A Strategic U.S. Immigration Policy for the New Economy

Blueprints for an Ideal Legal Immigration Policy

By Stephen Moore on March 1, 2001

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Stephen Moore, former director of fiscal policy studies at the Cato Institute, now serves as president of the Club for Growth.


In the 21st century global economy, the resource that is in greatest scarcity is human capital. There is a pervasive global shortage of world-class minds and cutting-edge skills. The whole world is in a search for excellence. Through immigration policy the U.S. has an awesome opportunity to import many of the best and brightest talents from around the world.

We ought to take advantage of this opportunity. A strategic immigration policy designed to attract many of these world-class workers is in the national interest and will enhance U.S. economic competitiveness in incalculable ways.

We do some of this now, but we can and should do better. U.S. immigration policy should be redesigned so that it becomes an integral part of an overall pro-growth economic policy.

All of this is to say that when it comes to U.S. immigration policy, quality matters now more than ever. We must greatly expand skill-based immigration.

But quantity matters, too. As America’s workforce ages, we need the infusion of young workers — yes, even unskilled workers fill vital niches in our workforce — to keep our economy prosperous and to avoid the kind of serious demographic crisis that may soon beset most other advanced developed nations. A policy of gradually bumping up quotas from the current level of about 800,000 per year to a range of 1-1.5 million would ensure that we have a steady stream of young workers to keep our economy prosperous when the baby boomers begin to retire.

Finally, it is essential for the social cohesion of the nation that when newcomers are accepted into the United States, they Americanize like the immigrants of old. We should establish a policy that says: "yes to immigration, but no to welfare." And we should also adopt a policy that says: "immigration yes, assimilation yes." Assimilation would be facilitated by de-emphasizing ethnic separatist policies and identity group politics. Bilingual education and racial quotas should be abolished, for example. Greater influence in our schools should be placed on American history, American government, and western civilization, rather than celebrating and teaching multiculturalism.

How Many Immigrants Should We Admit?

Most Americans have come to believe that the United States is accepting unprecedented numbers of immigrants — that the nation is virtually "under siege" from foreigners. Many of our politicians, such as Pat Buchanan, have tried to reinforce this sense of an out-of-control border by resorting in some cases to frightening rhetoric. Buchanan, for example, speaks of the need to "build a sea wall around the United States" to keep out "the rising masses of foreigners."*

The truth is that the numbers today are not unusually high or unmanageable. It is indeed true that in the 1980s and 1990s the U.S. admitted about 15 million new immigrants. This was the most immigrants to come to the United States since the great wave that arrived through Ellis Island between 1900-1910. Roughly half of all immigrants settled in just four states: California, Florida, Texas, and Illinois.

Perhaps the best measure of America’s ability to absorb immigrants into the social and physical infrastructure is the number of immigrants admitted as a share of the total population. The U.S. immigration rate has risen from about 2.0 per 1,000 residents in the 1950s and 1960s to about 3.5 per 1,000 residents by 2000. In earlier periods of our history the immigration rate has been as high as 16 per 1,000, or five times higher than today. The average immigration rate over the past 150 years has been about 5 per 1,000 residents.

Today, more than 25 million Americans — or about one in ten — is foreign born. This is somewhat lower than the historical average of about one in eight Americans being foreign born. Our historical experience thus suggests that increasing immigrant quotas would not cause unprecedented immigration.

The birth rate in the U.S. today is slightly below replacement levels. For many industrialized nations, low birth rates are a huge long-term demographic problem. Thanks to immigration, our demographic problems are less severe than in Japan, Germany, Spain, Italy, and France, to name a few. As the Baby Boomers begin to retire in 10 years, America will need young workers through immigration more than ever.

Policy recommendation: Historical experience shows that the United States can easily sustain an immigration level of one million new entrants per year. For at least the next 20 to 30 years, because of America’s changing demographic profile, more workers will be needed to sustain the U.S. economy and pay the retirements costs of current workers. This can be achieved in part by modestly raising immigration levels. Certainly, it would be contrary to the national interest to be reducing immigration levels at this time. 

