How High-Skilled Immigrants May Hurt Workers and Help Consumers

A boost for consumers and company profits, a loss for computer-worker wages
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High-skilled immigrants hurt tech-industry workers in the 1990s and helped U.S. consumers, a pertinent finding at a time when America's migration policies might be headed for change. 
 
President Donald Trump's administration hasn't detailed how it will handle high-skilled immigration, but based on a draft executive order, the administration may push companies to try to hire Americans first and make it more difficult for lower-paid roles to qualify for H-1B skilled-worker visas. The study below is one in a long list of visa-related economic work that could help to inform how such policies shape up. We've also summed up research on where undocumented immigrants tend to live, the future of economic growth, and consumers' reactions to income surprises. Finally, we take a look at Millenials' moving patterns. 

Check this research roundup every Tuesday for the latest in relevant economic studies. 

The costs and benefits of high-skilled immigration

Skilled immigrants have a mixed effect on the industries where they tend to work, a new National Bureau of Economic Research paper finds. The researchers focus on H-1B visas, which are reserved for specialty workers and are heavily used by technology companies, during the Internet boom years of 1994 to 2001. Without immigration in that category, American computer scientists would have seen higher wages to the tune of 2.6 percent to 5.1 percent and would have enjoyed 6.1 percent to 10.8 percent higher employment, they find. On the other hand, U.S. consumers would have paid more for technology goods and companies would have missed out on stronger profits. 

The model is "far too simple" to base future immigration policy around, the authors warn. But it does suggest that unlimited high-skill immigration, such as awarding green cards to all foreign students attending American universities, could carry drawbacks for U.S. workers, and benefits to consumers.

Understanding the Economic Impact of the H-1B Program on the U.S.
Published February 2017
Available at the NBER website

Where do immigrants live?

When we're thinking about the economic impacts of immigration policy, it's important to note that newcomers tend to live in certain metro areas. This is certainly true of undocumented immigrants, as the Pew Research Center points out in a new study. Six in 10 of America's 11 million undocumented immigrants live in 20 metro areas, while just 36 percent of the total U.S. population lives in those places. 

New York and Los Angeles are home to the largest populations of undocumented immigrants, and five of the 20 metro areas with the largest communities of undocumented workers are in California. 

20 Metro Areas Are Home to Six-in-Ten Unauthorized Immigrants in U.S.
Published Feb. 9, 2017
Available at the Pew Research Center website

Low optimism and the future of growth

Output growth in the U.S. hasn't bounced back even with benchmark interest rates close to zero, and economists Olivier Blanchard (former IMF research director), Jean-Paul L'Huillier and Guido Lorenzoni are arguing that pessimism might be partially to blame.

"Put simply, the anticipation of a less bright future is leading to temporarily weaker demand," they argue. 

If true, this would be an important counter to the secular stagnation hypothesis, which suggests that low growth rates are here to stay. According to the three economists, an improvement in sentiment could spur greater consumption and usher in an era of higher interest rates.  

"To the extent that investors in financial markets have not fully taken this effect into account," market pricing "may understate the increase in interest rates to come," the authors write. 

Short-Run Effects of Lower Productivity Growth. A Twist on the Secular Stagnation Hypothesis
Published February 2017
Available on the NBER website

Good surprise, bad surprise

On a related note, consumer spending changes more when income is cut than it does when pay increases, based on a Bank of England post.

A surprise increase in a household’s income leads to an average rise in spending of just 14 pence for each extra pound, the researchers found based on a survey. Meanwhile, spending fell by 64 pence for every pound the household lost. This finding matters for monetary policy makers, because it could mean that interest rate increases would have a bigger impact than monetary easing. 

Do Consumers Respond in the Same Way to Good and Bad Income Surprises?
Published Feb. 7, 2017
Available on the Bank of England website

Blame Millennials for historically low moving rates

Millennials get blamed for a lot, and now you can add part of the recent slowdown in American moving habits to the list.

Only 20 percent of 25- to 35-year-olds reported having recently moved in 2016, which is a much lower migration rate than their older counterparts had at the same age. This is actually kind of surprising, Richard Fry at Pew Research Center writes, because American's young adults are less likely to have spouses, houses and children than their predecessors were.

The slowdown may owe to labor market opportunities and economic circumstance, since the group was hit hard by the Great Recession and is buried in student debt. 

Americans Are Moving at Historically Low Rates, in Part Because Millennials Are Staying Put
Published Feb. 13, 2017
Available at the Pew Research Center website

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