Friday, November 9, 2012

Immigration, Innovation, Stability and Confidence

It is days after the presidential election, and the president has been re-elected. In the next few days and weeks, he will set out his agenda as to what he wishes to accomplish during his second term. One of those items should be immigration reform. The future economic prosperity of this country depends on whether we can reform the nation's immigration reform to reflect current and future realities.

The United States is in a race to determine which country will be the economic superpower of the next hundred years. This is very important since economic power often translates to military power, which leads to dominance over global affairs.  Right now, the United States and China are the front-runners in that race to economic dominance. The United States is winning, but China has good momentum. What hinders China is that its economy is based primarily on replication as opposed to innovation. China is currently the biggest manufacturer in the world. However, it manufactures products that can be found in other parts of the globe. Its comparative advantage lies in pricing. China's products are competitive in the world market based in their prices being generally lower than its competitors. Yet, China lags behind its competitors, such the U.S., Japan, South Korea and the E.U. in innovation. Innovation is the key to long-term economic sustenance. Innovation is powered by bright minds, who working for themselves or for companies, come up with life changing products, which are then marketed around the world. Therefore, the country that has the greatest control of economic and trade matters will be the one that can attract the best work talent in the world.

For more than a century, the United States has not had a problem attracting many of the world's best and brightest. It is a democracy that protects many basic human rights that are enshrined in the U.S. Constitution. It has some of the best universities in the world. And, it is a country where opportunity to succeed is available to all and not just a select few. It is an obvious magnet for foreigners from around the world. However, current U.S. immigration law no longer accommodates the innovation needs of our country.

One of the clearest examples of such deficiency is in the H-1B professional work visa program.  The H-1B program is the mechanism by which U.S. companies can petition to bring into the country highly qualified professionals to work in such occupations as computer programmers, engineers and physicians.   In 1999, the U.S. government had a yearly quota of 65,000 H-1B work visas.  The U.S. Gross Domestic Product ("GDP") for that year was $11 trillion.   The yearly quota of H-1B visas was then tripled to 195,000 for the next few years, until it returned to 65,000 visas in 2004.  Yet, the U.S. GDP for 2004 stood at $12.39 trillion, a 12.6% increase since 1999.  The H-1B visa program had not been allowed to continue to grow along with the U.S. economy.  Even in light of what many call the Great Recession, the U.S. economy continues to grow overall.  Yet, the H-1B program has not continued to develop to adapt to such growth.  In 2005, another 20,000 visas were added to the H-1B program, which were reserved for individuals with an advanced degree from a U.S. institution of high education.  However, this did little to mitigate the massive 67% drop in visas allocation the prior year. 

It is essential that the U.S. expand its H-1B program if it wishes to continue its economic dominance.  Let's use a hypothetical to illustrate the point. "Company W" is a U.S. medium sized company that employs about a thousand U.S. workers. Its R&D department is working on the "next big thing", a product that will revolutionize how we do things or how live our lives. Think of such products as the iPhone, Facebook or the electric lightbulb. With this product Company W will grow 20 times its current size and will create thousands of more jobs. Company W is halfway in its timetable to create a prototype of its  product, test it, make a final product and then finally market it. It is still many years away from finishing the process. However, the executives of Company W have become aware that there are three foreign students at one of America's top universities, "X", "Y" and "Z", who on their own are working on developing a similar product. However, since their current immigration status is expiring X, Y and Z must soon return to their respective countries. Company W knows that with the help of X, Y, and Z, it can cut its timetable for its product by half, thereby mass-producing and marketing it years ahead of schedule. However, if the executives of Company W came to consult with us about the possibility of petitioning X, Y and Z for H-1B work visas, our answer would be that it is currently not possible. The quota of H-1B visas has been exhausted for the current fiscal year. Therefore, Company W could only employ X, Y and Z in H-1B status in the United States beginnning October 1, 2013. Of course, depending on the facts, there could also be other means of employing X, Y, and Z. However, without other facts, H-1B would be the only viable option.    October 1, 2013 is too long to wait for Company W. To do so, would be to lose one year in their path to develop their big product. Furthermore, Company W would run the risk that some foreign company in China or India would hire X, Y and Z and develop the product before Company W can, thereby making years of R&D obsolete and wasting millions of dollars invested. Such a decision, could bankrupt the company. In order to avoid this, Company W might decide to relocate its operation to another country thereby laying off nearly all of their thousand U.S. workers and extinguishing the future possibility of hiring thousands of U.S. workers.

The case of Company W happens in real life. In 2007, Microsoft opened an office in Vancouver, Canada because it was unable to petition in the United States the necessary amount of foreign programmers for its projects. The current state of U.S. immigration law is forcing companies to consider outsourcing in order to remain competitive in the world market.  This, in turn, leads to massive layoffs in the United States.   Without comprehensive immigration reform, the layoffs will continue, further affecting the U.S. economy and risking the possibility that the United States could cede its dominance in innovation to a country like China.   

The U.S. federal government must get serious about immigration reform.  The Obama Administration implemented Deferred Action for Childhood Arrivals (DACA) several months ago, which is aimed at providing temporary relief to a little over one million undocumented immigrants.  However, DACA is not immigration reform.  As was stated in the September 5, 2012 post on this blog, entitled "The Future of Immigration Reform":
Immigration reform would strengthen our nation's economy and put it in a better position to compete globally.  DACA does neither. While DACA provides protection from the fear of being removed from the country and in most cases can lead to work authorization, it does little to change a person's life. DACA, itself, does not lead to permanent residence. It is simply a temporary measure that provides a benefit that can disappear at any time. A person cannot plan his future based on DACA's instability. Likewise, DACA does little to attract and retain foreign talent.  
The Obama Administration must look beyond DACA in its second term in order the reform the immigration system in the United States.  However, the Obama Administration is unable to do so on its own.  It needs the cooperation of the U.S. Congress. 

There are several things that the Obama Administration and the U.S. Congress can do to fix our immigration system.  First, replace DACA with a permanent system that provides stability for those that would apply for it.  One option is the DREAM Act.  The Obama Administration and Congress last pushed for the approval of the DREAM Act during a lameduck seesion two years ago when other more pressing issues were on the agenda.  Congress is now about to begin another lameduck session where it will tackle the so-called "fiscal cliff", a set of draconian measures set to go into effect next year that has the high probability of crippling the U.S. economy.  This is not the time to present any major immigration legislation, such as the DREAM Act.  A more optimal moment would be early next year when Congress will begin a brand-new session. 

Another fix to the immigration system would be to increase the quota of H-1B professional work visas so as to reflect the needs of U.S. companies, large and small.  This will allow for innovation to continue to grow in the U.S., which in turn will lead to greater job creation domestically. 

The U.S. government should also shorten the wait-times for persons who wish to immigrate to the United States.  Currently, some of these cases are taking more the twenty years to process.   The long delays cause confidence in the system to erode, thus contributing to the undocumented immigrant phenomenon.  There is currently a bill in Congress, entitled the Fairness for High-Skilled Immigrants Act (H.R. 3012) that if approved would, in fact, shorten the wait time for many employment-based and family-based immigration cases.  It is doubtful that the bill could be approved before the end of the year.  However, Congress has the option to reintroduce the bill and enact it next year. 

If President Obama and congressional leaders are serious about wanting to ensure the U.S. economy remains dominant in the decades to come, they should tackle comprehensive immigration reform in the next two years.

The above information is provided for information purposes. It should not be construed as legal advice or the formation of an attorney/client relationship