Reforming Immigration to Boost Economic Competitiveness?

The focus of past US immigration debates has been heavily skewed towards addressing the future legal status of the millions of unskilled workers that have entered US borders illegally.  However, the hundreds of thousands of high-skilled immigrants who have entered this country legally and contributed substantially to the country’s economic output have been largely overlooked in these discussions.  As Washington continues to debate immigration policy, top US business leaders are building support for Startup Act 3.0 as a solution to boost economic competitiveness.

The Startup Act 3.0, recently introduced in the US Senate, seeks to issue “entrepreneurship visas” to immigrant founders of new companies that raise a minimum of $100,000 in investment, hire at least two employees within their first year, and at least five employees in the following three years of formation.  The legislation also modifies the current tax code to encourage business investment, accelerate the commercialization of university research, and improve the regulatory process. The new legislation seeks to allocate additional visas for foreign students that graduate from US universities with advanced degrees in science and technology-related fields.

In a joint study between UC Berkeley and Duke University titled “America’s New Immigrant Entrepreneurs,” Vivek Wadwha, AnnaLee Saxenian, Ben Rissing, and Garry Gereffi build the case for the passage of Startup Act 3.0 by measuring the contributions that high skilled immigrants in the US have made through innovation and entrepreneurship.

The pattern of high-skilled immigration providing job growth, innovation, and wealth creation has become a US phenomenon. The authors point out that between 1995 and 2005, 25.3 percent of technology and engineering companies started in the US were founded or co-founded by foreign-born entrepreneurs.  In 2005, these companies employed 450,000 workers and generated $52 billion of revenue.  The statistics to support high-skilled immigration are even more compelling for Silicon Valley.  Over the same period, 52.4 percent of all new startups in Silicon Valley were founded or co-founded by immigrants.

One key element of the study involved a comprehensive analysis of the “location clustering” of high-skilled immigration. The authors find that specific regions throughout the US have experienced a remarkably high rate of immigrant-led business growth.  As an example, between 1995 and 2005, 38.8 percent of technology and engineering companies started in California were founded by immigrants.  Similarly, New Jersey and Michigan experienced 37.6 percent and 32.8 percent, respectively, of technology and engineering business creation directly from immigrants.  Other states with significant immigrant contributions to business formation included New York, Massachusetts, Texas, Virginia, and Florida.

The authors proceed to present data supporting the industry strengths of specific immigrant groups. First, nearly 80 percent of immigrant-founded companies in the US exist within the software and manufacturing industries. Two immigrant groups in particular, Indians and Chinese/Taiwanese, are responsible for over 30 percent of technology and engineering firms created by US immigrants.  In the computer and communications industry, Chinese/Taiwanese immigrants are responsible for 36 percent of all immigrant startups, as compared to a 15 percent contribution by Indian immigrants. In the software industry, Indian immigrants account for 34 percent of all immigrant startups, while Chinese/Taiwanese immigrants contribute just 7 percent.

The data outlining immigrant contributions to the US economy, location clustering behavior, and skill-specific competitive advantages can play an important role, as the debate over immigration reform moves forward. While the US continues to recover from challenging economic times, policies promoting economic growth should continue to remain a focus for lawmakers and policy advisors.  Startup Act 3.0 is a step in the right direction in capturing the benefits of high-skilled immigration and supporting its crucial role in the US economy.

Feature Photo: cc/mdanys