Immigrants and the New Economy

The resiliency of the U.S. economy continues to confound almost all economists and government forecasters. This is an expansion like almost no other in American history, with trillions of dollars of new wealth having been created in just the past decade. What is new and different about this expansion is that it is being driven in large part by one sector of the economy: high tech. As economist Lawrence Kudlow of CNBC has noted, "This bull market economy is being pulled along by dramatic productivity gains in the high technology sector." Today, the U.S. is globally dominant in almost every important high-tech field — from computer software to pharmaceuticals to robotics to semiconductors.

U.S. policymakers should be doing everything possible to facilitate and foster the continuation of the remarkable productivity revolution in the computer and information technology industries. The good news is that in most cases, this simply means leaving industry alone, and allowing the survival of the fittest, like Microsoft, to flourish.

But U.S. firms also desperately need access to the kinds of technically trained workers that created the Silicon Valley prosperity in the first place. This means that over the long term they need better-trained U.S. workers. But it also means they need to be able to hire high-skilled immigrant workers. The immigration laws are pathetically inadequate in this regard. Until a few years ago, U.S. firms were permitted to recruit just 65,000 skill-based immigrants per year under a program called H-1B. In 1998 that cap was raised to approximately 100,000 per year.

That is still too few visas relative to the need and the economic opportunity. We should immediately double or even triple high-skilled immigration visas. These talented engineers, scientists, teachers, and business professionals will not take jobs from American workers — they will almost certainly create jobs by making our industries more profitable and productive. As T.J. Rodgers, president of Cypress Semiconductors, has noted, "Immigration is a leading factor behind the U.S.’s commanding competitive position in semiconductors, as it is in almost every 21st century industry." The combination of good old American ingenuity and the top talent from the rest of the world gives the U.S. an awesome comparative advantage against foreign rivals.

Policy Recommendation: What is the best way to attract high-skilled immigrants? Clearly the employer-sponsored system works well and should be made more generous. But additionally, the U.S. should establish 100,000-200,000 visas that would be allocated through a point-based selection system. Points should be awarded on the basis of: education level, occupational skills, English language ability, special talents, and perhaps other characteristics. Visas should be awarded to the immigrants with the highest point totals each year. Under such a system, we would roughly double the number of immigrant visas awarded on the basis of skills. With this change, the immigrants who come to the U.S. in the next 20 years will be the most talented people ever to come. It wouldn’t be long before we had a Silicon Valley in every state in the union. This would be an incredibly bullish policy for an already stampeding U.S. economy.

Family-Based Immigration

Throughout American history immigrants have tended to come to the U.S. with some or all of their immediate family. Others come to reunite with family members. The system generally works well, providing newcomers with a natural social network and safety net to fall into when they arrive. Because the family is the basic socializing structure in America, it makes sense that our immigration policy should continue to emphasize immediate family preservation.

Family immigration is also an imperative of our immigration policy because if immigrant workers cannot get their family members into the U.S., many will not wish to come. If we want skilled immigrants, we need to allow them to bring their families. Although opponents of the family system argue that it encourages "chain migration," reports by the U.S. General Accounting Office indicate that chain migration is not a major problem.

Policy Recommendation: Preserve family-based immigration. Moving toward greater emphasis on skilled immigration should be done as an add-on to the current immigration preference system, not as a substitute for current family immigration policies. The one exception is that the category preference that allows adult immigrants to bring in their elderly parents should be discontinued. Elderly immigrants provide almost no benefit to the U.S. and, unlike young immigrants, impose net costs on U.S. taxpayers.

Encouraging Ethnic Diversity

The 1965 immigration law ended the national origin system for allocating immigrant visas and replaced that system with the family-based system. The pre-1965 laws had been criticized rightly for becoming a de facto barrier against non-European immigrants. However, a strong case can be made that the laws have swung too far in the opposite direction — excluding many Europeans who lack the family connections to come to the U.S. In the 1950s about half of our immigrants came from Europe. Now less than 20 percent do.

