Making the case for changing U.S. policy regarding highly skilled immigrants.

• Author: Schuck, Peter H.

ABSTRACT

Highly skilled immigrants to the United States ("HSIs") have helped catalyze American economic growth and advances in human welfare by generating knowledge and innovations that have spawned new products, services, systems, jobs, and wealth. A number of studies document that HSIs are disproportionately innovative. Similarly, HSIs are more likely to start and grow companies, which are a vital source of new jobs. Unfortunately, current U.S. policy regarding HSIs--mostly relating to H-1B and EB series visas--inhibits our ability to more fully benefit from the growth- enhancing contributions HSIs can make. In addition to tinkering around the edges of existing policy, more far-reaching reforms are required to produce larger gains. We propose to (1) guarantee at least provisional visas for foreign-born graduates of science, engineering, technology, or math programs at American universities; (2) encourage state and local communities to actively advertise for and recruit HSIs with characteristics, experiences, and skills targeted to particular economic development opportunities, such as life sciences, clean energy, or other disciplines; (3) create a new provisional visa for HSI entrepreneurs who create jobs and growth; and (4) adopt new policy mechanisms, such as a point system or an auction of HSI visas, better suited to attract high-productivity individuals and promote economic growth.

TABLE OF CONTENTS Abstract Introduction I. HSIs Can Help Expand the U.S. Economy, Address Increased Competition, and Meet Demands for Highly Skilled Labor A. HSIs are Innovative and Entrepreneurial 1. HSIs as Innovators: Education Levels and Patenting Activity 2. HSIs as Entrepreneurs: Starting and Growing Firms and Creating Jobs a. Lag Effect b. Other Research B. Other Countries Have Begun Winning the Competition for HSIs C. U.S. Demand for Highly Skilled Labor II. A Summary of Current U.S. Policies Regarding HSIs A. H-1B Non-Immigrant, Temporary Visa Program B. EB Series Immigrant, Permanent Resident Visa Program III. Reforming U.S. Policy Regarding HSIs A. Reform U.S. Policy to Directly Target HSIs and Entrepreneurs 1. Intensive Recruiting Efforts 2. Recruit Graduates of U.S. Colleges and Universities 3. A Point System 4. An Auction System 5. Start Up Visa Act 6. A Job Creator Visa B. Improve Current Programs 1. Modify Allocations 2. Accelerate Processing Conclusion INTRODUCTION

Human curiosity expands our understanding of phenomena relating to science, technology, engineering, and math ("STEM"), among other fields. Those understandings generate new knowledge and innovations, which may in turn lead to new products, services, productive systems, and jobs that contribute to economic growth and advances in human welfare. Stated differently, knowledge is iterative and dynamic; it is limited only by our capacity to comprehend more, ask new questions, and dedicate the necessary resources, time, and energy. Such knowledge drives our economy but depends on a critical mass of engaged people.

Highly skilled immigrants ("HSIs") to the United States, particularly foreign-born workers with graduate degrees in STEM fields, have catalyzed and expanded U.S. innovation, economic growth, jobs, wealth creation, and the resulting advances in human welfare. Their inventions, innovative approaches, and new companies are legion. America has been attractive to HSIs and other innovators at least in part because of its fundamental freedoms, market-friendly values, and reliable infrastructure. But this past success in attracting HSIs is no guarantee of the United States' future ability to attract or retain such immigrants. This gives rise to three questions.

First, could our nation have achieved greater innovation, economic growth, jobs, and advances in human welfare if U.S. policy had focused more deliberately on potential contributions from HSIs? Second, how can the United States ensure that we continue to benefit from HSIs in the face of increased competition from other countries seeking to attract (or retain) them? Finally, is our economic leadership and future being compromised by clinging to old policies not well-adapted to current and future circumstances?

In this article, we marshal data and evidence demonstrating that HSIs offer innovative and entrepreneurial talents, particularly in STEM fields. We also show that new policy approaches could better deploy these talents and result in economic growth. We advocate several changes, including: making targeted efforts to recruit people with preferred characteristics, experience, and skills for starting and growing companies and making permanent or at least provisional visas available to them; guaranteeing that HSIs who receive degrees from U.S. universities in STEM disciplines, particularly from graduate programs, receive such visas; creating new visa categories for HSI entrepreneurs; and adopting a new system for granting such visas based on points or auctions that reward HSIs who can advance our nation's economic objectives, especially innovation, entrepreneurship, and jobs.

