A correspondent who I value wrote to me after yesterday's H-1 B visa post to say he's not persuaded that the fiscal benefits to the United States of auctioning more work permits for skilled engineers would outdo the harms to native-born engineers' earning power.
Lots of people seem to think this way, but if you try to sit down and do the math it's clear that the benefits drastically outweigh the costs. Consider the interests of every single American who isn't a skilled engineer. The vast majority of private sector workers in the United States are engaged in local service provision. Maybe we're in high-status service-providing professions (doctors, architects) or maybe we're in low-status ones (retail clerks, maids), but it's what Americans do. And clearly everyone involved in local service provision benefits if a new skilled worker earning an above-average salary moves to town. It's impossible to predict precisely which local services this new engineer is going to demand, but he's going to demand some local services. Then a lot of other people work for state and local governments. Their financial interests are tied to the health of the local tax base which, again, is clearly going to be improved when a new engineer moves to town. He's an above-average earner who doesn't need Medicaid and whatnot. Add on to that the fiscal benefits to the national government if you auction the extra permits, and you have a really broad base of native-born people who are benefiting from the migration of more skilled workers.
Importantly, this base of native-born winners includes all kinds of low-wage workers and poor people. And then of course you have to consider the interests of the potential immigrants, which would be hugely enhanced by greater opportunities to migrate to rich countries.
Against that you have potential harms to a relatively small and relatively elite set of native-born workers. But it's not even totally clear that these harms exist. Think about the interests of, say, a smartphone app developer. On the one hand, he might benefit from reduced competition in the field of app development. On the other hand, he might benefit from the existence of a deep app ecosystem. The more good apps there are to buy, the more it makes sense for people to invest in top-of-the-line smartphones and the bigger the potential universe of customers he has. It's not unlike the ambiguous relationship I have with other online content providers. On the one hand, they're my competition. On the other hand, they're my complements—my source material for many posts and drivers of traffic (via links) to the things I write.
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