The Right Way to Reform High-Skilled Immigration

We can bring in top talent from abroad without creating perverse incentives to game the system or undercut American workers.

A mericans do not trust our immigration system.

In a national poll last year, four-fifths of voters said the American immigration system needed either “major changes” or “a complete overhaul.” The main driver of this sentiment is the long-simmering crisis at the southern border, a major priority for President Trump’s second term.

But Americans are also frustrated by our dysfunctional system of legal immigration. A broad bipartisan coalition — 78 percent of voters, including 71 percent of Trump voters — supports increasing high-skilled immigration. President-elect Trump himself, while a longtime proponent of a border wall, has said he wants a “big, beautiful door” open to talented immigrants from all over the world. His new consigliere Elon Musk has also advocated for high-skilled immigration reform, tweeting that our current system is “ridiculously slow” and “difficult, even for super talented people.”

The critics of the status quo are right. Our immigration system for high-skilled workers is a mess. Applicants for employment-based green cards wait years for a decision from the government. Our signature high-skilled visa program, the H-1B, approves qualified applicants at random. We do not offer promising founders from abroad a startup visa; instead, we push them toward accepting salaried jobs to get a foothold in the U.S. On top of that, our programs for temporary visas are much larger than our pathways for green cards for skilled workers, leaving accomplished applicants in backlogs for decades. Many simply give up. Three out of every five international students who graduate from American colleges end up leaving.

There is a better way. We can reform high-skilled immigration policy without creating perverse incentives to game the system or undercut American workers. Today the Economic Innovation Group is releasing a detailed plan to do just that, overhauling our high-skilled immigration system from top to bottom to rebuild trust in it and maximize benefits to American workers and communities. But to do this right, we first have to rethink some longstanding principles of immigration policy.

Economists have long argued that immigration policy should focus on admitting people who are “complements” to the U.S. labor market, those filling so-called “labor shortages.” But recent history has shown the definition of “labor shortage” to be slippery.

Just a few years into the recovery from the Great Recession, businesses across an array of industries began raising alarms, claiming they could not find qualified workers. Homebuilders, for example, warned of labor shortages in 2015, even though the construction sector employed fewer workers than it had just a few years prior. Yet over the next few years, the sector managed to find and hire 1 million additional workers. And it was certainly not alone among economic sectors that had previously cried “shortage.” What happened? Employers raised wages to attract workers. Indeed, the national labor market defied expectations and added millions of jobs long after some economists had proclaimed the economy was at “full employment.”

In truth, nobody really knows how to define a labor shortage. Chasing this elusive target, our immigration system satisfies nobody. Businesses sponsoring valued, productive employees for green cards must prove that no “minimally qualified” Americans could take those job instead. The process now takes an average of well over two years, saddling employers with tens of thousands of dollars in legal costs simply to reaffirm that they indeed want to continue employing the sponsored worker.

Designing policy around labor shortages undercuts the benefits, which are unambiguously enormous, that high-skilled immigration offers to American workers, communities, and businesses. Immigrants are 80 percent more likely than native-born Americans to start a business, accounting for a full quarter of all new businesses annually. Immigrants have founded 55 percent of all “unicorn” startups valued at $1 billion or more.

Fixing our high-skilled immigration system would help us beat China in the race to dominate sensitive emerging technologies, as the Chinese Communist Party itself admits. Immigrants already account for one-fifth of the workforce in strategically significant industries — those vital to American economic and national security — and an even larger share of high-skilled roles. Yet decades-long backlogs for employment-based green cards for Indian and Chinese nationals are undercutting the ability of American companies to recruit from these sources of talent. Throughout our history, America has harnessed high-skilled immigration to outcompete adversaries, a tradition worth drawing on today.

Expanding high-skilled immigration even boosts the wages of blue-collar, native workers, a point underappreciated by mainstream economists. New arrivals with high salaries — say, as doctors or software engineers — make blue-collar workers more scarce within the broader labor market. High-skilled immigrants do not build homes, staff warehouses, or man assembly lines, but they increase the demand for the goods and services produced by blue-collar workers, raising their pay. Reihan Salam and Oren Cass, populist-leaning conservative writers, have touted this effect of high-skilled immigration, even as they remain skeptics of other kinds of immigration.

