The big debate about immigration and the U.S. economy usually focuses on whether having more overseas workers might hurt the pay or job chances of Americans. However, in a new essay, Wharton management professor Britta Glennon argues that high-skilled immigration should be seen in a much more positive light.

Analyzing an array of studies on immigration and the U.S. economy, she finds that immigrants are not taking jobs away from American-born skilled workers or competing with them. In fact, empirical evidence suggests that when employers are faced with immigration restrictions, they respond on other margins rather than hiring American-born workers like changing firm scope, shifting jobs abroad, automation, or partnerships. Furthermore, because skilled immigrants often start businesses, they create jobs instead. Specifically, one study cited in Glennon’s paper indicates that immigrants are some 80% more likely to establish businesses compared to U.S.-born citizens.

“I have been frustrated by the degree to which the public-policy debate over immigration has tended to ignore the role of firms, and to assume that the impact of immigration policy is constrained within national borders,” said Glennon. “The essay tries to change that, by showing the significance of companies in the policy debate and to illustrate how a change in immigration policy in one country might affect other countries. There is a national competitiveness angle here that is often overlooked.”

How High-skilled Immigrants Are Enhancing Business Performance

Glennon’s article, published in the Journal of Economic Perspectives, notes that hiring skilled overseas workers can make big companies more productive and innovative. When businesses perform better and invest more because of high-skilled immigrants, they usually end up hiring more people, which is good for the economy. 

Plus, immigrants often bring new ideas and technology, which can make businesses more efficient and increase wages overall. For instance, 59% of artificial intelligence PhD graduates hired by U.S. companies are immigrants, according to research, showing that the talent driving the blossoming AI industry in America comes from all over the world. They also help multinational companies perform better when exporting their products and services overseas, Glennon notes.

“Immigrants have large positive benefits for firm outcomes, particularly for startups.”— Britta Glennon

Given these benefits, many countries share a common goal of attracting and choosing the most talented immigrants who will contribute economically. The U.S. is one of the primary destinations for immigrants, with 18% of the world’s overseas workers heading there in 2020, one study showed.

The U.S. immigration system allows legal immigration through three primary channels: family connections, humanitarian grounds, and employment ties. The family connection pathway is the most prevalent, accounting for roughly two-thirds of legal immigration to the U.S., according to the Migration Policy Institute.

In the case of skilled immigrants, the U.S. operates on a demand-driven system, where American companies play a pivotal role. This is in contrast to “supply-based” systems where immigration eligibility is based on a scale that assigns points for factors like education and skills.

What Happens When Demand for High-skilled Immigrants From U.S. Companies Outstrips Supply?

It works like this: U.S. firms select the high-skilled immigrants they wish to employ, submit visa applications on their behalf, and continue to sponsor them until they either leave the country or obtain permanent residency. However, Glennon writes that the demand for skilled immigrants from U.S. companies surpasses the restrictions, quotas, and limitations in place.

For instance, the demand for employment-based green cards from companies exceeds the per-country limit for people from China, India, Mexico, and the Philippines, prolonging their wait times for permanent residency. For Indian citizens aiming to work in the U.S., these wait times are currently projected to exceed 100 years. 

Glennon’s article finds that skilled immigrants and the policies surrounding them shape the decisions and outcomes of U.S. corporations. When the availability of skilled immigrants changes, firms may adjust their production methods, expand their operations, or relocate skilled workers overseas.

“There is a national competitiveness angle here that is often overlooked.”— Britta Glennon

“The reason why firms make such sometimes large adjustments to their strategy is because there is significant evidence that immigrants have large positive benefits for firm outcomes, particularly for startups,” she says.

In the U.S., American-based multinational corporations make up about one-third of H-1B visa applications for skilled workers, not counting foreign companies that also hire H-1B workers. It’s no coincidence that these U.S. multinational companies are responsible for 80% of the research and development conducted by U.S. firms, Glennon writes.

How Restrictive Immigration Policies Damage Competitiveness

In a global economy, businesses in countries that restrict the inflow of skilled immigrants might not do as well compared to those in countries with more open policies, Glennon argues. Ultimately, she calls for more sophisticated models of immigration that consider how businesses make choices and adapt to changes in the availability of skilled immigrants.

In particular, Glennon notes that it’s important not to limit the scope to national borders. Immigration patterns and national policies have repercussions that extend globally; a shift in skilled immigration policy in one country can have notable consequences for innovation, investment, and employment in other nations.

Concluding, she writes: “Countries that hamstring their own firms with restrictive skilled immigration policies may damage their own national competitiveness by shifting investment and innovation abroad.”