Economic Implications of the RAISE Act
October 13, 2017
By Adam Chernew
More specifically, the legislation is being pitched as a way to boost pay for American workers by protecting them from competition from immigrants, and includes two key provisions to do so.  First, in deciding whom to admit to the U.S., the bill would give far more weight to prospective immigrants’ skills rather than their ties to family members already in the country. Moreover, this bill would also cut in half the number of green cards issued annually from 1 million to 500,000 over course of the next decade.  Although these provisions do overlap to a degree, it is worth considering their economic impacts separately.
Currently, the American immigration system is primarily family-based.  The U.S. issues about 1 million green cards annually, and roughly sixty-five percent of them are allocated to individuals who have a family relationship with a U.S. citizen or lawful permanent resident of the United States.  As previously eluded to, however, the RAISE Act would change this by instead emphasizing applicants’ skills over their family ties. Specifically, the RAISE Act would eliminate visa preferences for extended family and grown adult family members of U.S. residents, while simultaneously establishing a point system for granting visas that gives prospective immigrants credit for education, English-language ability, and “entrepreneurial initiative” amongst other factors. 
Such a shift in immigrant prioritization has been criticized on both moral and economic grounds. As a moral issue, former Deputy Secretary of State, Tony Blinken, described this merit-based approach as un-American, and CNN’s Senior White House Correspondent Jim Acosta suggested that the provision violates the Statute of Liberty’s promise that the U.S. will welcome “huddled masses yearning to breathe free.”   Economically, critics have suggested that a merit-based system prioritizing high-skilled workers could harm industries that rely on low-skilled immigrant labor (such as ranching) by raising their labor costs, which would in turn lead to higher prices for consumers.  That being said, a merit-based immigration approach has been shown to yield some economic benefits. For instance, evidence from Canada (which utilizes, although not exclusively, a point system) shows that immigrants arriving through the points system have higher education, employment rates and earnings than immigrants admitted through other channels and are therefore likely to make higher net contributions to the government (though there is no direct evidence linking immigration selection criteria and government contributions).  Likewise, Serge Shikher of the U.S. International Trade Commission has found that countries with a strong flow of highly educated labor (often facilitated through a merit-based system) tend to have more productive economies.  Thus, while some may consider prioritizing skills over family ties immoral, the economic impact of such a policy shift would likely be mixed. As is the case with many economic policy decisions, there are important tradeoffs to consider.
When it comes to the economic impact of the RAISE Act’s other main provision, however, there is far more consensus. Almost all economists agree that halving the number of green cards issued annually over the course of the next decade is a bad idea. For example, arguing that “the only way to meaningfully increase U.S. economic growth on a sustained basis anytime soon is to increase immigration”, Moody’s Analytics chief economist Mark Zandi called the bill’s effort to cut legal immigration a grave mistake.  More to the point, in April, over 1,400 economists from across the political spectrum sent a letter to President Trump and congressional leaders extolling the economic benefits of legal immigration and urging them not to cut it.  In defending their argument, they cited immigrants’ high rates of entrepreneurship.  which is critical at a time when Americans are starting fewer companies,  and highlighted the need to bring new workers to the U.S. to fill the employment holes left by retiring baby boomers.  In fact, the irony of cutting immigration in half over the course of the next decade is that it would likely prevent the U.S. from achieving 3 percent economic growth annually, a promise that President Trump has made repeatedly.  Hence, while moving toward a merit-based immigration system may provide certain economic advantages to the U.S., the same cannot be said for halving the number of immigrants admitted to the U.S. on an annual basis. Put simply, enacting this provision would be a major step backward for the American economy.
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