On September 29th, FWD.us, a pro-immigration reform lobbying group, posted a video on YouTube titled "Know the Facts: H-1B Visas". I've posted a transcript and commentary on the video at http://econdataus.com/fwdusvid1.htm. However, I wanted to focus on the last claim of the video which is as follows:
THE FACT IS: EVERY FOREIGN-BORN WORKER WITH A STEM DEGREE CREATES AN AVERAGE OF 2.6 JOBS FOR NATIVE-BORN AMERICANS
As explained here, the actual claim in the referenced study is that every foreign-born worker in STEM fields with advanced degrees from US universities is associated with an average gain of 2.62 jobs among US natives. Still, I found this claim especially interesting because it reminded me in many ways of the supply-side claim that tax cuts raise revenues. I posted an analysis of the tax cut claim at http://econdataus.com/taxcuts.html. Following are the reasons why the FWD.us claim reminds me of this claim:
First of all, both claims are counter to the most obvious effects. The most obvious effect of a 10 percent tax cut is that revenue will drop 10 percent. Likewise, the most obvious effect of hiring an H-1B worker to fill a job is that an American worker will not be hired to fill that job. Both actions do have other, secondary effects. But these are the most obvious, primary effects.
Secondly, both claims propose that the actions will stimulate economic growth which counters these primary effects. In the case of tax cuts, it is proposed that this growth will be high enough to more than offset the lower tax rate. In the case of H-1B jobs, it is proposed that enough jobs will be created to more than offset those jobs being taken by H-1B visa workers. Of course, there will be secondary effects. But both claims tend to focus just on one or more effects that run counter to the primary effects. For tax cuts, the evidence shows that there can be a negative effect caused by mounting deficits. Likewise, for H-1B workers, there can be a negative effect of lessening the motivation for Americans to go into STEM disciplines. In fact, there are complex effects in both directions. That is why it is critical to look at the data independent of any theories about what those effects are. It is also critical that the sources and calculations be released to the professional community and the public.
Thirdly, both claims, if accepted, have the effect of stifling debate. If tax cuts raise revenue, then tax cuts are like a free lunch that nobody has any reason to oppose. Likewise, if foreign workers create jobs, everyone is a winner and nobody has any reason to oppose that policy. If the issue is more complex, however, with both benefits and costs, then a careful analysis and debate is required. The attraction of the two claims is that such a careful analysis and debate seem unnecessary.
One thing that I find more worrisome about the FWD.us claim, however, is how widely it has spread with little visible opposition or verification. From what I can tell, it came from a single study titled "Immigration and American Jobs", written by economist Madeline Zavodny and published by the American Enterprise Institute and the Partnership For A New American Economy. The online About page of the latter organization states its third principle at follows:
Increase opportunities for immigrants to enter the United States workforce — and for foreign students to stay in the United States to work — so that we can attract and keep the best, the brightest and the hardest-working, who will strengthen our economy;
This would suggest that this group only searches out and/or funds research that supports this principle. In fact, their online Research & Reports page list a number of reports, all seemingly favorable toward increased immigration.
In any event, googling variations of "foreign born worker creates 2.6 jobs" gives a large number of references. One of the top ones is a paper on the White House site titled The Economic Benefits Of Fixing Our Broken Immigration System released by the Executive Office of the President in July 2013. On page 7, it states:
Moreover, studies indicate that every foreign-born student with an advanced degree from a U.S. university who stays to work in a STEM field is associated with, on average, 2.6 jobs for American workers.
It's a bit disturbing that this paper has seen fit to say that "studies indicate" when the source is a single study. In fact, that statement is footnoted and the footnote does list the single study. I noticed that tendency in a few other references such as this one that states "studies have shown that for every foreign-born student who graduates from and stays in the United States employed in a STEM field that an average of 2.62 jobs are created for U.S. born workers. This is usually attributed to the fact that the foreign-born worker helps lead innovation, research or development." By the way, that last sentence is repeated in a number of the references.
