Trump-Backed Points System Immigration Bill (RAISE Act) will Chill the U.S. Economy

On August 2, 2017, President Trump formally backed an overhaul to legal immigration which would cut the number of legal immigrants entering the country by half over the next decade.

The bill, presented by Senators Tom Cotton (R-AR) and David Perdue (R-GA) is known as the RAISE Act. The Reforming American Immigration for Strong Employment Act threatens to reduce overall immigration by 41% in its first year and 50% by year 10.

The act would accomplish this by ending the 22-year-old immigration lottery system and opting for a merit-based or points system, limiting annual refugee admission to 50,000, and reducing family-sponsored immigrants from 480,000 to 88,000.

It would also introduce a W-visa for parents of adult U.S. citizens. W-visa holders would not be eligible to receive public benefits such as food stamps, social security, and TANF.

Visa applicants would earn points for meeting or exceeding certain criteria. Examples are age, education, income, ability to invest, English language proficiency and being internationally renowned such as Nobel Prize winners and Olympic medalists.

For example, a U.S. doctoral degree holder in their late twenties who speaks flawless English and will be earning three times the median income for their area of residence would maximize points.  An elderly person with a foreign degree earning just the median income for the area of residence would receive far fewer points. Applicants must have at least 30 points to apply.

In addition to systemically disadvantaging certain groups, such as women who are less likely to receive STEM education and work in unpaid occupations, the RAISE act proposes serious implications for the economy.

According to a White House in an official statement, the bill, if passed, will, “…reduce poverty, increase wages, and save taxpayers billions and billions of dollars.” However, the bill would not increase wages. In fact, it will likely slow the economy.

Immigration and diversity in the workplace increase wages. A study from Dr. Abigail Cook, assistant professor at SUNY-Buffalo, found that as diversity in the workplace rose one standard deviation, wages increased by 1.6 percent. A similar rise in the city increased wages by 6.0 percent.

Another study from the National Bureau of Economic Research showed that a 1 percent increase in immigrant employment leads to a .5 percent increase in income per worker.

Contrary to President Trump’s assumption that immigration leads to lower wages for U.S. born workers, the opposite is true.

It is true that immigrants have a profound impact on the American economy.

• 18% of small business are owned by immigrants and immigrants are twice as likely as native born Americans to start a business.
• Immigrant-owned business employ over 5 million people and generate almost a trillion dollars annually. (In 2011, immigrant owned businesses generate $775 billion in revenue and Latino and Asian owned businesses employed 4.7 million workers.)
• Immigrants add over $1.5 trillion to the gross domestic product annually.
• According to the National Venture Capital Association, immigrants have started 25 percent of public U.S. companies that were backed by venture capital investors. This list includes Google, eBay, Yahoo!, Sun Microsystems and Intel.
• Furthermore, immigrants are our chief innovators with 33% of engineers and over a quarter of the United States’ mathematicians, statisticians, and computer scientists being born in another country.

Immigrants who do not have a bachelor’s degree also contribute significantly to the economy.  According to Census Bureau data, 2.1 million immigrant entrepreneurs do not have a bachelor’s degree. Of this number, 445,000 had construction businesses and 100,000 worked in building services or landscaping.

Senator Lindsey Graham (R-SC) notes that many industries such as technology, agriculture, and hospitality would suffer from the decrease in the immigrant labor pool. He sites that agriculture and tourism drive his state’s economy remarking,

“If this proposal were to become law, it would be devastating to our state’s economy, which relies on this immigrant work force.”

The children of immigrant workers are significantly more skilled than their first-generation parents and their native-born peers. Low skilled workers bolster the economy by supporting positions for native born persons higher up the organizational chart.

Immigrant workers also provide inexpensive labor, which helps keep the price of consumer goods low, while they also consume goods and contribute billions to the economy.

The RAISE Act would decrease GDP by 2 percent over the long term and cost 4.6 million jobs according to a study by Penn Wharton Budget Model.

A 2014 analysis of 505 metropolitan areas from 2005 to 2011 shows that immigration positively influences job growth in metro areas. Hiring one skilled immigrant worker is correlates with the hiring of another 3.5 workers over the subsequent 14 years.

The picture is clear: Immigrants are essential to the fabric of the United States. Fiscally and culturally, immigrants shape the American way of life. Our global image suffers when we attempt to limit would be Americans from immigrating under false pretenses.

In sum, the RAISE act will not raise the economy or salaries of U.S. employees. It will shrink the economy and cost jobs.

Our leaders need to reduce the arbitrary government restrictions on U.S. companies and allow them to admit skilled talent into the U.S. to fuel the economy. If this is done, the economy will grow and jobs will be created.