Columbia Business School

The Business, Economic and Social Case for Immigration

Presented by Columbia Business School

The Business, Economic and Social Case for Immigration

Against the backdrop of President Trump’s border wall demands and the continuing media coverage of migrant families being separated and detained at the U.S. border, the Sanford C. Bernstein & Co. Center for Leadership and Ethics hosted the KPMG Peat Marwick/ Stanley R. Klion Forum featuring a panel discussion on the business case for addressing the global refugee and immigration crisis.

The event, considered one of the School’s premier speaker series, annually hosts distinguished business, academia, and policy leaders committed to resolving the major ethical, social, and economic challenges of our time- and this year’s topic was certainly relevant and timely. After hearing from the experts this year, one thing became clear: immigration is not only good for the economy, it’s vital for healthy growth. The factual misinformation and inaccurate statistics often quoted by politicians and repeated in the media – that there are hordes of immigrants coming in, committing crimes, and stealing American jobs, etc. — are simply not supported by the actual numbers.

Consider, for example, that the 14-15% of immigrants that make up the U.S. population have a spending power of $1.1 trillion. They pay $405 billion in taxes and employ at least eight million people in their own businesses. They tend to be more entrepreneurial risk-takers as 40% of new companies are started by immigrants, generating $5.5 trillion in revenue. And, of all new firms founded in the U.S., 25% are by immigrants, and 35-40% have at least one immigrant co-founder. Without this addition to the working-age population, industries already tight on talent would hit a growth wall.

“That’s why I’m very bullish on immigration as an economic opportunity,” said Exequiel Hernandez, the Max and Bernice Garchik Family Presidential Assistant Professor at The Wharton School. “The economy would pretty much die, or slow down significantly without immigration.”

In other words, the influx of immigrants gives back much more than it takes.

“So the number of people invading the country is much smaller than you would think, but they have a disproportionate contribution to the economy in terms of starting firms, employment and paying taxes,” Prof. Hernandez noted.

This is even true for illegal immigrants who become consumers, creating new markets and product categories to meet their demands. They also contribute to the diversity of skillsets and perspectives necessary for a robust economy over the long term.

And, “a lot of immigrant entrepreneurs don’t come here documented,” argued Prof. Hernandez. “That happens later…But the immigration system is a bit of a mess here, so economically there’s not much [of a] difference between legal and illegal immigrants in terms of what talents they bring.”

As for certain media reports of violence amongst illegal immigrant drug gangs in sanctuary cities, this group represents a tiny fraction of the immigrant population. In fact, immigrants have a lower crime rate than non-immigrants.

“The explanation is pretty simple,” countered Prof. Hernandez. “It’s not because they’re inherently better people; they behave well because they’re scared to death of being deported.”

Playing devil’s advocate, faculty moderator Professor Alonso Martinez, a senior lecturer at Columbia Business School, asked about the taxpayer burden.

“One of the things you always hear about from the other side of this is we’re paying for education, we’re paying for health,” posed Prof. Martinez, who is a former senior vice president at Booz Allen & Hamilton in Latin America. “Aren’t taxpayers paying for that?”

Yes, and no. A report on the economic and fiscal consequences of immigration put out by the National Academies of Science last year found that the net value of an immigrant in the U.S. during their lifespan is between $250,000 and $400,000. That said, those are federal gains. The local economy of the new arrival does bear a burden, and the revenue benefits aren’t always fairly distributed. For example, an immigrant might arrive through Houston, where he or she is educated and given health care, but that individual might relocate to New York to find a job, giving that state a disproportionate share of the benefits. But that is more a matter of policy on cost and benefit distribution.

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“Those are legitimate questions that need to be discussed,” said Prof. Hernandez. “But not in the context of excluding immigrants because the net benefit for the country is clearly positive.”

One of the panelists, Wissam Kahi ‘04, is a case in point. An immigrant from Lebanon and co-founder of the New York-based catering company, Eat Offbeat, Kahi has employed approximately 60 immigrants over the years to prepare and serve ethnic home-cooked meals to office workers throughout the city, including many at the United Nations agencies. Many of the Eat Offbeat employees have gone on to start their own businesses that employ more and more non- immigrant and immigrant workers.

It occurred to Kahi, who, coincidentally, also worked for Booz Allen & Hamilton, that the home-cooked meals created by Eat Offbeat employees, many from Iran, Iraq, Nepal, Sri Lanka, Syria, and Ethiopia, were under-represented in the New York City food scene. Thus, the chefs took pride in introducing their native cuisine to Americans, and customers loved the product.

“So it makes business sense,” said Kahi. “From a strategic perspective, it’s diversification, it’s a niche business, and it’s something differentiated. For us, definitely, it’s an opportunity.”

The economic and business facts notwithstanding, the popular perceptions and fears surrounding the topic of immigration remain. What is considered an opportunity for some is widely regarded as a threat by others. And to some extent, that is understandable, the panelists acknowledged. Politicians around the globe have exploited anti-immigrant sentiment on the heels of a global financial crisis, creating “economic angst” which has historically given rise to populism. Hence the election of President Trump, Brexit and the rise of nativist nationalists across Europe. When you are looking for a culprit, “foreigners are easy to blame,” said Prof. Hernandez.

But, in a larger global context, immigrants make up less than 3% of the world’s population, and many are refugees. Currently, there are 65 million people who have been forced to flee due to conflicts, violence, and repression or war; and of those about 25 million have crossed borders to proximate countries, explained panelist Ninette Kelley, Director, NY Office of the UN High Commissioner for Refugees (UNHCR), adding that she expected those numbers to rise in the next report.

“They’re the refugees, and they’re fleeing conflict and violence, and they’ve lost their homes and livelihoods,” Kelley said. “That’s what the world is seeing when these people are crossing borders and coming by sea. It looks like an influx, and it’s alarming.” But the numbers overall are historically consistent and nothing that other parts of the world, with rational immigration and refugee policies, can’t absorb.

Closer to home, in Latin America, we’re seeing a movement of people from Honduras, Guatemala, and El Salvador. This could have been predicted based on the escalation of violence in those countries, where “mothers are trying to protect their daughters from becoming slaves to drug lords or young men don’t want to be conscripted into illicit activities,” explained Kelley. And “the solution has been for some years to invest in security, development, and opportunity in those countries.” Meanwhile, the U.S. needs to work with the region to improve the system along these mass migration routes, improving capacity and expeditiously processing people to determine who is a refugee, who is simply immigrating for economic opportunity, and who might be a security threat.

“We need to be able to maintain the integrity of the international refugee regime, which came out of the horrors of World War II…and protects millions of people around the world while at the same time ensuring the security of the border,” Kelley said.

Of course, like all large movements of people, it’s a mixed bag and a fine line between people running from violence or toward economic opportunity. Fleeing Venezuela because of a lack of access to food and medicine, for example, may appear on the surface to be a quest for economic opportunity, but in many cases, it’s a matter of life and death.

But, most refugees have fought hard to get the U.S., and once they’ve found their safe haven, they are especially grateful for the chance to become financially self-sufficient and provide for their families. Many are also highly educated. A driver or dishwasher, for example, might have a nursing or accounting degree from their home country that does not equate to U.S. standards or hold up to reciprocity in this country.

“Sometimes you have to take a chance on people with a different perspective who can bring something new to the table,” says Kahi. “Definitely, we’ve taken a few risks, but, very, very often it’s paid off.”

Read the original piece on Columbia Business School’s Ideas and Insights blog. 


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