?Patricia Tanona International Economics Final Term Paper The United States’ quota based immigration system weakens the country’s ability to sustain its position in the increasingly competitive global economy. Although the United States has a substantial flexible labor market, huge international corporations and some of the best universities in the world, it faces great competition in the global labor market. With the increasing economic opportunities available in industrialized countries and the continually expanding economies of India and China the US needs to update its immigration policies to remain strong globally.

Immigration in the United States has been an assortment of changing policies in an attempt to accommodate the endless people seeking temporary or permanent residence in the U. S. Below is a summary highlighting these policy changes. 1819-The Steerage Act of 1819 established the official collection of immigrant data and was the first Federal law to distinguish permanent immigrants from alien visitors not intending to stay in the United States. 1855-The Passenger Act of 1855 required that there be separate reporting of the number of permanent and temporary entrants. 864-The Act to Encourage Immigration Law was passed. It is also known as the Contract Labor Law. It required employees to reimburse their employers for transportation costs. The workers were indentured and received no pay during their repayment period. 1868-The National Labor Union (NLU) successfully repealed government support for the Contract Labor Law but private employers still were allowed to use indentured labor. 1885 Indentured Servitude was outlawed when the Alien Contract Act of 1885 was passed to prohibit the importation of aliens under contract for the performance of labor or services of any kind. 907-The Immigration Act of 1907 required aliens to declare intention of permanent or temporary stay in the United States and officially classified arriving aliens as immigrants and non-immigrants. 1917-The 1917 Immigration Act imposed a head tax on immigrants and excluded immigrants over 16 who could not read at least 40 words in any language. California farmers complained of labor shortages, and persuaded the US Department of Labor to suspend the head tax and the literacy test for temporary Mexican farm workers. 1932-The

Immigration Act was amended to set actual timelines for the length of time the alien could work in the US and set the precedent that is still used for temporary visas such as H-1B. It also gave employers immense power over workers because termination of employment was a prelude to deportation. 1942-Farmers appealed to the US government for Mexican workers to produce food for the war. Their argument worked in 1917 and it worked again in 1942. 1944-Florida sugar cane farmers obtained permission to hire Caribbean workers to cut sugar cane on non-immigrant temporary visas. 952-The Immigration and Nationality Act of 1952 established the H-1 program, which allowed the US Attorney General after consultation with appropriate agencies, to import needed foreign workers. The Alien Contract Act of 1885 law and all it’s amendments were repealed. The McCarran-Walter Act was passed. This law reversed the prohibition against contract laborers into the U. S. and expanded the classes of eligible non-immigrants that were exempted from the immigration quotas. It authorized the admission of temporary workers during labor shortages.

This law set a precedent for the admission of skill-based temporary workers and was later used as a model for H-1B. Foreign workers were required to go back to their home countries if they lost their job, or if the visa expired. The H-1 program was mandated to be temporary. 1961-The J-1 visa was implemented in 1961 by the Fulbright-Hays Act to promote educational and cultural exchange. There is no basic minimum qualification for the J-1 so it is generally regarded as faster and easy to obtain. 1970-The L visa was created by an Act of the Congress.

The specific objective of this non-immigrant visa was to make it simpler for large international companies to transfer foreign personnel to the US. The L visa was divided into two categories: L-1A and L-1B. 1976-1976 was a crucial year in the history of H-1B. The Immigration and Nationality Act Amendments of 1976 increased the total number of visas allocated specifically to employment-based immigrants and their family members from 34,000 to 58,000. The Association of American Universities succeeded in slipping in a clause into Title 8 of the U. S.

Code that removed universities from the uniform labor certification requirements. This precursor to H-1B exempted colleges and universities from the standard labor certification requirements. It also declared universities as having perpetual labor shortages. 1986-The Immigration Reform and Control Act (IRCA) of 1986 changed the name of the H-2 program to the H-2A program, and incorporated many of the regulations used to administer the program into law. This bill allowed Mexicans to move out of agricultural labor in hopes of reducing illegal immigration but that failed.

