This article was co-authored with Rohan Poojara of the American Enterprise Institute.
In this time of deep economic malaise, Western leaders talk gravely about shared sacrifice and the need to do “whatever it takes” to restore prosperity. So why is Britain shrinking its economic output, tax revenues and job creation for the sake of keeping ethnic outsiders away?
The answer, of course, is populist politics. When jobs are scarce, politicians start turning against immigrants. This past April, the British government closed the Tier 1 visa program, for which skilled workers could apply under Britain’s points-based immigration system. It also introduced a cap of 20,700 on the Tier 2 visas which U.K. employers use to hire migrant workers from non-European Union countries.
Such restrictions defy the facts — and they harm all of us. The estimated economic cost of reducing immigration to the U.K. is about £9 billion a year in foregone tax revenues and a reduction in output of 1 percent.
That’s a lesson America’s presidential candidates should never forget. Because with all the heated rhetoric about building moats with alligators to keep unwanted workers away, it’s easy to lose sight of this fact: Poorly designed immigration policy could seriously dampen the U.S. economy, where immigrant productivity raises GDP by at least $37 billion per year and perhaps much more.
But that is only part of the loss. The Kauffman Foundation’s Index of Entrepreneurial Activity found that American immigrants are, on average, more than twice as entrepreneurial as native-born Americans. Immigrants are about 13 percent of the American population but were responsible for starting nearly 30 percent of all new businesses in 2010. Furthermore, Hispanic Americans only make up about 16 percent of the American population but accounted for more than 23 percent of all entrepreneurs in 2010.
Highly skilled workers are necessary for many successful business start-ups. Limited immigration of skilled workers to the U.K. has also hurt businesses. “We have now lots of case studies of companies which are either not investing or relocating or in many cases just not able to function effectively because they cannot get key staff — management, specialist engineers and so on — from outside the European Union,” Business Secretary Vince Cable recently admitted.
Restricted skilled immigration in the U.S. has a similar result, especially in technology industries that face a dearth of workers because, even with unemployment at over 9 percent, there is a fundamental mismatch between the skills of the unemployed and the skills demanded by firms. High-tech firms have a lot of difficulty finding computer scientists and engineers without access to immigrants because unemployed American English majors, for instance, cannot fill those positions.
Then there’s scientific research and development. A quarter of international patents filed from the U.S. in 2006 named a non-U.S. citizen working in the country as the inventor or co-inventor. One-quarter of all Americans who have won Nobel Prizes since 1901 have been immigrants — even though immigrants comprise just one-eighth of the U.S. population.
In Britain, eight of the 11 scientists to win a science Nobel Prize since 1996 have signed a letter urging the government to reconsider its policies:
The UK produces nearly 10% of the world’s scientific output with only 1% of its population; we punch above our weight because we can engage with excellence wherever it occurs. The UK must not isolate itself from the increasingly globalised world of research — British science depends on it.
Despite this clear record of immigrant-fueled prosperity, nativist sentiment persists, springing from two general fears. The first is that immigrants will decrease opportunities for natives. Immigrants in the U.K. are, on average, more educated than native-born Britons. From 1975 to 2005, the percentage of working-age university graduates rose by an astonishing 160 percent. But the share of university graduates among immigrants rose by an astronomical 308 percent, nearly double that of native-born Britons. This isn’t because native-born Britons are lazy or stupid, but because the economic return of education for immigrants is much greater than for natives.
Because of the differences in education and skills, however, immigrants and native-born Britons do not generally compete in the same industries. A research paper from the Centre for Research and Analysis of Migration (CReAM) at University College London found that immigrants generally compete with other immigrants who arrived before them, not with native-born Britons.
The second general fear is immigrant use of the welfare state. The British welfare state is a tragedy for industrious Britons, the government’s finances and the moral health of society, with wealth transfers that encourage poverty-extending behavior. Rather than use immigrant access to the welfare state as an excuse to restrict immigration, what should be restricted is immigrant access to the welfare state.
In the U.S., legal immigrants do not have access to most of the welfare state for their first five years of residency. Both the U.S. and the U.K. should extend that period of time as much as possible to remove the specter of immigrant welfare use.
The U.S. and U.K. are both too restrictive of highly skilled immigration. But legislative proposals in America like the STAPLE Act, which increases the number of skilled immigrants and temporary workers who graduate from American universities, are moving the debate in a positive direction.
Ultimately, free people in American and Britain should be able to decide whom to employ without regulations concerning the birthplace of such hires. And at a time when we’re being asked to make sacrifices for the greater good, politicians should make one of their own: Stop the nativist rhetoric and start welcoming skilled immigrants for the sake of economic renewal.