My colleagues, Aubrey Kirchhoff and Will Rinehart are in CGO’s tech policy world, but their recent project has a lot of immigration implications.
Their new release reviews the passage of the CHIPS Act and the barriers to the act fulfilling its intentions of jumpstarting the semiconductor industry in the US. For context, the 2022 CHIPS and Science Act included $280 billion of support for specific industries to be paid out as tax credits, support for commercialization, and workforce training.
Let me magnify one of their insights—our labor shortage is likely to mean these dollars do not go as far as they could.
It’s been common in wonk circles to point out that the rollout of CHIPS immediately hit two snags—permitting and workforce. This is what Aubrey and Will highlight in their conclusion, “delays caused by permitting and workforce shortages could quickly drive up costs and undermine the investments made in the Act.”
Order matters
This may not seem like a big deal, but it is fundamental for the subsidies and public support to work. The point of the subsidies is to make it easier to build in the US. So if delays and workforce shortages drive the cost up, then the sizable support provided to the semiconductor industry may lead only to a fizzle instead of a boom.
As Eli Dourado quips, the order matters. In this case, the lesson policymakers should consider is that throwing money at the problem is not enough. They must also figure out how to get out of the way of US industries. That means policymakers should be looking at permitting reform and immigration reforms.
We simply don’t have the talented people to staff these kinds of factories that we want to reshore. We can and should invest in training more Americans for these roles. But that is a long-term plan, not a solution for today.
If we don’t also bring in workers as we push cash towards chipmaking, then the effect of public spending can just be filling the wallets of scientists today. This is because the supply of the relevant workers is fixed. So putting more funds into these systems only raises their paychecks, and not the production of chips—at least not in any relevant timeframe. It’s true that higher salaries draw people into occupations. However, that is in the long run. And given that shortages in STEM professions, like chipmaking, have existed for years and years, it must be the very long run!
How immigration can help grow industries in the US
Immigration and supporting the training of Americans are not in conflict. In fact, it’s something that immigration can help with in two ways. First, immigration fees already fund native education in STEM roles that you’d find within semiconductor manufacturing and design. Expanding the H-1B program, the US’s primary skilled immigration visa, would put more funds in these accounts.
Second, just as the US invests in our workforce using dollars, it should invest by using visas to jumpstart industries in the US. That’s why Connor O’Brien and Adam Ozimek at the Economic Innovation Group advance the chipmaker’s visa. They propose 10,000 new visas per year for 10 years to infuse the human capital needed to jumpstart the US chipmaking industry. They suggest using the funds generated through this new visa to educate natives as well.
The simple story here is that just as a cash investment helps a company succeed, so does human capital.
It turns out that immigrants are often the missing piece for much of industrial policy. O’Brien reviews an international history of industrial policy in a separate report. He shows, clearly, that many industrial powerhouses got a jumpstart by importing talented people. “The importance of talent with on-the-ground experience and practical expertise cannot be ignored,” he concludes.
Don’t just throw money at a problem
The success of the CHIPS Act hinges not just on the allocation of funds but on the thoughtful integration of several policies. Particularly, the balance between nurturing domestic talent and strategically welcoming global expertise. For any substantial financial investment in specific industries to create long-term stability, the workforce issue must be addressed. Immigration is thus not just a supplement, but a vital component.
Pairing immigration expansions with industrial policy is about enhancing the capacity of our industries in the present while steadily building our domestic workforce for the future. A combined approach is key to unlocking the potential of these public investments.