Despite a detailed law and regulations, there is as much litigation over the H-2A program as all other temporary foreign worker programs combined, with lawyers representing workers suing to discourage the program’s use and expansion, and attorneys for farmers suing to make it easier to obtain farm workers through the program. The AFL-CIO supported IRCA. The union called for the careful regulation of guest worker programs and wanted visas restricted only for those situations where U. S. workers cannot be found. In 1987 AFL-CIO applauded IRCA as a far-reaching amnesty program. 988-Senators Ted Kennedy (D-Massachusetts) and Alan Simpson (R-Wyoming) co-sponsored legislation that would have led to a modest reduction in family-based immigration while creating additional visas for well-educated, English-speaking immigrants employed in occupations in which the U. S. suffered from labor shortages. The Kennedy-Simpson bill passed the Senate but never made it through the House. 1989-During the AFL-CIO convention a resolution was adopted that said they were opposed to increasing the number of employment based visas. They said it was better to invest in American workers. 990-President George H. W. Bush’s signing of the “Immigration Reform and Control Act of 1990” is often considered the day H-1B was born. Under the 1990 Act Visas for employment-based immigrants rose to 140,000 from the 58,000 cap established in 1976. The 1990 Act set an annual cap of 65,000 non immigrants entering the U. S. under H-1B visas. H-1B workers were given a 3 year visa with a possible extension for a total of six years. It specified that H-1B workers must hold at least a bachelor’s degree or its equivalent in their specialty field.

The Act also required employers to pay H-1B workers the prevailing wage. In addition, the 1990 Act created three other new visa categories for skilled temporary workers–the H-1A visa for nurses and O and P visas for prominent scientists, educators, artists, athletes and entertainers. A cap of 25,000 visas per year was placed on the annual number of newly created “P visas” available for foreign workers in the entertainment industry. When the H-1B visa was created in 1990, the 1952 requirement that the visa was temporary was removed.

H-1B became a dual-intent visa which allowed the foreign worker to remain in the U. S. while applying for permanent residency (green card). 1993-1993 will become known as the year when the AFL-CIO reversed their stance on immigration. At their 1993 convention they adopted a resolution that praised the role that immigrants have played. This resolution set a new precedent for the AFL-CIO that foreign workers might be good for bolstering the unions sagging memberships. 1994-The North American Free Trade Agreement (NAFTA) became law and with it the TN visa.

The TN visa program allows Canadian and Mexican professionals with US job offers to work in the United States. A TN visa application may require several hours for review depending on its complexity. NAFTA significantly favors Canadian professionals over Mexican professionals. Mexican professionals must submit to a more intensive application process similar to the H-1B visa application. There is no limit to the number of Canadians that can enter the United States annually, however, no more than 5, 500 citizens of Mexico can be classified as TN (Trade NAFTA) non immigrants each year.

This NAFTA provision arguably creates a common labor market between Canada and the US labor forces. 1996-In 1996 the AFL-CIO allied itself with the National Association of Manufacturers (NAM), Americans for Tax Reform, the National Christian Coalition, and civil libertarians to oppose immigration changes. By joining with a coalition of some of the most anti-union organizations in the country, labor leaders succeeded in blocking immigration reform designed primarily to protect the economic well-being of low skilled workers in the nation. 997-In September 1997, for the first time the annual 65,000 ceiling (called the visa cap) for H-1B workers was reached, halting H-1B admissions for the remainder of the fiscal year and providing the computer industry with new evidence of unmet demand for high-tech workers. They would use this evidence to justify increasing the quota. The INS used some accounting gimmicks to defer some visas until 1998 so that all of them could be approved without exceeding the visa cap. 998-Senator Kennedy, in 1998, both in committee and on the Senate floor, proposed amendments to legislation so that companies must first try to fill vacancies with Americans before using H-1B labor, and to forbid companies to hire H-1B labor into positions whose skills were held by Americans who had been laid off in the past six months. On May 18, 1998, both amendments were rejected on the Senate floor; immediately thereafter, the larger bill was passed to increase the number of H-1B Visas allowed per year. The actions of the U. S.

Senate prove that our politicians intended to make it legal to hire H-1B labor into positions for which Americans are available, and that it is legal for companies to lay off their American workforce and replace them with H-1B labor. Signed by President Clinton on October 21, 1998, the H-1B legislation increased the number of H-1B visas from 65,000 to 115,000 in 1999 and 2000, then reduced them to 107,500 in 2001 and 65,000 in 2002 and beyond. Prior to 1998 there was no provisions to restrict US employers from hiring H-1B visa holders until they could prove that no American could fill the job.

