Economic Argument for H1-B Visa Expansion

Date: Wednesday, August 02, 2006 1:23 AM

<<<<< JOB DESTRUCTION NEWSLETTER No. 1529 -- 08/02/2006 >>>>>

A new op-ed by John Tamny makes a specious attempt at arguing for an
increase in the H-1B cap. He gets into immediate trouble by using the
writings of Adam Smith.

One argument in favor of the existing visa caps is that an
influx of foreign workers will drive down U.S. wages in the
engineering and technology space. Aside from the supply
constraints mentioned above, this is zero-sum thinking.
Workers are in the end capital, and along the lines of the
pin factory Adam Smith described in the Wealth of Nations,
an increase in the number of skilled workers will increase
output, and make all of us wealthier in the end.

Tamny incorrectly assumes that importing H-1Bs increases the skills of
workers. Even if his assumption was correct, Adam Smith's pin factory in
the "Wealth of Nations" is an irrelevant example that tends to disprove
Tamny's point. Smith wrote that in order to improve productivity labor has
to be divided to the point that less skilled people can accomplish the same
task.

Tamny's faith-based economics that increasing the number of skilled workers
makes "all of us wealthier" denies that the supply of labor determines
wages. Adam Smith on the other hand totally understands the relationship
between the supply of labor and wages. Here are two excerpts by Adam Smith
from his "Wealth of Nations".

http://www.econlib.org/library/Smith/smWN3.html#B.I,%20Ch.8,%20Of%20the%20Wages%20of%20Labour

When in any country the demand for those who live by wages;
labourers, journeymen, servants of every kind, is continually
increasing; when every year furnishes employment for a greater
number than had been employed the year before, the workmen
have no occasion to combine in order to raise their wages.
The scarcity of hands occasions a competition among masters,
who bid against one another, in order to get workmen, and thus
voluntarily break through the natural combination of masters
not to raise wages.

It generally requires a greater stock to carry on any sort of
trade in a great town than in a country village. The great
stocks employed in every branch of trade, and the number of rich
competitors, generally reduce the rate of profit in the former
below what it is in the latter. But the wages of labour are
generally higher in a great town than in a country village. In a
thriving town the people who have great stocks to employ,
frequently cannot get the number of workmen they want, and
therefore bid against one another in order to get as many as they
can, which raises the wages of labour, and lowers the profits of
stock. In the remote parts of the country there is frequently not
stock sufficient to employ all the people, who therefore bid
against one another in order to get employment, which lowers
the wages of labour, and raises the profits of stock.

The remainder of Tamny's article is full of clichis that have nothing to
do with H-1B. For example, what does H-1B have to do with the fact that the
U.S. is a great place for entrepreneurs?

The H1-B program thus should not be expanded with nationalistic
concerns in mind, but for the simple fact that the U.S. remains
the single best place for entrepreneurs to achieve their goals.

This one makes me wonder if Tamny even knows what the H-1B program is
because he confuses offshoring with H-1B.

If a cure for cancer is found in India, well all be better off.
Country origin, in a free global market, is irrelevant.

Considering that Tamny is the Director of Development at the Cato
institute, he should be ashamed of himself for writing such a logically
flawed article. The following non-sequitur is truly unbecoming of someone
who claims to be in a think tank:

The U.S. remains the best country for entrepreneurs to grasp ideas,
and once having done so, create wealth-enhancing innovations that
the whole world can enjoy. The H1-B visa program should be greatly
expanded with this in mind.

+++++++++++++++++++++++++++++++++++++++++++++++++++

http://article.nationalreview.com/?q=Yjk4NmMwYTQyYTk3ZWM2MjlkOGIxMWE5OWE3MzY2MDE=

July 31, 2006, 8:35 a.m.

The Economic Argument for H1-B Visa Expansion
The U.S. remains the best country for entrepreneurs to create
wealth-enhancing innovations that the whole world can enjoy.

By John Tamny

Writing to Scottish relatives about prospects in the United States in the
late 19th century, industrialist Andrew Carnegie stated: "If I had been at
Dumferline [Scotland] working at the loom its very likely I would have
been a poor weaver all my days, but here, I can surely do something better
than that, and if I dont it will be my own fault, for anyone can get
along in this country." Carnegies words still ring true today, and come
into greater focus given the small yearly allotment of H1-B visas to
foreign nationals with advanced degrees in science, engineering, and
technology.
A simple contemporary reality is that U.S. companies go wanting for skilled
workers on a yearly basis due to congressional limits on the number of
skilled foreign workers allowed into the country. At present, there
arent enough domestically trained U.S. citizens available to fill
crucial positions at American companies.

One argument in favor of the existing visa caps is that an influx of
foreign workers will drive down U.S. wages in the engineering and
technology space. Aside from the supply constraints mentioned above, this
is zero-sum thinking. Workers are in the end capital, and along the lines
of the pin factory Adam Smith described in the Wealth of Nations, an
increase in the number of skilled workers will increase output, and make
all of us wealthier in the end.

Notably, some in favor of increasing H1-B caps engage in zero-sum thinking
of a different kind. Their view is that if we refuse skilled foreign
workers, well fall behind countries such as China and India, which
already possess high numbers of scientists and engineers. The flaw here is
in the assumption that the U.S. economy is a closed one, and that
innovations in other countries will make us less well off at home. If this
were true, California and New York, not to mention Europe and the rest of
the world, would have been impoverished for the fact that Microsoft was
founded in Seattle. More realistically, Microsofts innovations made
workers around the world more productive.

Economic advances, be they scientific or technological, are almost by
definition worldwide advances to the extent that countries keep their
markets open and free. If a cure for cancer is found in India, well all
be better off. Country origin, in a free global market, is irrelevant.

The H1-B program thus should not be expanded with nationalistic concerns in
mind, but for the simple fact that the U.S. remains the single best place
for entrepreneurs to achieve their goals. The U.S. is a magnet for capital,
perhaps because of the enlightened thinking of the average American. As
John D. Gartner pointed out in his 2005 book, The Hypomanic Edge, a 1999
poll found that while 91 percent of Americans viewed starting a business to
be a respectable career path, only 28 percent of British and 8 percent of
Japanese respondents felt the same way.

From a purely business perspective, various studies of economic freedom
still indicate that the U.S. possesses one of the freest economies in the
world, with a recent World Bank study ("Doing Business") showing the U.S.
to be one of the easiest global locales in which to start a business. It
can be argued that Bill Gates would not be one of the worlds richest men
if he had been born in France, Germany, or Italy.

More practically, it has to be remembered that while Henry Bessemers
discoveries in England made steelmaking more efficient, it was Andrew
Carnegie who perfected the process in the United States. Similarly, while
Frances Lumiere brothers developed the first movie projector, it was
eastern European immigrants who created the U.S. film industry (one in
which U.S.-based companies account for 80 percent of profits to this day).
Henry Ford did not invent the assembly line, but he did perfect the
process.

As Gartner noted, "entrepreneurs often do not create original ideas -- they
grasp the significance of an idea, wherever it comes from." The U.S.
remains the best country for entrepreneurs to grasp ideas, and once having
done so, create wealth-enhancing innovations that the whole world can
enjoy.

The H1-B visa program should be greatly expanded with this in mind.

John Tamny is a writer in Washington, D.C. He can be reached at
jtamny@yahoo.com.

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