Donald Trump’s win in the recent American presidential elections involved a considerable shift in support base from the opposite side, most notably Silicon Valley entrepreneurs and investors. And this coalition of supporters is beginning to see conflict of interest. Most notably on the issue of immigration on which Trump and his right-wing supporters have been historically against whilst the newly converted lot have all been beneficiaries and hence pro-immigration, especially of tech workers. Elon Musk, considered to have been instrumental in Trump’s win came to America on an H-1B visa and has been vocal on his social media platform X about how he is going to defend the immigration policy, so important for America to retain its competitiveness – “If you force the world’s best talent to play for the other side, America will lose.” In particular, the Indian tech worker community has been at the receiving end of Trump’s right-wing supporters on social media.
In this blog, Noah Smith comes in support of the immigration policy, citing research that shows that tech immigrants do not end up taking American jobs but fill in a void created by lack of local tech talent. Indeed, demand created by such well-off skilled immigrant workers create jobs in other American industries.
“How are these results possible? One possibility, put forward by Mayda et al., is that H-1b workers and native-born workers just do very different jobs, so there’s a “low degree of substitutability”. This is similar to the argument that immigrants take jobs that native-born workers can’t or won’t do.
But I think there’s another force at work here: industrial clustering. It’s a well-known fact that companies in knowledge industries — tech, finance, entertainment, biotech — tend to cluster together in cities. Why? When you have an area with a lot of high-skilled labor, high-tech companies will find it easier to hire everyone they need in that area, so they’ll pour investment into that location. This is why Silicon Valley remains dominant in the IT industry despite the Bay Area’s very high costs and dysfunctional governance — it’s where all the engineers live, so companies want to invest there.
The same is true at the country level. If America weren’t home to so many talented software engineers, for example, the tech industry would be much more reluctant to invest there. Software would be relatively easy to sell from Bangalore or Hyderabad; instead, companies make it in San Francisco and Palo Alto, because of their concentrations of talent.
Thus, H-1b workers could actually be reinforcing America’s overall advantage as the place where high-tech companies want to invest. This increased investment naturally benefits native-born tech workers as well.
In fact, there is some evidence for this theory. Glennon (2023) shows that when companies are prevented from hiring H-1b workers, they start investing in other countries instead:
How do multinational firms respond when artificial constraints, namely policies restricting skilled immigration, are placed on their ability to hire scarce human capital?…[F]irms respond to restrictions on H-1B immigration by increasing foreign affiliate employment…particularly in China, India, and Canada. The most impacted jobs were R&D-intensive ones…[F]or every visa rejection, [multinational companies] hire 0.4 employees abroad.”
He makes a more pertinent point about who exactly are native American workers?
“…the United States has been an immigration-fueled polyglot since its very founding.
No sooner had British Americans created the country than it was inundated by Irish Catholic immigrants, causing vast anti-Catholic backlashes and efforts at large-scale deportation. These had barely died down when tensions began to rise in the late 19th century over the arrival of Italians, Poles, Jews, and other East and South Europeans en masse. Today’s anti-immigrant freakout is the third since the founding.
So if you decide to try to strip down America’s population to its founding stock, who will you include? Do the Italians get to stay? How about the Vietnamese refugees who came in the 70s? Are the Irish part of America’s core population, or papist interlopers? What about a Mexican American whose ancestors came in the 1930s? Where do you draw the line? What about someone who looks entirely Asian but who has one ancestor who sailed in on the Mayflower?
Searching for an ethnicity that represents the “true” or “core” American stock is like peeling back the layers of an onion — when you get to the center there’s nothing left.”
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