A provision was added in 1998 that required employers to prove they looked for an American worker first. 1999-The INS approved 21,888 H-1B petitions in excess of the fiscal year 1999 cap. The problem was fixed by passing legislation called “AC 21” which implemented a retroactive increase for 1999 to cover all petitions approved by the INS. 2000-In April 2000, the Secretary of Housing and Urban Development, proposed that unions and immigrant communities support expansion of the H-1B program in order to get amnesty.

Pro immigration elements in the union took the advice and decided to support an increase of the H-1B quota. Union insiders inside the AFL-CIO made a tacit deal with President Clinton. The bargain was that the unions would remain quiet on the H-1B increase and in return Clinton would get them amnesty. 2001-The INS issued the maximum number of H-1B visas that the 195,000 visa cap allowed. President Bush visited Mexico February 2001 and proposed a comprehensive guest worker program. 2002-President George Bush signed H. R. 2215, the 21st Century Department of Justice Appropriations Authorization Act.

This bill includes a provision that allows H-1B visa holders to extend their stay beyond the statutory six-year period if a labor certification has been pending for at least 365 days. This extension allowed H-1B visa holders to continue to get extensions until they get a Green Card. Another provision in the bill, allows foreign medical graduates to avoid returning to their home country after completing their course of study. These medical graduates are granted H-1B visas if they agree to practice in rural areas. 2003-The H-1B visa cap reverted from 195,000 per year to 65,000 for the fiscal year of 2004.

On July 31, 2003, the Senate approved the Singapore and Chile Free Trade agreement. The bill got wide bi-partisan support in both the House and Senate. The FTA contains a visa called the H-1B1 that has a limit of 6,800 visas per year that are counted against the H-1B visa cap. L-1 visas from Singapore are unlimited. 2004-The omnibus spending bill passed the L-1 Visa and H-1B Visa Reform Act of 2004. International students who earn a Masters or PhD in the U. S. were now eligible to use an H-1B visa that is exempted from the cap.

Exemptions of this type have been estimated to be approximately 20,000 per year so effectively the yearly cap was raised from 65,000 to 85,000. 2005-The Department of Homeland security admitted that due to an accounting mistake they issued 10,000 more visas than authorized by Congress. Since Congress approved an additional 20,000 to be issued in 2005 in addition to the 65,000 already mandated, this means that 95,000 new H-1B visas will handed out in 2005 to foreign job seekers. The current H1B program, allows companies to bring highly skilled foreign workers to the U. S. for up to three years.

The 1999 and 2000 quotas were at 115,000. 132,000 H1B visas were approved in 2004 and 117,000 in 2005. In 2007 the cap was lowered and the 2007 quota was reached in just two months. The 2008 quota was exhausted before the end of the first day on which applications were accepted, April 2, 2008. Emerging competitive challenges are shown in the newest international migration report from the OECD. The Organization for Economic Cooperation and Development (OECD) is an organization where the governments of 30 market democracies work together to address the economic, social and governance challenges of globalization.

These countries are: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, South, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom and the United States. Utilizing the data of the OECD and statistics from the World Bank, U. S. immigration can be compared to other industrialized countries. In 2005 (See below table for 2005 data) 12. 9% of the total U. S. population was foreign born.

This is not large when compared to various OECD member countries. Foreign-born population As a percentage of total population, 2005 Although the foreign-born share of the US population is not particularly large, it plays a leading role in global migration, especially among those foreign born that are working age (25 and older). Between 1990 and 2000, the amount of working age immigration increased by 17. 2 million (41%). Of that, 8. 9 million (57. 5%), over half of the total increase was to the United States. Foreign-born population (working age) growth from 1990 to 2000 As a percentage of total growth,

In addition to being the top place in the world for immigrants, the United States has a competitive advantage in the global bidding for skilled workers. In 1990 the US was home to 6. 2 million immigrants with more than a high school education, almost half of the OECD total. In 2000, there were 12. 5 million skilled immigrants, half of the OECD total. The reason why the US is so dominant in the market for skilled workers is due to the size and flexibility of the US labor market, the quality of U. S. Universities, and the high number of multinational corporations.

