In a recent Niskanen commentary, we released new data revealing how Canada is poaching valuable graduates of American universities by offering a direct pathway to permanent residency based on merits alone–without requiring sponsorship or even a job offer. What’s more, American companies are increasingly moving their foreign employees to Canada and other nearby countries to avoid the delays in our immigration system.
By seeking immigration status for foreign employees in countries other than the U.S., businesses can dodge the visa caps, backlogs, and country caps currently plaguing our immigration system–a short-term win for these businesses.
The practice of moving business operations or employees abroad is commonly known as offshoring or, in the case of our closest neighbors, nearshoring. Although these practices may give businesses greater stability than our current immigration system, they could also severely affect the American economy, and immigration reform is needed to prevent this.
In a survey of over 500 business representatives, 86 percent reported that visa challenges forced them to hire employees abroad for roles intended to be U.S.-based. Ninety-three percent said they were likely to pursue nearshoring or offshoring in the future due to immigration barriers and labor shortages in the U.S.
Businesses consider these alternatives because even after demonstrating that no qualified American workers are available to meet their needs, they are often left without sufficient labor for months or even years due to backlogs and capacity restraints. At that point, transferring a new hire to work remotely from Canada, Mexico, or another nearby country that can promptly meet their immigration needs becomes the next-best option.
While remote work may now be the new normal for many Americans, there are economic consequences to losing out on in-person employment. Many American cities have already felt it, with office buildings remaining empty and downtown lunch spots shuttering their doors.
Furthermore, because American spending patterns have shifted away from city centers, other localities have been able to capitalize on the opportunity for economic gain.
Domestically, one program offers remote workers over $10,000 to live in certain parts of West Virginia, and internationally, many developing countries have profited from Americans’ desire to work remotely by offering so-called digital nomad visas with hefty incentives.
These policies recognize that although the work contributes to a company’s profits elsewhere, the mere presence of those workers can still stimulate local economic growth.
Similarly, when American companies move workers to Canada out of necessity, Canada benefits through tax and consumption. Foreigners pay income tax to the Canadian government, even if they work for a company that does not have an office or operations in Canada. These workers then spend the vast majority of their income in Canada on rent, cars, groceries, and lifestyle goods.
Our desperate need for immigration reform translates to the American economy losing out on significant profits made by U.S. businesses because they are used to stimulate economic growth in other countries.
The current outlook for retaining immigrant workers in the U.S. is also hardly promising. The H-1B program for specialty workers was established in the 1990s, and demand for the program has outsized its cap every year since 2004. Country caps have exacerbated already daunting wait times, and some green card wait times are nearly 50 years, even with employer sponsorship.
These factors, among others, make offshoring and nearshoring attractive alternatives for employers frustrated by the U.S.’s current limitations.
The U.S. must act fast to alleviate these concerns with America’s economy by reforming the American immigration system so that it’s responsive to our economic interests, capable of attracting and retaining talent, and robust enough to encourage corporations to keep their workforce within our borders. If we don’t enact some kind of immigration reform, America will only continue investing in the growth and prosperity of competitors at the expense of the U.S. economy.