Immigrants with skill-based visas certainly bring some economic benefits, but one cost is the increased wage and employment competition faced by natives with similar skills. This is a not a trivial concern given that most "high-skill" H-1B immigrants are not exemplary — they're mostly run-of-the-mill college graduates who compete with middle-class natives.
Yet advocates claim that skilled immigration increases native employment even in the short run. Michigan Gov. Rick Snyder became the latest to insist that skilled immigration has no costs when he told the Washington Post that immigrants "create 2.5 jobs for every position they hold."
It's not the first time Snyder has made that claim, and he has a lot of company. Members of Congress like to repeat the same talking point, though they give the more "precise" figure of 2.62 jobs. Back in April, Reps. Erik Paulsen (R-Minn.) and Mike Quigley (D-Ill.) promoted an expansion of the H-1B program by saying that each foreign-born STEM graduate in the United States creates 2.62 jobs for natives. Sens. Orrin Hatch (R-Utah) and Jeff Flake (R-Ariz.) cited the same number back in March. It's also a go-to talking point for the Chamber of Commerce. (See here for a comprehensive list of "2.62" sightings.)
The 2.62 number comes from a paper written by Madeline Zavodny for the American Enterprise Institute (AEI) and the Partnership for a New American Economy (co-chaired by high-immigration billionaires Michael Bloomberg and Rupert Murdoch) with the explicit purpose of advocating for expanded immigration. The paper examines how the native employment rate varies with the immigrant share of the workforce within states over time. The simple correlation between immigrant and native employment is positive, of course, since immigrants are attracted to high-growth states where natives are also doing well. For example, few immigrants settle in economically depressed West Virginia, whereas the nearby booming Washington, DC, area has attracted a large foreign-born population.
Separating out the effect of immigration per se on native employment, independent of economic conditions that have nothing to do with immigration, requires more sophistication. One method used by economists is to find an "instrument" for the proportion of immigrants in the workforce — that is, another variable that is correlated with the presence of immigrant workers but is not correlated with economic conditions. The instrument can then be used to remove the bias caused by the fact that immigrants tend to move to areas of high job growth.
The problem is that good instruments for immigrant workers are hard to find, and the AEI paper uses a decidedly inadequate one — namely, the number of immigrants in the population. That's right, the authors actually try to control for the immigrant share of the workforce by using the immigrant share of the total population, which is nonsensical.
The immigrant share of the population is clearly correlated with the immigrant share of the workforce (which it needs to be as an instrument), but it is still going to be correlated with economic conditions (for which it cannot be used as an instrument). In other words, the paper's attempt to control for the effect of economic conditions does not succeed. In fact, it does not even come close in my view. The 2.62 (or 2.5) native jobs figure repeatedly cited by politicians and business groups is therefore of little relevance to the policies they are pushing.
Although the quality varies from paper to paper, every study we know of that attempts to link immigration and job growth across U.S. regions suffers from this same causality problem. Immigrants are attracted to high-growth areas, and so far no amount of statistical wrangling has been able to remove that effect.
So again we have politicians citing data based on extremely questionable assumptions as if it were authoritative. That's what happens when advocates overreach in the hope of quelling all objections. Skilled immigration brings economic benefits, but, like low-skill immigration, it imposes costs as well. We should be willing to acknowledge the trade-offs.