"Some Democrats Worry Newcomers Will Crowd Job Market," read the headline in last Wednesday's Wall Street Journal. The article quoted several low-skill workers who are concerned that immigration reform and new guest-worker programs could steal their jobs and depress their wages.
This is one of those fallacies that persists in spite of centuries of evidence to the contrary. Economists even have a name for it: the lump of labor fallacy. This fallacy assumes there is a fixed amount of work in an economy, to be divided up among the pool of workers. France fell victim to it in 1998, enacting a 35-hour workweek.
Usually it's productivity that poses the biggest threat to the lump-of-laborites, not immigrants. If machines or new technologies enable businesses to produce more with fewer workers, it must mean the unemployment line for those displaced workers, right?
In the short run, it may. Over time, the evidence isn't supportive. U.S. expansions that were characterized by the strongest rebounds in productivity growth also witnessed the fastest pace of job creation. The recoveries that started in 1970, 1975 and 1982 are good examples.
Various studies have documented the entrepreneurial nature of immigrants. About a quarter of the technology and engineering companies started in the United States between 1995 and 2005 had at least one foreign-born founder, according to researchers at Duke University and the University of California, Berkeley. In Silicon Valley, more than half the companies had a foreign-born founder.
These entrepreneurs provide jobs — good, high-paying jobs; they don't steal them.
The recent trends aren't encouraging, according to an updated study by the Kauffman Foundation in Kansas City, Mo. The share of immigrant-founded companies nationwide shrank by 1 percentage point to 24.3 percent in the 2006-12 period. In Silicon Valley, it dropped from 52.4 percent to 43.9 percent, denying the U.S. economy "a critical source of fuel."
More than half the foreign-born founders of U.S. technology and engineering companies came here initially to study, according to Kauffman. The lucky ones might migrate to Silicon Valley and get a job to acquire business experience before setting out on their own. Many more educated immigrants would like to do the same, judging from the oversubscribed lottery for the 65,000 H-1B visas issued each year.
Limiting the number of educated, skilled immigrants who want to work in the United States is counterproductive. Given their entrepreneurial bent, immigrants create new demand for labor. They produce more goods and services and expand the economic pie. Even low-skill workers would benefit if employers could no longer hire an undocumented immigrant and pay him a sub-standard wage.
The United States is a nation of immigrants. It got to where it is today by letting people in, not keeping them out. Let that be a model for the future.
Caroline Baum is a Bloomberg View columnist.
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