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Building a Workforce for the Information Economy
As do domestic entrepreneurs, scientists, and engineers, so also foreign entrepreneurs, scientists, and engineers create jobs.4 Entrepreneurs create businesses that hire others, while scientists and engineers—through the science and engineering that underlies new technologies—create jobs for other scientists and engineers working with those technologies.
At the same time, foreign workers in the United States can have negative impacts as well:
Learning from U.S. IT sector firms, they may bring back to their home countries expertise and knowledge that they can use to compete more effectively against U.S. companies.
The availability of foreign workers to U.S. employers raises the supply of labor for those jobs that foreign workers will fill. As with any increase in the supply of available workers, the use of foreign workers may have deleterious effects on the wages and job security of U.S. workers who might otherwise do the work entrusted to foreign workers. To the extent that foreign workers compete with native U.S. workers, economic principles suggest that (a) the foreign workers may displace the domestic workers and (b) the presence of the foreign workers may hold down wages in those jobs.5 Wages may be depressed even if all employers paid temporary nonimmigrant workers the wages prevailing for the jobs for which these nonimmigrant workers are hired.
This remainder of this chapter discusses in more detail the use of foreign IT workers in the United States and in their native lands by U.S. firms.
4
For example, foreign-born individuals have been instrumental in starting major U.S. hardware, software, and semiconductor firms, including Wang, Intel, Sun, and Computer Associates.
5
This outcome was endorsed by Federal Reserve Chairman Alan Greenspan when he argued in testimony before the House Banking Committee on February 16, 2000, that the availability of foreign workers was a critical factor in holding down wage inflation during a long period of economic growth. Specifically, he stated that ”. . . imbalances in the labor markets perhaps may have even more serious implications for inflation pressures. While the pool of officially unemployed and those otherwise willing to work may continue to shrink, as it has persistently over the past 7 years, there is an effective limit to new hiring, unless immigration is uncapped. At some point in the continuous reduction in the number of available workers willing to take jobs, short of the repeal of the law of supply and demand, wage increases must rise above even impressive gains in productivity. This would intensify inflationary pressures or squeeze profit margins, with either outcome capable of bringing our growing prosperity to an end.”
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