Giving Compass' Take:

• Demetrios G. Papademetriou and Kate Hooper explain the strengths and weakness of points-based and demand-driven systems for selecting economic immigrants. 

• Which solution is more appropriate for the United States? How can the weaknesses of that method be mitigated or overcome? 

• Learn about practices for building immigration consensus in a divided world. 

Since entering office, President Donald Trump has made repeated calls for the United States to adopt a “merit-based” immigration system, moving away from prioritizing family-based admissions to instead focus on economic immigration and the admission of skilled workers. If he were to succeed in this quest, it would mark a sharp departure from the U.S. immigration system that has been in place since the 1960s. While Trump is not alone in looking to Canada and Australia for inspiration on immigration reform—merit- or points-based elements were included in ultimately unsuccessful legal immigration reform efforts put forward by the U.S. Congress in 2007 and 2013—his reform vision is a first for a U.S. president.

Currently, the United States selects economic-stream immigrants through a demand-driven system, whereby employers select the foreign workers they need, with the government playing a hands-off role that focuses on enforcing immigration and employment rules. This approach is in sharp contrast to the merit-based systems of Canada, Australia, New Zealand, and others, in which the government uses both employer demand and human-capital considerations to select economic-stream immigrants, awarding points for professional experience, a job offer, education, proficiency in the destination-country language, and other factors. Canada, for example, uses a points-based, two-stage system to assess applications for three federal programs—the Federal Skilled Worker Program, the Canadian Experience Class (for those with skilled work experience in Canada), and a nascent Federal Skilled Trades Program—as well as a share of the Provincial Nominee Programs run by most of Canada’s provinces and territories. As of 2017, some 85 percent of points that could be awarded were for human-capital factors.

The points-based system appeals to policymakers both for its transparency, since it involves clear
and objective selection criteria, and its flexibility, as policymakers can adjust the system’s criteria and distribution of points in response to changing estimates of labor demand or evaluations of selected immigrants’ integration outcomes. For example, Canada, Australia, and New Zealand have all experimented with ways to encourage immigrants to settle in relatively less populated regions of their countries, by facilitating regional sponsorship and by awarding points for links to employers in these regions.

It is this flexibility that has allowed Canada, Australia, New Zealand, and other countries to move toward a hybrid selection system that attends to current labor-market needs while still using points to assess and select pools of prospective economic-stream immigrants. Concerns raised about poor initial labor- market outcomes for immigrants selected on the basis of points alone led policymakers to introduce more demand-side criteria into the selection process, such as awarding points for a job offer (or even making one compulsory, as in the United Kingdom) or for factors linked to better integration outcomes (e.g., in-country education or work experience). Moreover, some countries with U.S.-style employer-led selection systems, such as Japan, South Korea, and China, as well as Austria and several other EU Member States, are now experimenting with using points tests to assess applicants entering through employer-sponsored routes.
In effect, most employer-led and points-based systems are now somewhere nearer the mid-point along the continuum between labor-market and human-capital considerations.

Expectations of profound labor-market upheaval coupled with ongoing demographic change challenge all countries that aspire to be internationally competitive. While demand for skilled workers is likely to grow, policymakers will need to work with their private-sector counterparts to identify and select immigrants with skills that will continue to be needed and valued in fast-changing labor markets. Success will hinge on regularly assessing employer needs and how immigrants fare in the labor market, and using this evidence to inform and adapt both the design and the priorities of immigration systems. Ensuring that these mechanisms can respond quickly to emerging needs is crucial. This may involve, for example, incorporating regional input into the selection process, and updating the lists of shortage occupations used in decision-making to reflect growth industries. Policymakers may also wish to explore ways to measure and reward soft skills, in light of research pointing to their growing value in the workforce. And as more countries enter the competition for talent, governments will need to look beyond how they select immigrant workers to think about how they retain them. Of the many factors that influence an immigrant’s decision to move or stay, some of the most important are the professional opportunities offered by employers, the quality of life to be expected, how fair and efficient the immigration system is, and the opportunities the system offers for obtaining permanent residence or citizenship and accessing family reunification.

Immigrant selection systems are shaped by each country’s particular governance philosophy and social and economic context, which in turn determine how easy it is to change immigration policies. The United States has struggled to enact comprehensive immigration reform for more than 50 years. Today, even if policymakers were to arrive at a consensus, introducing a fully fledged points-based system would be nigh on impossible, given both the government’s reluctance to regulate labor markets and the executive branch’s relatively weak powers on immigration that limit its opportunities to tweak the immigration system to reflect changing priorities, as compared to countries such as Australia and Canada. But even so there may be opportunities to bring more human-capital factors into the U.S. employer-led system, and to use evidence on labor-market needs and integration outcomes to inform immigration priorities. Key lessons on how to operate effective and efficient selection systems include:

  • Ensure that systems are flexible and responsive. Modelling future labor-market needs remains a very difficult and imprecise task. Given the uncertainty involved, policymakers need to ensure their systems are primed to respond quickly to emerging labor or skills shortages. They should also explore ways to select immigrants with the ability to adapt to fast-changing labor markets, in which the first jobs they hold upon immigration might disappear.
  • Mind the interests of the domestic workforce. Immigration policies cannot serve as a substitute for the ongoing large-scale investments in education and training (and retraining) that governments will need to undertake to remain competitive in a fast-changing world of work. This is the least that economies and societies owe to their citizens and workers.
  • Review constantly how well the system functions. A key consideration for policymakers is whether immigrants, employers, and regions can navigate the application process easily, and whether it produces timely and predictable results. For example, the introduction of two-step expression-of-interest systems in Australia, Canada, and New Zealand are instructive in how to digitize applications, allow frequent draws of the best-available applicants as needed, and eliminate the backlogs that plague first come, first served systems.
  • Use evidence on integration outcomes to inform admission criteria. Australia, Canada, and New Zealand all use longitudinal data on integration outcomes to inform and update their immigration decisions. These data offer opportunities to improve integration policy in turn, such as examining immigrants’ barriers to labor-market integration and exploring ways to connect new immigrants with relevant services (such as credential recognition or tailored language instruction) as early as possible.