As the former Chief Economist of U.S. Citizenship and Immigration Services (USCIS), I need to comment on the 10 September 2015 Wall Street Journal article entitled “U.S. Visa-for-Cash Funds Luxury Towers.” I hope the concepts outlined in this White Paper will also be considered by Members of Congress who are weighing additional legislation concerning EB-5 Targeted Employment Areas (TEAs).  

I encourage additional guidance from Congress; however, Members and their staffs are not receiving complete information, which will lead to bad decisions.  In this paper, I use information concerning the Hudson Yard project and TEA to make my point, although my arguments apply equally well in most other parts of the country.  As a disclaimer, I have absolutely no personal or economic interest in any Manhattan project.  

Let us consider a few questions.  Who benefits most from the Hudson Yards Project?  The developer, shoppers, apartment tenants, or construction workers?  Clearly all of these factions benefit.  The argument is similar to the question of Honda manufacturing cars in the U.S.—who benefits more?  Is it the Honda shareholders in Japan, or the American workers employed in high-paying jobs on the line?  From the workers perspective, I think it is clear that Americans benefit the most.   Since we are discussing job creation in EB-5, I think we should always consider the workers’ opinion above others.

Extend this logic to the huge Hudson Yards project.   The workers employed on the site certainly welcome the opportunity to exchange their labor for wages.  In the NYC area, construction projects create 13.1 jobs for every million dollars spent.  According to the WSJ article this is a $20 billion multi-year effort.  Clearly, thousands of construction workers will benefit.

Where does this labor come from, and how do construction workers benefit?  There seems to be a misconception that only hedge fund managers live in Manhattan.  In truth, the American Community Survey (ACS) reports that many employed construction workers live in Manhattan: 13,574 to be exact.  According to the U.S. Bureau of Labor Statistics (BLS), construction workers in the New York-White Plains Metropolitan Division in 2014 earned a median hourly wage of $31.60.  These people clearly hold significant, solid-paying jobs.  In the nearby map, the white census tracts are those where 10 construction workers or fewer actually reside (project site marked in red contains 

exactly 10 construction workers).  The darker shaded tracts show areas progressively more densely populated by construction workers.  

What about the unemployed construction workers, the ones developers will attract to their work sites?  Unfortunately, we do not have the specific numbers for these people, but we can estimate where they live.  The nearby map identifies census tracts in green that automatically qualify as high unemployment areas (9.3%, or 150% of U.S. rate).  The orange tracts are those with unemployment between 7.3% and 9.3%.  Note the majority of unemployed people in New York County live on the northern end of the island.  This is the area referenced in the WSJ article as “gerrymandered”.

Let’s move away from percentages for a moment because unemployment is really about individuals who are willing and able to work, but cannot find employment.  In 2014 annual averages, New York County had 55,387 unemployed workers.  That is 55,387 unemployed workers in just a single county.  

Comparing this to unemployment in other locations, we find that the entire state of Iowa during the same timeframe had 75,259 unemployed workers and the entire state of Vermont had 14,302 unemployed.  It means a lot when the woes of a single county are comparable or greater than the woes of entire states.  It also shows why it’s important to look beyond unemployment percentages and also consider the raw number of individuals affected.  The EB-5 program was meant to address exactly this:  people.

I need to discuss some of the misinformation I mentioned earlier.  People opposed to TEA sub-county aggregation (aka “gerrymandering”) seem to believe that unemployed people need to be employed within the census tract of their residence.  Honestly, how many people reading this paper can claim that they work in the same tract where they live?  How many can claim that a census tract line or a county line or even a state line kept them from traveling to a job?  

Asked another way, how many unemployed construction workers in Harlem might travel all the way down to Hudson Yards for a job?  The ACS reports the mean travel time to work for New York County residents as 30.2 minutes.  According to the NYC MTA, a person could board the subway at the north end of Manhattan Island and travel to a subway station adjacent to the Hudson Yards project in 30-50 minutes for $2.75 or less one-way.  Does anyone believe an unemployed person would object to that kind of commute?   Those who oppose sub-county aggregation apparently do, and many hold this view only because they are informed by people who understand neither labor economics nor basic human needs.

We can look at commuting patterns across the U.S. in more detail utilizing the Longitudinal Employer-Household Dynamics (LEHD) product from the Census Bureau.  The LEHD site offers a variety of information about the commuting habits of workers, including distance and directional analyses of their commutes.  According to LEHD, there are 30,146 people employed in the Hudson Yards census tract (Tract 99).  Only 164 of these employees actually live within Tract 99.

The nearby LEHD radar chart shows commuter information for Tract 99.  Almost 60% of commuters travel 10 miles or less to Tract 99, and another 24% travel 10 to 24 miles.  The chart also shows the directions from which the workers commute.  In the case of Tract 99, workers live southeast and northeast of the site.  Refer back to the previous unemployment map and note that those are the locations of concentrated unemployment in New York County.  In fact, from the job site to the so-called “gerrymandered” Harlem tracts mentioned in the WSJ article, the distance is only 8.55 miles.  Clearly, the Harlem tracts lie within the primary sector of the radar diagram above.

Here’s another way to look at labor economics as it relates to EB-5. Commute statistics are based on where an individual lives and where the individual works.  So we ask, where do the people who work in New York County live?  According to the Census Bureau, only 30% of people who work in New York County actually live there, too.  

The remaining 1,630,673 workers brave a county or state-line crossing on a daily basis to work in New York County.  The nearby map depicts the major commuting pattern for New York County.  Clearly, many people are willing to travel for a job, and I would guess many of them are in the construction business.  Incidentally, this map also depicts the general area of economic impact for any project located in New York County.  Notice how the area is vast in comparison to any Manhattan TEA.  Misinformation says a TEA describes the region of job creation.  This is patently wrong, and unfortunately, prevalent in current legislative discussions that do not consider labor economics.

For years now, many observers have maligned urban EB-5 projects located in low unemployment neighborhoods as counter to the intent of Congress.  The urban TEA is often treated as a pariah, especially when it does not conform to an arbitrary size or shape.  In the long absence of Federal guidance, the States have collectively run amuck, decorating the TEA process with every conceivable constraint never intended by Congress. The emotionally-laden term “gerrymandering” is often uttered when discussing urban TEAs.  Let us remember that “gerrymandering” is a devious, political game.  Employing a mathematical aggregation of census tracts is not devious, not political, and definitely not a game.  We should allow mathematics to determine the size and shape of TEAs, not arbitrary decisions made in a vacuum for the sake of consensus.  I assure you, the people who matter most in this discussion, the unemployed, are not part of the consensus.  

I urge Members of Congress to understand the data behind EB-5 economics and acknowledge the realities of labor economics.  I hope the facts provided in this document help readers see through the misinformation currently swirling in the industry; misinformation that harms many millions who need new jobs.  Capital should be free to flow to its most efficient uses.  Hindering that flow only hurts the country.