05 December 2008

A Stimulus that Doesn't Cost Trillions - Raising the Quota for Foreign Workers

One of the ideas behind any economic stimulus package is that spending has a multiplier effect. If the government spends $100, the people who get that money will spend a portion of it on services and products that will, in turn, be spent again, and again, and again. The defense contractor gives his money to the restaurant owner who gives it to the flooring store who .... The $100 originally put into the economy might stimulate a total of $200 to $1,000 before its ripples fade into insignificance.

Communities can also get a multiplier effect from jobs that create goods that are sold globally. Engineers and manufacturers, for example, eat out, pay taxes that pay teachers, hire plumbers, and stimulate the local economy in various ways that are obvious when someone like GM closes a plant or office in a community.

We now are spending borrowed money in the hopes of stimulating the economy. Had our policy towards foreign graduate students and employees not become so xenophobic since 9-11, we might be getting more of that stimulus from high-paid professionals who are, instead, now living and working in places like Bangalore and Shanghai.

One of the most noticeable things about American high-tech firms is what a high percentage of their team members are foreign born. As a consultant, more than once I have been with development teams where I was the only American-born person. It is not unusual for about 90% of the team to be from either China or India. They are living and working here in the US but they had moved here either for graduate school or work.

Most Americans are unaware of how much work the nice couple from India or China brings into the area. When a high-tech company hires a software developer or hardware designer for a six-figure salary and his wife gets on at the local ER, making the same or more, these two stimulate the local economy in various ways. They spend money at local restaurants and bid up the prices of homes. They make it more probable that a book store will come into the area or that a college will offer MBAs to aspiring professionals. The plumbing company owner who makes even more than the engineering director can make that much because his clients make good money. Everything ripples. Surgeons in rich countries are rich and in poor countries are poor.

But if in a post-9-11 world this Indian software developer stays in Bangalore, so will the things he can buy. The bump in pay for the plumber, the expansion of the local MBA program, the steadier business for the restaurants ... all of this now accrues to Bangalore instead of Chandler, Arizona, or San Jose.

Since 9-11, it has been increasingly difficult for American companies to hire foreigners. Recently, I heard a director of software from a medium-sized company say that he doesn't even try to get work VISAs for foreigners and accepts that he just won't be able to get enough talent here in the US. Meanwhile, he - like so many managers I've talked to - tells horror stories about working with teams in Bangalore or Shanghai, trying to coordinate the definition of specifications and the execution on tasks across cultures, languages, and time zones. American companies would often rather have the talent here in the US but do not have that option. This doesn’t just make it hard on American companies; it makes it hard on American communities.

We live in a global economy and we may well be experiencing the first significant recession of this most recent wave of globalization. Today's report about the loss of half a million jobs last month makes it obvious that this is already worse than the average recession. I can't help but think that it has been made even worse by our nearly xenophobic policy towards foreign graduate students and professionals. After World War 2, we were the magnet for talent from around the globe. We had the technology and labs that could be found nowhere else. We had the capital and the big corporations. Gradually, that advantage has eroded. In the 7 years since 9-11, American politicians have consistently exacerbated this trend with their apparent fear of foreigners.

As American politicians consider radical measures like bailing out huge swaths of the economy with trillions of dollars, perhaps they could consider a simpler measure. Perhaps they could raise the quota for foreign-born workers to allow the American economy to enjoy the most organic and natural of stimulus packages: great jobs that help to employ the millions of teachers, doctors, dry cleaners, waiters, and plumbers whose salaries ultimately depend on the pay and productivity of their clients.

3 comments:

Jordan said...

wow. interesting post, dad. as a member of the academic community here in the states, i get the impression that, though academics have a great foundation in the states (because there is a lot of great research done in baton-passing sort of legacies, where there is both continuity and innovation), they get more (social and financial) support elsewhere. though american researchers don't get much support outside of the US, possibly due to the anti-intellectual reputation of the states..

Ron Davison said...

Jordan,
So you are saying that ideally we would have raised you in Canada? Or I should have been French?
Seriously, though, I wonder if other countries figure that American researchers already have financial advantages enough?
Thanks for swinging by my dear.

wheelsonthebus said...

I think that Americans are more emotional than rational about economic decisions. We like to think that social and economic issues are separate, but of course they are not. So, a choice to close borders is made based on feelings rather than the economic reality of the choice.

I love this blog.