File photo. A driver with the ride-sharing service Lyft waits for a customer on a street in Santa Monica, California October 17, 2013. (REUTERS/Lucy Nicholson)
Technological innovation is the cornerstone of the American economy, and increasingly, of the rest of the modern world. But as economic advancement relies more and more on the skills of the global talent pool, American immigration policies that fail to keep pace with the mechanisms of innovation are hamstringing the very businesses driving the bulk of our economic progress.
Products, services, and even modern business practices are constantly in a state of growth owing to innovation. Through innovation, new products and services displace older technologies, rendering them antiquated and obsolete. In turn, new jobs, fields of work, and even entirely new industries are generated.
Take, for example, Netflix – the hugely popular television and movie streaming service. In a matter of 15 years, Netflix revolutionized the distribution and consumption of television so effectively that cable, traditional, and other paid television services are attempting to emulate the model for fear of losing market share. Those who fail to adopt the obviously superior model in time – like movie rental stores Blockbuster and Hollywood Video – fold altogether.
Proponents of such policies pull the wool over the American public’s eyes with direct appeals to their livelihoods, alleging that H-1B workers are cheap labor sources rather than vital innovation drivers, and claiming that companies regularly abuse the H-1B system.
This cyclical process of innovation and displacement, coined “creative destruction” around the turn of the 20th century, is the popular notion of Austrian-American economist Joseph Schumpeter. Schumpeter recognized that, with rare exception, significant innovations in products or processes do not coexist with previous iterations. Rather, slowly or quickly, significant technological improvements beget themselves, and outdated or less efficient versions fall to the wayside.
Although such phase-outs might have taken years or even decades in Schumpeter’s day, the phenomena of increased interconnectivity and expanded globalization are expediting the creative destruction cycle, and with them come difficult-to-comprehend consequences that are even more difficult to treat.
Today’s innovation cycles only affirm Schumpeter’s theory, as its pressing and immense implications bear true for practically every sector of our economy. As companies and their services rapidly innovate and expand—often beyond US borders— the policies and regulations that govern these industries remain woefully inadequate in reconciling the innovation cycle.
Until recently, on-demand ridesharing services Uber and Lyft were embroiled in legal controversy stemming from lawsuits filed by their drivers. While drivers maintained that they ought to be considered “employees,” the companies asserted that they were best categorized as “independent contractors,” and it fell to the courts to make a determination.
It seems like neither label applies, noted U.S. District Judge Vince Chhabria, the judge in the Lyft lawsuit. “At first glance, Lyft drivers don’t seem much like employees,” he wrote. “But Lyft drivers don’t seem much like independent contractors either,” Though a federal judge recently found in favor of the drivers, granting them class-action status, Judge Chhabria identified the heart of the issue: “The test the California courts have developed over the 20th Century for classifying workers isn’t very helpful in addressing this 21st Century problem.”
As further evidenced by the controversy around Net Neutrality earlier this year, the issue of regulatory obsolescence is compounded when innovation – the driver of modern economic progress – hinges on policy solutions. Several immigration proposals being debated on the Presidential campaign trail seek to limit or even eliminate the H-1B visa program, policies advanced most vociferously by Donald Trump. But, for all of his stated business acumen, Trump maligns a program that connects American companies with the talent and skills they need to continue to innovate and grow – talent which, due to a severe, proven shortage of certain STEM professions in the U.S., is only available internationally.
Proponents of such policies pull the wool over the American public’s eyes with direct appeals to their livelihoods, alleging that H-1B workers are cheap labor sources rather than vital innovation drivers, and claiming that companies regularly abuse the H-1B system. In reality, it is enormously expensive for businesses to dedicate specific personnel and departments toward global recruiting, processing H-1B visa applications, and ensuring compliance with the myriad visa regulations – costs often amounting in excess of hundreds of thousands of dollars annually. From a cost perspective, companies would be very reluctant to engage in this costly system were it not for the valuable innovation it yields.
The world economy is evolving at an unprecedented pace, and as Schumpeter’s creative destruction shows us, the technological advances it generates will continue to render cycles of growth and displacement. Our broken immigration system, including restrictive H-1B access, is just one of the many areas where we will need to modernize our policies in order to ensure fair and open competition remains the firm backbone of our economy.
In the meantime, we simply cannot afford to cripple our businesses and strongest innovators with the broken, ill-fitting policies of the previous era. Any policy that fails to grow with the system is governs is destined for failure.
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