The drop-off of European immigration is troubling. Immigration is beneficial at least in part because of the ethnic and genetic diversity it brings to the U.S. Moreover, Europeans, like Asians, have tended to be highly skilled and thus desirable for the substantial human capital they bring with them.

One major reason why the U.S. has seen a decline in European immigration has had little to do with U.S. immigration policy, but rather the inability, until recently, of immigrants from former communist nations — including Poland, Russia, Hungary, and Romania — from traveling here. In the 1980s, only about 3 percent of America’s immigrants came from the Eastern bloc. The number of immigrants who came to the U.S. from all East Europe in the 1980s was roughly the same number that arrived from the small island of Jamaica.

Policy Recommendation: One goal of U.S. immigration policy should be to encourage ethnic diversity. The U.S. should allow increased immigration from Eastern and Western Europe. A point system as described above might give preference to those from nations where historical immigration levels have fallen substantially.

Immigrants and Welfare

America’s welfare system should not be a magnet for immigrants. For the most part it is not. Moreover, the welfare reform laws of 1996 tightened eligibility requirements, thus making it more difficult for immigrants to receive public assistance. The preliminary statistics indicate an encouraging decline in welfare use among immigrants in the wake of that law.

Studies at the Cato Institute, confirmed by other scholars, suggest that immigrants use welfare and other social services at about the same rate that U.S.-born citizens do, despite that the foreign born have higher rates of poverty. The taxes paid by immigrants typically cover the cost of public services used. The rate of welfare use is higher among immigrants living in high-benefit states, indicating that if states would reduce the value of their welfare packages, dependency rates among immigrants would decline still further.

Policy Recommendation: What is clear is that Americans do not want to be paying taxes for immigrants on welfare. The good news is that immigrants as a group are not welfare abusers —particularly now that the new tighter eligibility laws have been adopted. One long-standing condition for entry for immigrants is that they not become "a public charge." This policy should be more strictly enforced. For their first five years in the U.S. immigrants should not be eligible for most cash and non-cash welfare benefits, with emergency medical care being a notable exception. Immigrants who go on welfare during their first five years in the U.S. should be denied continued residency in the U.S. Efforts by some welfare advocacy groups to roll back the welfare restrictions for immigrants in the 1996 law should be vigorously

The explicit purpose of refugee assistance programs is to "help refugees achieve economic self-sufficiency within the shortest time possible following their arrival in the United States." In practice the programs have had precisely the opposite effect, contributing to a culture of dependency within refugee communities. Most special refugee assistance programs should be eliminated. Non-profit resettlement agencies and ethnic associations should privately provide refugee assistance.

Making Sure the Melting Pot Still Works

We as Americans should expect — even demand — that those who come voluntarily to these shores become part of the American community. This should be a central part of the citizenship pact. This requires basic steps toward assimilation: learning the language, learning about how the American system of government works, staying off welfare, avoiding criminal behavior, gaining employment rapidly so to start the climb up the economic ladder of success.

Assimilation is not a dirty word. It binds our society together. Too many institutions in America celebrate our separateness, not our shared identity and our shared values. Studies tell us that assimilation is also a virtual pre-condition for immigrant success in the U.S. English language ability is a huge predictor of economic advancement for immigrants. The immigrants want to assimilate — if only we as a society will encourage it.

Policy Recommendations: Abolish bilingual education. The California experience proves that English immersion is far superior for teaching immigrant children our common language. Abolish the system of quotas and preferences in the job market, the universities, and in government. Race-based preferences are not just an inherent injustice — a contradiction of the idea of equal treatment under the law — but also encourage an unhealthy entitlement mentality among racial and ethnic groups.

Finally, if our goal is to see immigrants become American citizens, we must take steps to reduce citizenship backlogs, of more than 1 million and counting. Citizenship tests should not be dumbed down, as some have suggested, and the residency requirements should remain in place, but it should not require years of delay for those who are eligible to become full-fledged American citizens.

*Patrick Buchanan, "The Immigration Bomb," The Washington Times, October 11, 1990.