Revisiting the American Story

The free flow of skilled human capital was identified as a top priority at an Asia Pacific Economic Cooperation (APEC) senior officials innovation meeting I led in Medan, Indonesia, this past weekend. The approval therefore by the U.S. Senate last Thursday of its version of immigration reform legislation was met with keen interest. Why is this legislation so important for the United States?

For more than a decade now, U.S. policymakers have failed to address the nation’s broken immigration system. This year has seen a plethora of different groups – representing business and the technology industry, labor unions, farmworkers, educators, youth groups, religious organizations and many others from both sides of the aisle – watching closely to see if lawmakers can overcome tough party divides.

While action last week is encouraging and the White House wants anxiously to sign an immigration reform law, many analysts think it will be a hard battle in the House of Representatives. The bill includes compromises for low-wage migrant workers as well as for high-skilled immigrants. By White House estimates, the Senate Bill has the potential to cut the U.S. deficit by almost 1 trillion dollars over the next two decades by adding taxpayers and allowing immigrants to grow GDP through activities like business creation. The President points out that in 2011, immigrants started 28% of all new business while accounting for only 13% of the U.S. population.

The most polarizing part of the bill is addressing the issue of illegal immigration. The Senate bill that just passed provides a 13-year path to citizenship for the 11 million unauthorized immigrants in the country. According to many analysts, the Republican-led House is unlikely to take up the Senate measure and is instead crafting a narrower bill that would not provide a path to citizenship for unauthorized immigrants in the country.

There is one issue that no party denies would be good for the economy: opening paths for high-skilled immigration. I hope it does not get lost in the debates ahead. Here’s why.

The October 2012 Kauffman Foundation report, “America’s New Immigrant Entrepreneurs – Then and Now,” showed that growth in immigrant-founded businesses in the United States is stagnating. Earlier studies documented that 25% of engineering and technology companies started between 1995 and 2005 had an immigrant founder. Those companies employed 450,000 workers and generated $52 billion in revenue in 2006 alone, driving significant economic growth for the U.S. economy. In Silicon Valley specifically, in that same period, immigrants had founded 52 percent of the startups. The above-mentioned new research shows that since 2005, that percentage dropped to 44 percent. This decline should worry us all.

The impact of immigrant entrepreneurial talent cannot be understated. From jobs to productivity-enhancing innovations to life-saving new technologies, immigrant founders and investors in high-growth businesses create benefits for all. Take, patent filing statistics, for instance, to check the pulse of innovation among immigrant entrepreneurs. In 2007, an analysis of the World Intellectual Property Organization (WIPO) data showed that the number of international patent applications filed by noncitizen immigrants was 24.2% in 2006. The Kauffman Foundation and other research organizations have pointed out for years that America could lose this economic force. That year, according to entrepreneur-turned-academic Vivek Wadwha and his research team at Duke University, there were 1 million skilled immigrants waiting for permanent resident visas. The annual H1B quota for skilled overseas workers had (and continues to have) a cap of 65,000. As Wadhwa has pointed out in many articles and interviews, in the technology world entrepreneurs have to execute their ideas fast before they become stale. Therefore, in face of the backlog, many STEM graduates were understandably looking to other entrepreneurship ecosystems, including China and India, the homes of the majority of these graduates.

The presence of these issues at the APEC meetings I joined in Indonesia this past weekend should be a reminder to U.S. policymakers that the rest of the world is taking advantage of U.S. delay on addressing these issues. I spoke with many whose nations—including Canada, Australia, Chile and Singapore—have been working on their own legislation and programs not just to open their doors to job-creating entrepreneurs and early-stage investors, but to improve business conditions to increase the attractiveness of their startup ecosystems. They do not see immigrants as economic scapegoats and competitors—as some Americans do—but rather a source of economic vibrancy to recruit.

The fact that last week the House Judiciary Committee approved its own bill to offer more visas for foreign computer engineers and scientists should provide some optimism that that House of Representatives will see “smart immigration” also in terms of fixing the system for skilled workers and entrepreneurial talent. As the debate shifts there, it is worth reminding commentators and opinion leaders of the quality research available concerning how current policies affect this important economic force. One such report is the Kauffman Foundation’s, “America’s New Immigrant Entrepreneurs – Then and Now,” and Vivek Wadwha’s book The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent. Vivek kindly offered PDE readers a complimentary copy. If you are interested, his ebook is available for free download to PDE readers from now through July 22.

The U.S. has an economic history based on immigration. I hope that in the upcoming House of Representatives debate, policymakers won’t undermine this proven source of growth and competitiveness and instead will join other nations around the world in offering a welcome mat to talented entrepreneurs and scientists.

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