Investing in Immigrants - Primary, Secondary, & Tertiary Reasons for Visa Reform
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Minnesota-based global sanitation and chemicals major Ecolabs (NYSE: ECL) believes it will be able to almost double its revenues if it can find the talent it needs to hit its stated goal of $11 billion in revenue and capitalize on its recent merger. Chairman, President, and CEO Douglas Baker has also expressed concern that, “Currently, U.S. immigration laws make it more difficult to bring the best talent to our company and get the right worker in the right place at the right time.” Baker also goes on to make the moral case for reform, “America, more than any other nation, has historically attracted immigrants in search of a brighter, safer future. It’s time that we returned to our founding principles by creating an immigration system that works.” Ecolabs is not alone in its concerns and convictions.
America’s technology sector has certainly generated its fair share of profits for the US economy in recent decades, and is even more dependent upon foreign talent for its patents (84% of information-technology patents involved a foreign national) than pharmaceuticals (79%) or the biological sciences (75%). In fact, after medicine, the tech sector is the hardest hit by the current high-skilled visa madness. One-quarter of all high-tech start-ups have at least one immigrant founder, and Silicon Valley is so desperate to find a solution while the Beltway dithers that Germany-born Peter Thiel (of PayPal and Social Network fame) and other investors of Blueseed are devising a way to anchor what would be history’s most luxurious slave galley in international waters off the California coast in the hopes of finding a short-term solution to the visa bottleneck.
Rich Beyer, former Marine Corps officer and recently retired Chairman and CEO of Freescale Semiconductor (NYSE: FSL), an Austin-based Motorola spin-off with over $5 billion in revenue, has stated that, “Freescale Semiconductor competes in the global marketplace, and it is imperative that we recruit the world’s best talent and locate them where they can deliver the most for our company and our customers.” Freescale is one of the many firms in America that for a variety of reasons are compelled to hire foreign workers and compete for the supply of annual visas. Of the annual allotment of 65,000 H1-B visas for this year (which ironically began April 1st), only a few thousand remained available as of June 1st.
Ted Ruthizer, an attorney who co-chairs the business immigration group at Kramer, Levin, Naftalis & Frankel in New York, underscores the arbitrariness of the current system, “[The number of visas] is artificially low. It's a number that was pulled out of a hat in the 1990s. It’s way out of whack with the size of the economy now.”
For those that fear a glut of humanity (and if Thomas Sowell’s writings on the subject which show most migrants prefer and do go home when given the opportunity), it is worth noting that the migration market is self-correcting – and for investors, monthly statistics on H1-B applications may be a more reliable indicator of market sentiment than any of the job reports that get released.
A major difference in recent years is that as the US immigration system becomes more politicized and onerous, US competitors have been reforming their systems and implementing special programs to attract the best of the best. So, as American businesses “return to normalcy” this time around the US has little downtime remaining to fix the bottleneck. As a result, Americans have not only handicapped their own entrepreneurs and corporations, but have been making its competitors stronger by continuing to party like its 1999.
As Carl Bass, President and CEO of Autodesk (NASDAQ: ADSK), a company that is literally designing the future makes clear:
As a country, let’s give ourselves the chance to regain our economic leadership, and welcome those with a passion to design a world we can only imagine…over 10 million professionals in 185 countries use our software to solve some of the world’s most complex problems. Whether it’s a business issue like how to get a car to market faster, or a global challenge, such as harnessing the power of ocean currents…Our ability to innovate and in turn enable innovation in others depends on a supply of talented engineers, designers, and digital artists who are passionate about the challenges that drive us. Many of these talented individuals are foreign-born students who all too often are forced to leave the United States once they graduate from our universities. By sending them home, we ensure that our country will never benefit from the depth of their imagination or realize the fruits of their vision. We not only lose the talent that can create sorely needed jobs, but also the opportunity to witness the creation of something revolutionary.
America needs to jettison its arrogance and realize that the country is not the one doing the favor to the migrants. The relationship between the foreign-borns and the native-borns is mutually beneficial. Even in America’s primary industries there is little real debate. American Seafoods Group, Archer Daniels Midland (NYSE: ADM), and Weyerhaeuser (NYSE: WY) would all be crippled without immigrant labor. Roughly 80% of seasonal agriculture workers are migrants (and in the off-season many meet the irregular demand in the hospitality and tourism sectors). The US Department of Agriculture estimates that every on-farm job supports three additional jobs, often in better paying sectors, such as processing and transportation. So while native born Americans are difficult to attract – even to $30+ an hour field labor jobs in places like Washington State's Inland Empire – they definitely want the trucking and packing positions that offer better benefits and security.
Looking at the history of Fortune 500s started by immigrants and current success stories like PayPal, it is clear that the foreign-born enterpreneurs are likely to recognize and attract similar foreign talent that will benefit the US as a whole and meet needs in the economy where other American institutions have failed. Investors should also take note that while evidence suggests that founder-led companies are usually a good bet, history also suggests that immigrant founder-led companies are even more so.
Hopefully, through the Partnership for a New American Economy’s coalition of companies and communities, the United States will finally enact meaningful immigration reform. It’s one thing to lose a race to superior competitors, it’s another thing entirely to break your own legs before even beginning.
hukgon has no positions in the stocks mentioned above. The Motley Fool owns shares of Archer Daniels Midland Company, Autodesk, Ecolab, and Weyerhaeuser Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.