This article explores immigration reform planned in the USA and its impact on small businesses. It describes the immigration processes in general and the impact of illegal workers.
Immigration Reform and Small Businesses
Over the lifetime of the U.S., immigration was the strength of the national identity. Today in the United States every-eighth resident was born outside the country. This is the highest level of immigrants in the total population of the country since the 20-ies of XX century.
Since the development of the colonial America, nature and structure of immigration have changed dramatically. Initially, the first settlers, based in what is now the United States, came from Europe, mostly from its Western and Northern parts. In colonial times predominant group of immigrants was from the UK, which accounts for over 80 percent. During the formation of the United States as an independent one and the growth of its economic power, immigration from European countries was still the main source of population growth.
The present period is characterized by a significant predominance people from Latin America and Asia in the structure of the immigration. The main origin countries are Mexico, the Philippines, India and China, and they are the leaders of the number of legal and illegal immigrants. The age structure of the immigration flow is characterized by a predominance of people of working age, the share of which was about 70 percent in 2012. Basic states of settlement of immigrants are: New York, California, Texas and Florida, which accumulate over 61 percent of the total number of immigrants (Younglai, 2013).
The basis of modern immigration policy is the law of 1990, which with some additions and amendments is valid today. The total quota is set at 675 thousand a year; the number of immigrants from any country cannot exceed 7 percent of all arrivals. The basis of modern immigration policy is system of preferences, which is valid in the following areas: immigration based on kinship (for relatives of the U.S. citizens); immigration based on employment; humanitarian immigration (refugee status or asylum); and immigration for the purpose of ethnic diversity (lottery Green Card) (Galvin, 2013).
According to Matt Spetalnick and Richard Cowan, Reuters, on January 29, 2013, the U.S. President Barack Obama asked Congress to speed up the implementation of immigration reform: "We need to take comprehensive measures that would solve the problem of 11 million immigrants who are in the country without documents" (Spetalnick & Cowan, 2013).
On January 28, a group of senators, which includes representatives from both the Democratic and Republican parties, gave the president a draft of immigration reform. This project is basically consistent with the proposals of the White House department of immigration policy.
Both projects involve the introduction of checks and registration procedures for immigrants, tightening visa control and taking action against companies that hire illegal immigrants.
Immigration has a positive effect on the labor market. Immigrants perform many of the socially necessary work in sectors that are experiencing a structural shortage of labor. In particular, this applies to low-paid, non prestigious, difficult and dangerous jobs that are reluctant for locals.
The widespread use of cheap unskilled foreign labor is an important factor of the functioning of a number of traditional industries such as the agricultural sector, where the share of immigrants in which takes 70 percent of total employment (Rugaber, 2013).
Nowhere contribution of immigrants has been more evidential such as in high-tech and knowledge-intensive sectors. Silicon Valley and other sectors based on advanced technology probably would not have existed if the borders were closed for highly skilled immigrants. But they are not illegal, so the impact of the reforms will slightly affect this part of immigrant.
The majority of immigrants compete only for the jobs in small businesses that do not require special training or qualifications. But even in this negative manifestation of the influence of immigration on the labor market, a positive side can be found.
Specifically, immigrants contribute to the training of local workers in small businesses, taking over their low-skilled and low-paid jobs, thus forcing the latter to improve their skills. Due to one of branches of contemporary U.S. immigration policy with specific conditions for business immigrants, immigrants create jobs for local people.
The present financial crisis differently affected the U.S. labor market. Most of all illegal immigrants were affected by it. The unemployment rate among immigrants is higher than that of the local population, especially, this imbalance is observed in the low-skilled segment of the labor market (Walsh, 2013).
Immigration is one of the fundamental factors of the growth of the U.S. economy. Legal immigrants in the U.S. increase country’s GDP by producing and consuming national output, paying taxes and social contributions, and making savings. Due to the reform regarding borders’ tightening, the amount of illegal immigrants will decrease. Consequently, this will increase GDP of the country.
A number of enterprises founded by immigrants is considered to be the flagship of the U.S. economy. Legal immigration gives the United States an economic advantage in the global economy because immigrants fill up the shortage of labor of small business. What is more, immigrants bring innovative ideas and entrepreneurial spirit of the American economy. They provide business contacts with other markets, increasing the ability of the U.S. trade and investing capital in the global economy (Rugaber, 2013).
