Curtailing visas for skilled foreign workers could cause US firms to shift jobs and investment abroad.
America lost an estimated $100 billion because of President Donald Trump’s suspension of H-1B, L-1 work visas largely used by Indian professionals, according to a leading Washington think tank.
Trump’s June 22 proclamation, which was eventually suspended by a US district court in early October, barred the entry of H-1B, L-1 and J1 visa holders until the yearend claiming their entry “would be detrimental to the interests of the United States.”
“Our ongoing research provides evidence to the contrary and documents that the EO negatively affected the market valuation of the largest US firms,” the Brookings Institution said in a new study.
The study, ‘An Executive Order worth $100 billion,’ focusing on H-1B and L-1 visas was conducted among others by Prithwiraj Choudhury, Indian American Lumry Family Associate Professor of Business Administration at Harvard Business School.
According to estimates, Trump’ EO barred the entrance of nearly 200,000 foreign workers and their dependents, it noted. The nonimmigrant visas (such as the H-1B and L-1 visas) that were targeted are used by companies to hire or transfer high-skilled immigrants.
READ: Silicon Valley challenges new H1-B visa restrictions (October 21, 2020)
There is overwhelming evidence documenting that skilled immigration improves firm outcomes such as profits, productivity, production expansion, innovation, and investment, the paper said.
“Thus, it is plausible that the Trump administration’s measures significantly restraining immigration will have lasting negative impacts on American firms, and with it, slow down the post-covid-19 economic recovery,” it said.
In fact the largest US firms have already taken a big hit due to the negative impacts of this policy, the study said based on “the cumulative average abnormal stock returns for Fortune 500 firms.”
“The market valuation of the Fortune 500 companies in our sample dropped by about 0.45 percent, a loss to the economy as a whole that we estimate at around $100 billion based on the market valuation of the same firms a day before the EO,” the study noted.
This negative shock was much more pronounced for firms that had maintained or increased their reliance on foreign workers during the years prior to the EO, as measured by growth in each firm’s Labor Condition Application requests, which proxies demand for H-1B visas, it said.
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The sizable negative effect on the economy reflects the fact that investors—and markets more generally—understand that many of these firms will not be able to perform as well without the ability to hire top foreign talent, directly affecting the firms’ overall valuation, which in turn affects the recovery prospects of the economy as a whole, Brookings said.
If the EO—and other recent policies that curtail visas for skilled foreign workers—stays in place, there is robust evidence suggesting that in the next few years, these firms, instead of hiring US-born workers as the policies intended, will likely offshore many of their activities to other nations.
“In other words, in the short run, the EO caused a loss of $100 billion in market valuation,” Brookings study said. “In the long run, it could cause even more damage to the US economy as firms react to these constraints by shifting employment and investment abroad.”
READ: ‘New H-1B rules would hurt American firms’ (October 7, 2020)
Brookings hoped its “study can inform the policy debate on the importance of designing policies that allow the US economy to continue to grow by complementing American workers with talent from abroad, a formula that has always been an engine of growth for the economy.”
The paper said its results are “yet another piece of evidence that policies restricting immigration to the US (from refugees and fundamental workers to students to highly qualified individuals) are harmful to the country.”
These are the opposite of what is needed to achieve a full economic recovery in the aftermath of the global pandemic, it concluded.