While the United States maintained its lead in educated immigrants, other large technological advanced countries such as Germany and France also attract many educated immigrants. In 1990 and 2000, the United States’ share of educated immigrants was only surpassed by Canada. During this period the percentages of several OECD countries increased significantly, notably Ireland, the UK, Luxembourg and Finland. Hungary’s percentage increased from 15% to 22%; combined with other gains in European Union countries, the trend reflects the growing interest of the E.

U. as a destination for skilled workers. Foreign-born population with more than a High School Education 1990 & 2000 The U. S. has the ability to attract skilled immigrants with its large flexible labor market. As a result, educated immigrants are more likely to find jobs in the United States than in other countries. As noted, the U. S. not only attracts a large share of the global supply of skilled labor, but high percentages actually succeed in finding jobs. The data from the OECD (summarized below) shows a wide variance of this success.

In 2000, 76% of immigrants from India, 51% from China, 33% from South Korea, and 25% of Moroccan immigrants obtained skilled jobs. Even after 2001, the United States remained the favored destination for immigrants despite the September 11th terrorist attacks and the small 2000-2002 economic recession. With the tightening of U. S. border controls and much attention to the U. S. immigration policy, legal immigration rose by 34% from 2003 to 2004. Between 2000 and 2005, the foreign born population of the United Stats increased by 4. million people, boosting the foreign born share of the population from 11. 2 to 12. 4 percent. Also, the countries of origin of immigrants to the United States changed. The foreign born population from India had a dramatic increase from 2000 to 2005 of 39. 8%, followed by Peru and Honduras, each at 36%. Immigration from advanced industrialized countries rose only slightly and in some cases declined. According to the U. S. Census Bureau, there has also been a general rise in the educational levels of immigrants who entered the United States after 2000. 2% of immigrants entering the U. S. between 2000 and 2004 held at least a bachelors degree as compared to 17. 3% between 1990 and 1999. Those with advanced degrees rose 10. 3% to 12. 1% in the same time periods. It is true that the United States is still the leader in the global competition for skilled immigrants – but the country faces challenges. The National Academy of Sciences Report “Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future” explains some of these challenges.

It discusses the trade deficit in high technology products. As China, Japan and South Korea increased its funding in research and development (R&D), especially after the September 11, U. S. funding has declined or remained stagnant since 1990. Other countries, especially Asia are continuing to publish an increasing share of scientific papers and applications for patents. U. S. high-school students are behind students in other advanced industrialized countries in math and science and few U. S. college students pursue science and engineering degrees.

It also notes that the new 9/11 immigration policies have deterred foreign students from obtaining educations in the U. S and prevented international research leaders from organizing conferences in the States. Besides the new 9/11 restrictions, U. S. Immigration policies limit the amount of skilled immigrants entering the country. Because of this the U. S. is at a disadvantage in comparison to Australia, Canada and New Zealand, which have a system that that assigns points to immigrant applications based on the skills they can contribute to the economy.

And even though these countries do not present a current threat to the United States, there proactive immigration policies should be considered by our policy makers – who are currently preoccupied with the “war on terror” and illegal immigrants. The E. U, with 450 million people and an enormous regional labor market is a competitive challenge to the United States. There is a large supply of skilled workers in Eastern Europe, such as mathematicians, engineers and scientists and with the open labor markets – the creation of a regional labor market has the capability to challenge the United States.

Of the E. U. countries, only Ireland, Sweden and the United Kingdom opened their labor markets completely. According to the Commission of the European Communities 2006 “Report on the Functioning of the Transitional Arrangements Set Out in the 2003 Accession Treaty”, studies have shown that Eastern European immigration has had positive effects on the labor market of those countries. This has prompted Finland, Greece, Portugal and Spain to also remove their restrictions. Despite the removal of restrictions, there are still certain impediments in the E. U. such as cultural, economic, linguistic, political and social differences of E. U. citizens. In addition the large supply of skilled labor within the E. U. lessens the need to attract skilled immigrants from outside of Europe. In contrary, a number of E. U. countries, including Austria, Belgium, Denmark, Sweden the Netherlands, and the UK, have enacted tax incentives such as preferential tax schedules, tax free employer reimbursements of dependents’ education and other inducements, targeting foreign-born professionals. Japan and South Korea have also.

