In the last post, I showed the most common path that is taken by a non-immigrant worker (typically in the skilled jobs category such as IT) towards better life and opportunity in USA. The question then, is "How does this impact the country - Is it good or bad?" The question gets raised pretty much on a frequent basis, not surprisingly coinciding either with an election or with an economic downturn.
I feel that there are more benefits than risks, especially in this specific segment (temporary visas for skilled workers), and contrary to popular belief, I would argue that it actually benefits the economy than hurt it. Here's how.
B1 Visas
In case of B1 visas, where people come in for a short assignment, typically lasting no more than 3 months, there is some benefit and no real loss. While those folks tend to spend some money by buying gifts, they tend to conserve as much money as possible. It's mainly because the exchange rate is quite high ($1 = Rs. 48).
H1 Visas
The real benefit comes in H1 and to an extent, L1 visas. People in these visas tend to stay for a longer term - typically 3-6 years for a H1 visa and 2 or more years for an L1 visa. When a person comes in for a such a relatively long-period, he needs to set up a base here.
Accommodation and Travel
That means getting an apartment, furnishing it, buying essentials, getting a car, etc. All this contributes to the country's economy. Moreover, now that he is staying for a longer term, the tendency is to travel and explore the country with his friends/colleagues/family. This has a fairly significant impact on the American tourism, as can be seen at crowds gathered at Niagara Falls around national holidays! There is a joke that an Indian can find his long-lost friend or cousin if he visits Niagara Falls on Independence Day!
Marriage and Travel
This inclination for tourism only increases when the person gets married. This happens more often than not because people who tend to come in to USA on an F1 or sometimes even an H1 are young adults aged 20 - 30, and tend to get married around 25-35, when they get staffed in a relatively stable project. This change in the lifestyle once again contributes fairly to the American economy.
Child Birth
The next big expense comes few more years down the road when the family size increases. A new kid comes with its own expenses, often more than their parents! This again contributes to the economy.
Note that the typical downside of immigration such as potential increase in crime, uninsured medical expenses, etc. are not applicable here, as most tend to fall under the middle to upper-middle class with an average annual income of around $60,000 - $100,000 and they are all insured by their employers for the most part.
I have seen that a typical non-immigrant family tends to save less or at most same as what they would have, had they been back home. While the material possessions to tend to increase significantly compared to their counterparts back home, the overall savings remains the same.
On top of all this, one thing that I find most interesting is that H1 visa holders have to pay Social Security Tax. As you know, SS tax is intended for care post-retirement, which H1 holders are not eligible for, unless they stay here and get citizenship. Moreover, a country such as India does not have a bilateral agreement to convert the SS tax contributions to a PF (Provident Fund) contribution - the Indian equivalent of an SS tax. So, if the person decides to head back after the H1 term ends, their contribution goes to the SS pool, benefiting the rest of the citizens (or at least that's how I understand it).
There are a number of other intangible benefits as well. For example, as most H1s have kids no more than 3 years old, they do not place a burden on the educational system. Rather, they contribute to the economy of the day-care agencies. Also, most families tend to fly-in their parents and in-laws to see the newborn and to generally show them around the country. This in turn, increases the tourism as well.
So far, there are only positive. So, where's the negative? The biggest complaint is that an influx of non-immigrant workers will deprive the citizens off their opportunities for same jobs. However, I do not believe this is true. The same hue and cry existed when offshore development started. People feared that all IT work will go to developing countries. 5 years down the road, we are yet to see that happen. I believe that more than depriving people of their opportunities for jobs, I see this as a shift in the type of skill set needed within the country.
Change in skill set
In most developing countries, the educational system emphasizes rote learning and analytic work as opposed to creative work. As a result, people from these countries are excellent in analytical skills and task-oriented jobs. However, the same advantage also makes them poor leaders. The lack of emphasis on creativity makes them less effective managers, leaders, and entrepreneurs. This is where the American workforce shines, and this is where they can continue to get more work.
The exceptional few who are good leaders use the free market in this country to set up shop, which in turn, provides opportunities for a number of citizens.
So, in all, I think it is in fact, advantageous to have H1 workers at a constant rate than not have any. It bodes well for the country's economy, tourism, and development.
Green Card
The penultimate step in the quest for citizenship is permanent residence (or Green Card). This makes the non-immigrant worker effectively an immigrant and helps them in getting some of the benefits enjoyed by citizens. The children also would have grown up by now and get incorporated into the educational system. The influx of the analytic-oriented kids into a creative system can help bring a better balance to the overall educational system as well and foster healthy competition.
Moreover, most green card holders now have to upgrade their lifestyle and tend to buy a house (and spend more money on house maintenance!), which again is a boon to the economy.
Bottomline: Having a reasonable influx of non-immigrant workers can be healthy for a developed nation both in terms of economy and in terms of keeping it in its toes. This influx should be considered as a shift in the work force and not as a replacement.
Now that we have seen how a developed country actually gains a lot more than it loses due to non-immigrant workers, you may wonder "Who loses?" After all, nature is more or less balanced and if one wins, someone else must lose - and that would be the developing nation! In my next blog, I hope to explain what the developing nation loses, and how it can potentially avoid the loss.
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