Immigration's Contribution to the US Workforce
The article below is from our BRIEFINGS newsletter of 19 August 2019
Key to any sustainable economic expansion is the growth of an appropriately skilled labor force — something the US has experienced uninterrupted since the global financial crisis. We caught up with Goldman Sachs Research's Abby Joseph Cohen to discuss immigration's contribution to this growth, the subject of her latest report "Immigration and the US Workforce."
Abby, what role has immigration played in shaping today's workforce?
Abby Joseph Cohen: A tremendously important one. If you look back at the last 30 years, the US has seen a robust expansion of its labor force while other developed economies have struggled with declining birthrates and shrinking working-age populations. Nearly half the increase is attributable to foreign-born workers. And it's more than just a numbers story – these workers have proven particularly well-suited to the ongoing shift from a manufacturing to a services economy, now holding an outsized share of the highly-skilled jobs relative to their 17% total share of the US workforce. Going forward, it's widely expected that highly skilled jobs in STEM, health care and financial services will see the most growth – and these are fields where the US hasn't produced enough native-born workers to meet the growing labor demand. So to the extent those trends continue, we'd expect the reliance on foreign-born workers to continue, as well.
In your report, you also note some interesting stats on immigrants' contributions to research and innovation. What has the record been so far?
AJC: I'll first point to a recent US government study, which found that high-tech immigrant-owned businesses scored higher than native peers on almost all innovation measures, including higher propensity to engage in innovation and R&D. And anecdotally speaking, we see foreign-born workers reaching some of the highest levels of achievement in terms of their economic and cultural contributions. Roughly 45% of Fortune 500 companies were founded by immigrants or their children, and more than half of the US Nobel laureates from the last five years were born abroad.
What about earnings potential for foreign-born workers in the US – can joining the workforce be a mutually beneficial relationship?
AJC: In highly skilled fields, yes, partly because US immigration policy encourages it. Foreign workers are required to possess advanced degrees or high-demand skills to secure legal permanent resident status or temporary specialty visas, and as a result, they tend to be concentrated in more specialized, higher-earning positions. In STEM fields like computer science, physical science, and engineering, for example, we've found earnings potential is 15% to 25% higher on average for immigrants than for native peers. But the story is very different once you move into the low-skilled occupations. Here, foreign workers earn 15% to 30% less, which may be attributed to a lack of English proficiency, and in some cases, legal working status. It's worth noting however that prospects do improve across the board for the next generation, with the children of foreign-born workers tending to be better educated and higher earning than their parents.
So how do you see the story evolving from here? Do you think we'll continue to see foreign-born workers grow their role in the highly skilled fields?
AJC: I think demographics will require it, but ultimately, it all depends on the direction of policy. In recent years, we've seen declines in the number of permanent resident status "green cards" awarded for employment preferences, and we've also seen declines in the number of temporary visas granted to international students and specialized workers. If these trends were to continue, it could hurt the US' ability to attract and retain talent and, by extension, its ability to innovate and compete globally.