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Trump's new immigration plan may undercut his promise for economic growth, experts say

President Donald Trump, flanked by Sen. Tom Cotton, R- Ark., left, and Sen. David Perdue, R-Ga., speaks in the Roosevelt Room of the White House in Washington, Wednesday, Aug. 2, 2017, during the unveiling of legislation that would place new limits on legal immigration. (AP Photo/Evan Vucci)

Donald Trump's most prominent campaign promises revolved around growing the U.S. economy and fixing a broken immigration system, but the latest immigration proposal from the White House could put the two at odds.

On Wednesday, Republican Senators Tom Cotton of Arkansas and David Perdue of Georgia stood beside President Trump to unveil a merit-based immigration proposal aimed at both attracting the best and brightest from around the world and reducing net-migration to the United States by as much as half over the next decade.

Aside from stirring a heated debate about the Statue of Liberty, the proposal has also raised questions about whether the president can make good on his promise to increase U.S. economic growth to 3 percent annually, while cutting the number of immigrants entering the United States legally.

Over the next 15 years, the U.S. labor force is projected to grow at its slowest rate since the early 1950s, according to research by The Conference Board, a global membership organization that provides business data and analysis.

More U.S. businesses have been reporting skilled labor shortages in recent years. The Bureau of Labor Statistics reported the highest recorded number of job openings in June with six million vacancies.

And economists, looking down the barrel of an aging U.S. workforce and significant shortages across occupations, have warned that without an influx of new workers, economic growth will remain at a sluggish rate of 1.5 to 2 percent.

WHAT THE IMMIGRATION PLAN DOES AND DOES NOT DO:

The senators who introduced the RAISE Act (Reforming American Immigration for a Strong Economy) argue the plan will drive economic growth and higher wages by creating a merit-based system that awards points to immigrants who have the skill-sets U.S. employers need. The United States already uses a merit-based system for a portion of worker visas.

At the same time, the RAISE Act also calls for strict limitations on legal immigration. It would impose a 50,000-person cap on refugees, while ending the practice of offering Green Cards to immigrants' extended family members (beyond spouses and minor children). It would also end the diversity lottery, which would cut an additional 50,000 visas per year.

Sen. Cotton defended his bill on Thursday, telling Sinclair Broadcast Group that even though the bill would cut net migration, it would still address America's skilled labor shortage.

"Through the employment-based Green Cards we're trying to reorient our immigration approach to get more high-skilled workers who can come here," Cotton said. "They won't take jobs from blue-collar workers, they wont drive down the wages. They will help create new jobs for all Americans."

Cotton further noted that the number of employment visas offered under the merit-based system would be capped at current levels, only 140,000 per year.

Sen. Jeff Flake (R-Ariz.) one of leading supporters of the 2014 attempt at comprehensive immigration reform, warned that the proposed cuts to legal migration could have a strong, negative economic impact.

In recent years, the U.S. government has moved a lot of visas to a merit-based, point-based system, but did not cut down the overall number, Flake explained. "That's where the problem is. The problem isn't shifting some of them to be merit-based, that ought to be done. It's that the overall numbers have been cut in half and that's not good for our economy."

ADDRESSING THE LABOR SHORTAGE:

Barring an event akin to the industrial revolution or digital revolution that drives labor productivity, it's hard to imagine how the United States can get out of its sluggish economic growth rate without bringing in more immigrant workers to meet growing labor demand.

Donald Trump's own pick to lead the White House Economic Council, Kevin Hassett recently argued that in order to spur GDP growth by just a half a percent annually, America should double its total immigration and prioritize bringing in new workers.

Brian Schaitkin, senior economist at The Conference Board, has studied the effects of immigration on economic growth. He concluded that a proposal which limits the U.S. labor supply, "makes it much more difficult to reach the GDP targets over the long-term that the president has in mind."

Between 2015 and 2030, there is zero growth projected for native-born American workforce. "The only way of boosting up those numbers is through increasing levels of immigration," Schaitkin said. "Having higher levels of immigration, rather than lower levels, as the Cotton-Perdue bill proposes, would actually be better in terms of boosting growth over the long term."

Jeremy Robbins, the executive director at New American Economy, a pro-immigrant and pro-business coalition, emphasized simply that "attracting more highly-skilled immigrants is smart economics."

The overall contributions by immigrants to the U.S. economy based on the current system is already profound, according to data gathered by New American Economy. In 2015, immigrants earned $1.4 trillion and had $982 billion in spending power and immigrant entrepreneurs employ approximately 6 million people.

"Aggressive moves to slash immigration are going to take an enormous growth engine out of our economy," Robbins advised.

THE SKILLS MATCH GAME:

As the bill's sponsors pointed out, in recent years, the United States has brought in about 1 million immigrants on average, but it has largely been based on family connections, not skills.

According to projections, the sectors that will be hardest hit by the skilled-labor shortage in the next decade will be health care, STEM (science, technology, engineering and math) and skilled labor.

Focusing on skilled immigration is among the important recommendations in the RAISE Act, Schaitkin explained, specifically trying to align immigration criteria with the overall needs of the U.S. economy. But even here the bill appears to miss the mark.

As the White House pointed out on Thursday, a merit-based approach to immigration has worked for Canada, but not by limiting the number of immigrants.

The Canadian system focuses on aligning regional economic needs with national immigration. Provinces play a key role in identifying the jobs and skills needed to fuel their regional economies to ensure the right match with immigrant workers. Not every province needs PhD candidates and highly-skilled engineers.

According to Sen. Cotton, that is not what RAISE will do. States and regions will not be playing the Canadian provincial role in guiding federal immigration based on high-demand sectors. That approach, Cotton said, "is not something that been part of the American immigration tradition."

That's a problem, Schaitkin observed. The proposal to award points based on educational and achievements, "aren't nearly specific enough" and could end up excluding the kinds of workers to fill the most in-demand positions.

"A system that immediately excludes applicants who don't have a Bachelor's degree is probably a step in the wrong direction, because it doesn't look closely enough at where actual labor shortages are from both an occupation and location perspective."

American businesses need high-skilled, highly educated workers. But they also need lower-skill workers in parts of the country that either aren't very attractive to most U.S.-born natives or areas that have a large population of older, non-working age Americans.

Republican Sen. Ron Johnson expressed his concern about the bill on Wednesday, noting that in his state of Wisconsin, there is still a high, unmet demand for lower-skill labor.

"I’m all for merit-based and skills-based immigration, and a legal immigration system," Johnson said, "but we need to make sure we have an immigration system that allows enough people into this country to make sure that we can staff manufacturers and dairy farms and all of our organizations that grow our economy."

Rural communities in Washington and Oregon have documented shortages in agricultural workers, despite increasing wages to as much as $15 per hour in apple orchards and nurseries.

The aging baby-boomer generation has also meant a dramatic increase in demand throughout the entire health care sector. Home-caregivers represent another occupation where workers may not need to check off all the boxes in the points-based system, just training and mobility.

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