulting risk “is quite substantial.”

“We want policies that are thought-out and don’t have to be modified or walked back.”–Michael Useem

Business Recruiters, University Students Hit Hard: Meyer said the impact “spills over to whether the U.S. will become a tougher place to get a good education,” adding that the U.S. image as “the world leader in higher education” is also under threat. Several universities have voiced concerns over the impact on students and faculty who hail from the seven countries targeted by the order.

“This transcends any sector, any particular business,” Useem said. He noted as encouraging Blankfein’s statement that the order will hurt diversity in recruiting at Goldman Sachs and a pledge by Starbucks CEO Howard Schulz to hire 10,000 refugees over the next five years. He also pointed to Zuckerberg’s statement that everybody benefits “when the best and brightest from around the world can live, work and contribute here.”

Hira agreed that the impact on universities is an important consideration, and said that while he didn’t want to minimize the impact of the order on individual workers, “we cannot make a muddled mess of mixing issues like outsourcing of jobs and guest workers” with that of homeland security. He noted that his calculations showed the order affects only 0.4% of people with H-1B work visas in the country, and the impact is smaller at the level of individual firms.

According to Useem, however, “The impact is on everybody.” The U.S. growth rate is suffering, and its companies “need great people. Where do they come from? Pretty much everywhere.”

Call to Stand Up and Speak: Useem called upon people like Blankfein and Schulz to voice their concerns through their trade associations or chambers of commerce. “Individual companies and universities will have a challenge ahead in trying to push back and resist these national policies,” he said. “We want stability in our markets, and people and goods moving across borders without arbitrary restrictions. I’d like more companies working this through business roundtables and chambers of commerce such as the California Technology Council and the Massachusetts High Technology Council.”

“You’ll get people looking for a bogeyman under every bed.”–Robert Meyer

Useem also wanted companies to shed what he saw as a growing reluctance to speak up. “In recent years, with the rise of very tough minded institutional investors and the globalization of business, companies have lost their willingness to work aggressively together to do what’s right for the country and certainly for business,” he said. “This is the time for them to come back from that point and get their collective act together.”

A Safer Place, or a More Fearful Place? Meyer said the travel ban could end up making U.S. citizens feel more insecure, rather than achieve its stated objective of enhancing safety. “A case you could make is: Is it ultimately good for business — do consumers feel happy and safe and [willing to] spend more, and is the world a happier place?” he said. “What worries me is that it would have quite the opposite effect.” He noted that people may worry if “the problem [of terrorism] has gotten so severe that a massive, unprecedented order like this is necessary to take care of it. You’ll get people looking for a bogeyman under every bed.”

Photo credit: By Quinn Norton from Excellent Question – SFO Muslim Ban Protest, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=55535397

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