As if these benefits weren’t impressive enough, we estimate that the average skilled immigrant pays $40,000 more in federal taxes each year than they use in government benefits. This is before accounting for undoubtedly large, indirect ways in which high-skilled immigration boosts tax revenue through innovation and entrepreneurship. Imagine how much lower federal tax revenue would be if Tesla, Google, or other immigrant-founded giants didn’t exist.

Trump understands as well as anyone how much high-skilled immigration contributes to economic growth. Last summer, on the All In podcast, he even proposed granting permanent residency to all foreign graduates of U.S. schools. Unfortunately, while well-intentioned, the deep flaws in basing skilled-immigration admissions on academic degrees have become glaring in Canada and the U.K., where political support for such programs has collapsed. In the British case, rather than creating a “Singapore on the Thames,” degree-based programs have opened the door to more low-wage immigration and led to the growth of degree mill schools offering easier paths to work visas. Trump and his allies, including Musk, are certainly right that the U.S. should offer more visas to highly talented immigrants (and retain more graduates), but how we do that matters.

Rather than use jury-rigged processes to identify complementary workers, or print unlimited green cards for fresh graduates, our system should instead relentlessly prioritize the very highest-skilled workers and founders. Doing so requires simpler, more transparent policy.

First, the skilled-immigration system should select, first and foremost, the highest-earning applicants. Across both parties, our signature skilled-immigration program today, the H-1B visa, has earned a reputation for being abused by staffing and outsourcing firms. The H-1B visa not only fails to prioritize the highest-earning workers; it fails to prioritize anyone at all, choosing among visa applicants entirely at random. We propose scrapping this broken program and replacing it with a new skilled-worker visa that puts the highest-paid applicants at the front of the line.

Bureaucrats making monthslong assessments at their desks in Washington cannot precisely determine the workforce needs of hundreds of American industries. Markets provide the best signal of which skills and experiences are both scarce and highly valued: wages. Nor can bureaucrats reliably predict the rise of new industries such as cryptocurrency, artificial intelligence, and autonomous vehicles. The game-changing startups founded by immigrants in these areas emerged organically, not from careful assessments of labor shortages.

Second, our skilled-immigration system should not create unfair competition for American workers. Current visa programs, including the H-1B, aim to “protect” American workers by limiting skilled newcomers to a narrow range of jobs, making it difficult for visa holders to escape an abusive employer or just seek a promotion at another firm. These restrictions do the opposite of what they were intend to do. They suppress the wages of H-1B holders and create a class of captive workers whom Americans have to compete against.

Pro-worker politicians are waking up to how damaging restrictions on job mobility can be in other contexts. For example, there is a growing, bipartisan movement to ban the widespread use of noncompete agreements, which reduce Americans’ wages and slow new business formation. Rather than enforce what are effectively noncompete agreements on high-skilled immigrants, we should allow them to freely move between firms or start job-creating companies of their own.

Third, the high-skilled immigration system should do more to benefit the wide swaths of the country suffering from declining population and deindustrialization. Today’s skilled visa programs overwhelmingly send talent to a small number of places — three-quarters of high-skilled immigrants live in just 100 counties. But more parts of the country would opt in to additional high-skilled immigration if given the choice through Heartland Visas or similar programs.

A place-based, high-skilled immigration program like the Heartland Visa would give struggling locales a potent tool to attract talented entrepreneurs or retain talented foreign-born graduates of their local universities. The Heartland Visa concept was endorsed by a national coalition of mayors last year, and a bipartisan Heartland Visa bill was introduced in the Senate in December.

Americans deserve secure borders and an orderly immigration system. They also deserve a high-skilled immigration system that is designed, from the bottom up, to deliver more opportunities to American workers, their families, and their communities.

Our visa programs for skilled workers should be transparent. Americans should trust that they are truly designed to select exceptional talents. The system should set a very high bar for who we admit — but for those who clear that bar, the process should be straightforward and easy to navigate.