America’s STEM shortage II: Why high-skilled immigrants are vital for innovation

Mounting visa problems and other obstacles are making it harder for talented students and skilled workers to enter the US, depriving the nation of the brainpower required to succeed in a fast-moving world built upon collaborative technological progress. 

Challenging conventional wisdom

Critical to embracing immigration reform is challenging the conventional notion that skilled-immigration unfairly increases competition and depresses the earnings to American workers in STEM.

These observations are refuted by research conducted by the National Foundation for American Policy.  The study used 9 years of data on foreign students with STEM majors from 2008-2016 to analyse OPT approved international graduates and the impact on competition for domestic STEM jobs. The study found “no evidence” that foreign students participating in OPT reduce job opportunities for U.S. workers. Conversely, the report found that “A larger number of foreign students approved for OPT, relative to the number of U.S. workers, is associated with a lower unemployment rate among those U.S. workers”. Rather than undermining jobs, the relatively small proportion of OPT participants relative to the US workforce was found to act as a “safety valve”, providing an important source of STEM workers at times when labour markets were tight and US workers in these fields were scarcer.

In general, any broad argument that U.S. workers in STEM fields are hurting for jobs is probably overstated. In August, the unemployment rate for workers in computer occupations, life, and physical sciences was 2.5%; for architects and engineers, the figure was 1.3%.

 Immigrants Play a Key Role in STEM Fields

 

Moreover, immigrants hold a disproportionate share of jobs in STEM occupations in the US (accounting for 54.5% of STEM PhD according to 2013 figures) , meaning they are increasingly important for maintaining the nation’s preeminence in advanced industries, according to a report published by NBER (the National Bureau of Economic Research).

The paper’s authors compare the wages of native-born and immigrant men. The researchers investigated how the wage gap between immigrant, and native-born STEM workers varies with the number of years since immigration; they found that for the period 2010-2012, immigrant STEM workers who had been in the U.S. less than 5 years earned on average 5.7% less than their native-born counterparts. However, immigrant STEM workers who had been in the U.S. for at least 6 years earned more than their native-born counterparts. In summary, these wage patterns seem to cast doubt on concerns that allowing firms to bring skilled workers in STEM fields (H-1B?) has undercut the earnings of domestic workers.

Skilled immigration vital for prosperity and productivity

The researchers also found that immigration of skilled STEM workers has a net positive impact to U.S. productivity growth, writing: “In modern growth theory, the share of workers specialized in R&D plays a role in setting the pace of long-run growth. Because high-skilled immigrants are drawn to STEM fields, they are likely to be inputs into U.S. innovation.”

“Immigrants as a group can have a dynamic effect on an economy” -Harvard Business School Professor William P. Kerr

The specific contribution of skilled-immigrants to innovation in STEM fields is further outlined in ‘The Gift of Global Talent: How Migration Shapes Business, Economy & Society”  a 2018 book written by Harvard Business School Professor William P. Kerr. Kerr finds that although foreign-born people make up only 13% of the US population, immigrant entrepreneurs create 25% of new companies. In immigrant “gateways” such as New York and California, Kerr demonstrates this percentage is even higher with 40% of new businesses led by immigrants. He identified that whilst immigrant-led companies typically start off smaller, on average they grow at a faster rate than domestic-companies and are more likely to survive long-term.

Kerr’s research also found that immigrants working in a STEM field are more likely to obtain a patent than a native-born worker in the same field (accounting for roughly a quarter of US patent filings). These contributions are a proxy for innovation and demonstrate the benefit which immigrants working in a STEM field can have on new inventions with commercial applications.

“One out of every 11 patents developed in the United States today is either invented or co-invented by an individual of Chinese or Indian ethnicity living in the San Francisco Bay Area,” Kerr says.

In business, this trend continues. No less than 43 % of Fortune 500 companies were founded or co-founded by an immigrant or the child of an immigrant, and that figure rises to 57 per cent among the Fortune 500 Top 35. Moreover, more than half (44/87) of America’s unicorn startup companies valued at $1bn+ were started by immigrants.

So why are immigrants more entrepreneurial?

One set of explanations outlined by Kerr is that the mindset required to migrate a great distance from their home countries is a self-selecting process which produces immigrants more tolerant of business-risk and more driven to succeed.  Discrimination against immigrant workers and difficulties finding jobs commensurate with their skill-level can drive immigrant workers to see enterprise as their best option to succeed. In the case of STEM innovation, the relatively high investment to GDP ratio in STEM education in countries like India and China provides for a skilled workforce capable of technical expertise.

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Source: Center for American Entrepreneurship

Prominent former and current immigrant CEOs (Indra Nooyi- PepsiCo, Satya Nadella- Microsoft, Sundar Pichai- Alphabet)

Anti-immigrant rhetoric could stifle innovation

Conversely, Kerr has argued that anti-immigrant rhetoric could go a long way in undermining the innovation by foreign-born workers which should be instead encouraged. This is particularly due to uncertainty lowering investment. Highly mobile and skilled workers or international students facing an unwelcoming environment may be more reluctant to come to the US and less likely to start a company if they fear being forced to leave, and more eager to immigrate to countries which welcome immigrants to build the economy in partnership.

America’s increasingly hardline position towards foreign student and worker immigration in STEM paints a picture of this group of immigrants as a threat. Conversely, they an engine of prosperity, innovation, and economic growth. To maintain a  competitive edge, openness and transfer of knowledge is vital

Written by: Thomas Kurian

Sources:

Harvard Business Review:

https://hbswk.hbs.edu/item/in-america-immigrants-really-do-get-the-job-done

https://hbr.org/2018/10/research-shows-immigrants-help-businesses-grow-heres-why

Stanford University Press:

The Gift of Global Talent: How Migration Shapes Business, Economy, & Society-William P. Kerr (https://www.sup.org/books/title/?id=29770)

CNBC:

https://www.cnbc.com/2018/05/29/tech-is-facing-a-tough-summer-for-immigration-issues-microsofts-brad-smith-says.html

https://www.cnbc.com/2018/04/13/reform-immigration-and-boost-stem-education-now-says-nasdaq-vice-chairman.html

NBER: https://www.nber.org/digest/nov16/w22623.html

The Atlantic: ‘The Trump Administration is driving away immigrant entrepreneurs’  https://www.theatlantic.com/business/archive/2018/06/trump-immigrant-entrepreneurs/561989/

Center for American Entrepreneurship: http://startupsusa.org/fortune500/

National Foundation for American Policy:

https://nfap.com/wp-content/uploads/2018/10/2018-BILLION-DOLLAR-STARTUPS.NFAP-Policy-Brief.2018.pdf

https://nfap.com/wp-content/uploads/2019/03/STEM-OPT-and-the-US-STEM-WORKFORCE.DAY-OF-RELEASE.March-2019.pdf

 

 

 

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