Despite significant public costs related with immigration, in the end, the balance between revenue and expenditure of immigration is positive, contributing to the welfare and sustainable geopolitical position in the world arena.
Draft of the document of immigration reform contains important point which will not give opportunity in not only getting citizenship, but also getting citizenship in the long term. According to the document, illegal immigrants, about 11 million in the USA, will be legalized in 8 years after the adoption of the law.
Exceptions, as a two-year waiting period, are provided for young people who entered the country as children with their parents. Besides, who are seeking legal status will have to learn English, the U.S. history, and will have to be checked for criminal history.
Especially for illegal immigrants, the U.S. government introduces a new type of visa - Lawful Prospective Immigrant ("In the future, the legal immigrant"), which can be received not only by the immigrants, but also by their spouses and children. All applicants will also have to submit their biometric data as fingerprints and start paying taxes. Illegal immigrants will eventually obtain a residence permit in the U.S.
Document contains a number of serious measures to toughen immigration. As it has been said by Obama and members of his administration, the border controls will be increased, expanding the staff of judges, who will consider immigration cases. But the main point is the obligatory check of the legality of employees by their employers. A special database will be created to complete this task (Spetalnick, 2013).
This will create certain impact on the labor market and small businesses. During the fall of the last immigration measures in the U.S., 314 thousand private companies were abolished, while a total of all the small businesses in this period lay-off 4.9 million people.
Incidentally, this is the most rapid bankruptcy of small businesses from 30's. Detailed statistics are compiled from the 90's. In all, the number of businesses grew even in a recession of 1990-1992 and stagnation in 2001-2002. So, the current influence on small businesses is unique.
The companies, which have in the state from 20 to 100 employees, are in the most difficult situation. The number of these small businesses for three years has decreased by almost 11 percent.
Small Business, up to 500 people in staff, employs 36-40 percent of all employed Americans. In 2012, a small business employed 55 million people. They form the income equal to 2.1 trillion dollars. Every employee generates about 38 thousand dollars a year for the company. In a small business outside the United States less than 10 percent of employees are working. According to the Office of Small Businesses (United States Small Business Administration - SBA), the number of entrepreneurs in the United States reduced the fifth year and it is a tendency. On average, about 570,000 small businesses open and about 600,000 close every twelve months (Small business administration, 2010).
In the U.S. immigration is one of the main factors that determine the quantitative and qualitative parameters of the labor force in small business. By limiting the flow of immigrants, government will change structure of labor supply for small business significantly.
Targeted regulation of the magnitude and direction of migration will reduce tension among small businesses through the redeployment of labor surplus. This is the benefits of reform for small businesses. But the overwhelming majority of economic experts believe that planned for the near term economic growth, even with real increase in productivity, is impossible without manpower replenishment of small businesses through immigration.
In many states of the country, local labor markets now have not only a relative, but an absolute shortage of labor for small businesses in these types of activities: ‘3D jobs’ - dirty, difficult and / or dangerous work, requiring no qualifications, including high labor intensity (pipe, construction, production of natural raw materials, food processing, etc.); low or average skilled work, work is low or average skill in the public service sector, including in the area recreation and entertainment (dry cleaning, carrying a pizza, cleaning, trade, etc.); work on care and maintenance in the private sphere (the cleaning and domestic work in private households, care for children and for sick, etc.) (Walsh, 2013).
The role of immigrants is also significant in the ‘upper’ segment of the labor market with the qualified professionals: managers, scientists, workers of high-tech industries, and IT-specialists. The demand for such labor is caused not by rejection of local workers from these types of employment, but by the absolute lack of qualified personnel on small businesses, providing economic growth in developed countries. Therefore, the restriction of the number of immigrants and the tightening of the border will create a shortage of labor staff in small enterprises of such activity. These are disadvantages of implementing of immigration reform for small business.
It also should be mentioned that the main point of reform is a compulsory check the legality of employees’ immigrants by their employers. Thus, the number of illegal workers in legal small businesses will decrease, but the number of illegal workers in the illegal businesses will grow.
Therefore, the impact of immigration reform on small businesses is ambiguous with both advantages and disadvantages. All the consequences for small businesses are unpredictable and can be evaluated only after the implementation of immigration reform.