High-skilled immigration in a globalized labor market
The growth in emphasis on skilled immigration in OECD countries is driven by the perception that skilled immigrants are net contributors to the receiving economy, especially in the context of aging societies and especially for economies faced with large baby boom generations reaching the usual retirement age. The theory and empirical evidence suggest that skilled immigration is likely to lead to greater benefits for the receiving economy than would occur for the same level of immigration but focused on less-skilled immigrants. The implications for the sending country are less clear. There is a loss of human capital but increased remittances will at least partially offset this effect to the extent that remittances continue to be sent back to the home country. A number of other potential benefits to the home country have also been cited, and estimation of these effects is ongoing in the literature. In terms of immigrant selection policy, the use of point systems is on the rise but the emphasis appears to be shifting away from human capital criteria and towards occupations in demand and prearranged employment. This is partly in response to the mixed track record of human-capital-based point systems in selecting immigrants who will have high earnings in the receiving economies. Employer nomination, especially in occupations where there are skill shortages, is seen as leading to high rates of employment shortly after arrival and high rates of return on human capital. Occupational restrictions on immigrant selection have been found to be important in the case of regulated occupations where entry into the profession or into relicensing programs may be difficult for new immigrants. In this context, simply admitting an immigrant based on general human capital criteria could lead to a marked under-utilization of their human capital (and a loss of valuable human capital for the home country) if their educational credentials do not allow them to work in their intended occupations. However, even in unregulated occupations, concern exists regarding the admission of too many skilled immigrants into specific occupations. Flooding particular occupations with immigrants, even in situations of high demand, can be problematic if the demand suddenly dries up, as was the case in a number of countries after the IT collapse. The growth of two-step immigration programs where foreigners enter first as temporary residents (workers or students) then are able to convert after around two years to permanent residency is a recent phenomenon that has the potential to grow in coming years. The first step of the process can be thought of as a trial period with limited commitment on the part of the receiving country in which the potential immigrants can gain work experience and/or educational credentials in the receiving country, as well as accumulate host-country language and also possibly gain familiarity with the market and government systems in the host country. The empirical evidence supports the view that these individuals are likely to have high rates of employment and high earnings shortly after arrival relative to other economic immigrants. However, the Australian experience indicates that this type of policy can create perverse incentives. For example, foreigners may enter educational programs in the receiving country not out of an interest in the education per se but as a pathway to permanency. Providers (private but perhaps also public) may respond to this increased demand by creating low-quality educational programs to satisfy the criteria for admission (and earn tuition revenue) but little in the way of human capital development may occur. Similarly, two-step immigration programs may further the power imbalance between the employer and the temporary foreign worker (TFW). Given the pre-existing concerns about abuse of TFWs by employers, the introduction of a two-step program may further empower abusive employers since the TFW may be even less inclined to report abuse given that the ultimate goal may be gaining permanent residency for themselves and their children rather than just the income from the temporary job. Given these concerns, two-step immigration programs need to be implemented with extensive monitoring of behavior of the industry partners to ensure that they do not lead to bad outcomes for the immigrants themselves as the different agents respond to the new incentives. Related to this is the issue of allowing private sector employers to have a greater degree of control and influence over immigration intakes. If not properly designed and monitored, the resulting immigration program might not be in the country's best interests. The implications of increased competition for skill are unclear. The increased emphasis on skill by traditional receiving countries coupled with the emergence of new immigrantreceiving countries in Europe may create shortages in highly skilled immigrants wishing to enter the traditional immigrant-receiving countries such as Australia and Canada. This could be compounded should the US embrace higher scale skilled immigration, perhaps through the formal adoption of a point system or through setting much higher targets for both temporary visas and for their conversion to permanent residency.
McDonald, J.T. (James Ted), & Worswick, C. (2015). High-skilled immigration in a globalized labor market. doi:10.1016/B978-0-444-53764-5.00011-6