President Donald Trump’s executive order in June 2020 suspending new work visas for skilled immigrants cost Fortune 500 companies more than $100 billion in valuation, according to a recent research paper, titled “An Executive Order Worth $100 Billion: The Impact of an Immigration Ban’s Announcement on Fortune 500 Firms.” The authors of the paper are Dany Bahar, senior fellow at The Brookings Institution, Prithwiraj Choudhury, associate professor of business administration at Harvard Business School, and Wharton management professor Britta Glennon. The ban was estimated by the Migration Policy Institute (MPI) to block nearly 200,000 foreign workers and their dependents and targeted skilled work visas like H-1B or L1 visas.
The loss of $100 billion is equivalent to a fall of 0.45% in the stock market valuation of Fortune 500 companies in the three to five days following the executive order, Glennon explained in a recent episode of the Wharton Business Daily radio show that airs on SiriusXM. (Listen to the full podcast above.)
The study covered 471 publicly traded Fortune 500 firms, or “the universe” of all such firms in any year between 2010 to 2015. Those firms had a combined market valuation of $22.68 trillion on June 19, the business day before the executive order of June 22. They shed nearly 0.5% in their valuations after the visa ban, which according to the paper’s authors “represents a loss of about $100.14 billion for the economy as a whole.”
Productivity Losses, Too
Glennon noted that the loss in valuation likely reflects the lost company productivity gains from hiring skilled foreign workers. “The immediate response from investors and markets implies that they recognize how important these workers are to firm productivity,” said Glennon. According to the paper, the negative effects of the visa suspension are especially large for financial, information technology and real estate firms, followed by mining, utilities and construction companies.
“The immediate response from investors and markets implies that they recognize how important these workers are to firm productivity.” –Britta Glennon
The study considered two sets of valuations: one covered a three-day window after the visa suspension order, and the other looked at the impact over five days. The “negative effect” of the executive order remained steady for 10 days after the announcement, the paper noted. However, “this is not just an only-for-a-few-days-afterwards type of effect; [the losses] are compounded as time goes on,” said Glennon. These longer-run effects are documented in a growing body of research.
If the visa suspension continues beyond 2020, “you would see much more significant long-term consequences,” Glennon continued. Those would include “impacts on innovation of firms,” and companies moving some of their operations overseas if they are unable to get the skilled labor they need in the U.S., she added. “If they’re unable to hire the top talent that they need, it limits their ability to continue through this economic downturn.”
“Our study contributes to the active debate surrounding whether or not, and to what extent, skilled work visas create value for firms,” the paper stated. “[It] provides the first set of results on whether, and to what extent, markets value shocks to employment-based immigration policy in the very short term.”
Will Biden Revoke the Ban?
During his campaign, president-elect Joe Biden had promised to revoke the H-1B visa suspension. “Based on [Biden’s] broader immigration platform, it seems unlikely that these would continue under his administration,” said Glennon.
Even before the H-1B visa suspension order, some firms had begun relocating portions of their operations overseas in response to relatively less restrictive immigration policies, Glennon noted. After the Trump order, “one would only expect these trends to accelerate,” she said.
According to Glennon, skilled immigrants are “more often than not” the best talent U.S. firms can find. “Human capital is probably the most important component of what makes firms successful. If they’re not able to get the best, going for the second-best or third-best or fourth-best can have significant impacts for their innovation abilities and for their competitiveness.”