Currently the major threat to the United States for global talent is not from the countries with progressive immigration laws (Australia, Canada and New Zealand or the E. U. ). According to the Economist article, “The search for talent: Why it’s getting harder to find” the biggest threat for skilled labor comes from India and China. Both of these countries are encountering great economic and technological growth. This boosts job opportunities for skilled professionals, enticing them to stay and reducing the attraction of immigration to the United States. India and China are a key supply of skilled workers.

According to the U. S. Department of Homeland Security, Office of Immigration Statistics, in 2003, 36. 5% of all H1-B visas granted were to Indian immigrants. China was second accounting for 9. 2%. However the foreign born population from China dropped by 12% between 2000 and 2005. This demonstrates the growing domestic job opportunities for educated Chinese citizens and “reverse brain drain” as Chinese nationals who arrived in the U. S. before 2000 returned home. The stay rates of Indian and Chinese immigrants likely will decrease with the opportunities in there home countries grow.

In spite of the rising challenges in the global labor market for highly skilled workers, recent changes to the U. S. immigration policy have lessened the countries ability to get the needed skilled labor that the country needs. In 2004 Congress changed the annual H1-B quota from 195,000 to its 1990 level of 65,000. This was due to the concerns over homeland security after 9/11 and worries among U. S. workers due to the 2000-2002 recession. The current H1-B quota has been filled before the start of each fiscal year.

Congress also introduced a separate annual cap of 20,000 on H1-B visas issued to graduate students with degrees in science and engineering fields. The current quota based immigration system makes it difficult for U. S. companies to compete for the top global talent. It takes approximately 5 months and $3,000 – $5,000 in legal and administrative fees to process the initial application for an H1-B visa. In addition there is a six year limit, and extensions are costly and time consuming. The best way to repair the problems with the immigration policy is to replace the H1-B quota system with a quality selective system.

Moving away from the quota system and creating a multi-tiered system that entitles high skilled immigrants to work for any employer or set up their own business. However the political environment in the United States where homeland security concerns remain heightened after September 11th and the disturbance over illegal immigrants present little cause for optimism that such a revamp of the U. S. immigration policy will come to be in the near future. References Cited U. S. Citizenship and Information website: http://www. uscis. gov/portal/site/uscis Statistical Yearbooks of the Immigration and Naturalization Service and pdated since 2006 with INS Annual Reports: http://www. oecd. org/document/3/0,3343,en National Academy of Sciences, National Academy of Engineering & Institute of Medicine, Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future, February 2006 edition. Washington, DC: National Academies Press, 2006, OECD, International Migration Outlook. Paris: June 2006. Immigration to New Zealand government website: http://www. immigration. govt. nz/migrant Immigration to Canada government website: http://www. canadaimmigrationvisa. com/visatype. html

Immigration to Australia government website: http://www. immi. gov. au/ Commission of the European Communities, Report on the Functioning of the Transitional Arrangements Set Out in the 2003 Accession Treaty (period 1 May 2004-30 April 2006). Brussels: February 8, 2006: http://ec. europa. eu/employment_social/news/2006/feb/report_en. pdf The Economist, The Search for Talent, Why It’s Getting Harder to Find (Economist Special Report, October 7, 2006) U. S. Department of Homeland Security, Office of Immigration Statistics, Characteristics of Specialty Occupation Workers (H-1B): Fiscal Year 2003, November 2004.

New York Times, New Data Shows Immigrants’ Growth and Reach. (New York Times, August 15, 2006. Rick Lyman) National Science Board, Science and Engineering Indicators 2006 (Volume 2). Washington, DC: National Science Foundation, Appendix Table 2-33. David Bartlett, Building a Competitive Workforce: Immigration and the U. S. Manufacturing Sector. Washington, DC: Immigration Policy Center, American Immigration Law Foundation, August 2006. Business Week, “Give Me Your Diligent, Your Smart,” (Business Week, May 1, 2006; Spencer E. Ante)