In any case, there are questions about the original claim by the study. Page 4 of the study states:
During 2000– 2007, a 10 percent increase in the share of such workers boosted the US-born employment rate by 0.04 percent. Evaluating this at the average numbers of foreign- and US-born workers during that period, this implies that every additional 100 foreign- born workers who earned an advanced degree in the United States and then worked in STEM fields led to an additional 262 jobs for US natives. (See Table 2)
Hence, it appears that the study found an association between a 0.04 percent raise in employment and a larger share of these foreign-born STEM workers with advanced degrees. It then multiplied this by the average numbers of workers to obtain the 262 U.S. jobs per 100 foreign jobs.
The author, Madeline Zavodny, summarizes this starting at 1:12 of a YouTube video, stating:
...and so the first one is to look at immigrants with advanced degrees. This is either a Masters or a PHD in any field, you know, from English to the STEM fields, right, and what the report finds is that these immigrants, when you have a bigger share of workers who are foreign-born advanced-degree holders, the native employment rate in the state is higher.
In the Methodological Approach section, the study admits that there are challenges to its approach. On page 9, for example, it states:
But one of the fundamental challenges when using cross-state comparisons to show a relationship between immigrants and jobs is that immigrants tend to be more mobile and go where the jobs are. As a result, evidence of high immigrant shares in states with strong economic growth and high employment could be the result of greater job opportunities (as immigrants move to jobs), rather than the cause. Cross-state comparisons would then show an artificially high impact of immigrants on the native employment rate. The study avoids “overcounting” the effects of immigrant workers drawn by a recent economic boom by using an estimation technique (known as “two-stage least squares (2SLS) regression estimation” and discussed in the appendix) that is designed to yield the effect of immigration independent of recent growth and employment opportunities. The analysis also controls for state- and time-specific factors that might affect native employment rates.
It would seem that there are other fundamental challenges. For example, Table 8B in the 2012 USCIS report to Congress titled "Characteristics of H1B Specialty Occupation Workers" shows that 59.5 percent of 2012 H-1B beneficiaries were for computer-related occupations. Hence, there is likely a strong correlation between states with high number of foreign workers and computer industries which, to my knowledge, tend to have higher than average employment rates.
We are therefore left to trust that the author controlled for all of these complex factors correctly. However, as seems to be the case with most of these studies, there is not enough information supplied to reproduce the author's work. The Data section does reference some footnotes like the following:
28 The data are from http://nber.org/morg/annual (accessed March 17, 2011).
29 The data are from Foreign Labor Certification Data Center, www.flcdatacenter.com (accessed November 12, 2011), and are for fiscal years. The public-use H-1B data for 2007 contain erroneous codes for the work state, so the analysis here does not include that year. The employer state is used for the work state in 2006 for H-2A applications.
This last footnote, by the way, does not give one a really comfortable feeling about the underlying H-1B data. It does not surprise me, however, having run into problems with LCA data. In any event, I have worked with enough data to know that, when you have thousands of data points and scores of methods to analyze them, some of those methods will always give results that are more favorable than others. It is therefore critical that others be able to reproduce the results so that they can verify the work, critique those methods and try alternate methods. The best way to do this would be for the author to provide a spreadsheet that shows their calculations, along with the references to the data. As it is, however, I can see no way to verify the study's results and no indication that anyone else has verified them.
It truly is disturbing that a major argument in the immigration reform debate is based on a single difficult, if not questionable, calculation in a single study that, by all indications, nobody has verified. I'll conclude with the same thoughts with which I concluded a discussion of the infamous Reinhart and Rogoff spreadsheet error:
Why don't economists just post their original spreadsheets? There may be many reasons. Some may be willing to put up with peer-review when required but not want every pointy-headed number-cruncher with too much time on their hands to be going through their work. I suspect that those number-crunchers would catch a number of errors or questionable methodology that peer-review would not catch. In addition, some economists might feel that publishing their spreadsheets would reveal trade secrets and/or help other economists to compete in their area of study. Hence, I think that it's largely up to those who consume the studies to demand that the work be released. Of course, economists would still be free to release studies without peer-review and showing precisely how they arrived at their conclusions. But if those studies were simply ignored or treated as interesting ideas until they can be verified, I suspect that many of those economists would be willing to "show their work".