Part I identifies three threats to our economy that might be alleviated by new policies regarding HSIs. Part II summarizes relevant, current U.S. policies regarding HSIs, namely, the H-1B and EB series visas. Part III advances specific policy proposals to increase economic growth, innovation, jobs, and human welfare.

1. HSIS CAN HELP EXPAND THE U.S. ECONOMY, ADDRESS INCREASED COMPETITION, AND MEET DEMANDS FOR HIGHLY SKILLED LABOR

   More effective policies regarding HSIs can affect and help address at least three macro-level economic problems for the United States: sluggish economic growth and a need for new firms and jobs; growing competition from increasingly sophisticated and productive countries around the globe; and a supply shortage being created by an aging STEM population and not enough native STEM graduates. We now discuss each of these problems and their relationship to U.S. policy regarding HSIs. (1)

   1. HSIs are Innovative and Entrepreneurial

      HSIs innovate and engage in entrepreneurial activity, particularly in STEM industries, at levels disproportionate to their presence in the population and relative to native-born Americans.

      1. HSIs as Innovators: Education Levels and Patenting Activity

         Researchers often consider two indicators of innovation: education in a STEM discipline (2) and patenting activity) They find a correlation between advanced education in a STEM field and "high rates of entrepreneurship and innovation." (4) They also find high rates of patenting activity by foreign-born inventors relative to their presence in the population as a whole and in the workforce more specifically. (5)

         Other researchers find evidence of innovation by non-citizen residents at a rate twice their presence in the population and workforce. (6) They also find that immigrants with bachelor's degrees were granted patents at twice the rate of native-born Americans with bachelor's degrees; the difference rises to almost three times the rate when comparing those with graduate degrees. (7) The differences in patenting were less pronounced when comparing immigrant scientists and engineers with native-born scientists and engineers, but immigrants still received about 20% more patents than native-born scientists and engineers. (8)

         In addition, researchers found a direct correlation between increases in the number of H-1B visas and increases in patent applications. (9)

         Some commentators contend that HSIs crowd out native-born STEM innovation by interfering with access to graduate education, (10) taking jobs, (11) and depressing wages. (12) Others, however, find no evidence that increasing the number of H-1B visas reduces innovation by non-immigrant researchers, as measured by patent applications. (13) Researchers have also found either an absence of such crowding out, or a crowding in or positive spillover effect. (14) This research shows that increasing the number of H-1B visas benefits native-born workers and the broader population by helping achieve critical mass in researching specialized areas, providing skills that complement native-born researchers, and contributing to increased output, commercialization, or usefulness of the patents' subjects, which also benefits the native-born population. (15)

         Ultimately, whatever crowding out may occur must be weighed against the widely-distributed, substantial benefits produced by the quickened pace of scientific progress, discovery, and other benefits derived from foreign-born people creating and pursuing their ideas and innovations here. (16) Policy changes that encourage HSIs to come to and stay in the United States to work and start companies are likely to increase overall U.S. innovation and, by extension, economic growth, job creation, and human welfare.

      2. HSIs as Entrepreneurs: Starting and Growing Firms and Creating Jobs

         HSIs have contributed significantly to U.S. economic growth over time, (17) and they have a "striking propensity" to start and grow companies, particularly in technology fields. (18) HSIs have been integrally involved with founding about one-quarter of the technology and engineering companies started between 1995 and 2005 that comprise the Dun & Bradstreet Million Dollar database. (19) Other research corroborates this 25% ratio, including studies of Silicon Valley, (20) biotech companies in New England, (21) and publicly traded companies that receive venture capital. (22)

         The consistent finding that immigrants create about one-quarter of businesses in the subject pools is even more impressive when immigrants are considered relative to their general presence in the population and workforce. Immigrants start companies at twice their ratio in the U.S. population, twice their share of the U.S. workforce, and more than two and a half times their share of the overall population. (23) These ratios may even understate immigrants' entrepreneurial activity for at...