The Human Capital Imperative and the Dynamic American Economy

February 2, 2012

By Nick Schulz, NCF Scholar

Randy Johnson and Michael Hendrix both had thoughtful observations on the economic effects of skilled immigration.  What’s interesting to me in looking at the issue is how the evidence keeps accumulating in favor of bringing more skilled workers to America and deepening the pool of human capital in the United States.

For example, in a recent paper for AEI, economist Madeline Zavodny crunches some new data and discovers:

  • Immigrants with advanced degrees boost employment for US natives. This effect is most dramatic for immigrants with advanced degrees from US universities working in science, technology, engineering, and mathematics (STEM) fields.
  • An additional 100 immigrants with advanced degrees in STEM fields from either US or foreign universities is associated with an additional eighty-six jobs among US natives.
  • An additional 100 immigrants with advanced degrees—regardless of field or where they obtained their degrees—is associated with an additional 44 jobs among US natives.
  • Temporary foreign workers—both skilled and less skilled—boost US employment.

Now, these findings may strike some as counterintuitive.  How can adding more workers to the labor pool boost employment for those already here?

The answer, as I discuss in the paper “The Human Capital Imperative: Bringing More Minds to Market,” is that the U.S. economy is not a zero-sum game.  New skilled workers should be considered assets in the context of the broader American economy. This means they can generate incomes and jobs for themselves and for others by raising productivity and increasing the nation’s wealth.

This is especially important when we consider the nature of the American economy.  Think about a sector like manufacturing.  The United States has by far the most productive manufacturing sector in the world.  One reason is that we have been able to cultivate home-grown worker talent that has developed and embraced the use of new technology. Another reason is America’s major manufacturing firms have been able to attract top foreign talent needed to keep American manufacturing setting the pace when it comes to productivity.

The American economy is constantly evolving; so are the needs of companies within the American economic ecosystem. This includes established, best-in-class giants like Honeywell, Microsoft, Intel, and 3M; recent high-growth firms like Google; and brand new players like Facebook who are only just now reaching the IPO stage. They all need to harness the best human capital to propel the US economy forward. And to do so we need to make sure the world’s best minds are welcomed here on U.S. soil.

High-Skilled Immigration and Job Creation in America

January 19, 2012

By Michael Hendrix, Research Manager

Vivek Wadhwa, a noted immigration expert at Duke University, came out with an article in BloombergBusinessweek recently that highlighted some of the latest research on the benefits of highly-skilled migrants to the American economy.  Together with Nick Schulz’s recent NCF white paper on this very same topic, we’re beginning to see a compelling case form for what both authors call the biggest “free lunch” of them all: high-skilled immigration reform.

The title of Vivek’s article is pretty self-explanatory: “Fix U.S. Immigration Policy, Create Jobs.”  The “why” and “how” are answered by two large studies authored by Stuart Anderson and Madeleine Zavodny, respectively.  As Vivek highlights, they each provide support for building America’s human capital by drawing on the best and the brightest from around the world.

“Increasing bodies of evidence show that skilled immigrants are fueling technological innovation and job growth in America. A study released last week by Stuart Anderson of the National Foundation for American Policy found that immigrants were on the founding leadership teams of 24 of the top 50 privately held, venture-backed companies in the U.S. The highest percentage of these immigrant founders came from India. What’s more, Anderson found that in 76 percent of these companies, immigrants held key positions in engineering, technology, or management.”

“In another study released in December 2011, Madeleine Zavodny, an economics professor at Agnes Scott College, found that foreign-born adults with advanced science, technology, engineering, and math (STEM) degrees were strong net generators of jobs for native-born American workers. Zavodny found that 100 foreign-born workers with advanced STEM degrees generated 262 jobs for native-born workers, on average. The study, sponsored by the American Enterprise Institute and the Partnership for a New American Economy, echoes earlier research  by Professor AnnaLee Saxenian of the University of California, Berkeley, that showed that Chinese and Indian engineers managed 24 percent of the technology businesses started in Silicon Valley from 1980 to 1998. My own research found that in a quarter of the U.S. engineering and technology companies founded from 1995 to 2005, the chief executive or lead technologist was foreign-born. In Silicon Valley, the percentage of immigrant-founded startups was much higher—52 percent.”

Paper Finds importance of Keeping Foreign-Born STEM Students in U.S.

January 18, 2012

By Randy Johnson, Senior Vice President, U.S. Chamber of Commerce

A white paper authored by Nick Schulz, who serves as a National Chamber Foundation (NCF) Scholar and the DeWitt Wallace Fellow at the American Enterprise Institute, and unveiled today by NCF is part of a growing body of research that demonstrates the importance of high-skilled immigration to our nation’s economy.

Mr. Schulz asserts that in a knowledge-based economy there is a clear link between productivity growth and the contributions of highly-skilled immigrants.  In particular, the report notes that highly-skilled foreign-born nationals are being hired by prominent scientific, technology, and engineering firms – such as Microsoft, Coca-Cola, Intel, Caterpillar, 3M, and Ingersoll-Rand – to supplement the skill sets of native-born Americans.  These immigrants contribute to business operations not just through their skills but also their understanding of foreign markets, and in so doing play an active role in international commerce.

The paper argues that due to their willingness to take risks, high-skilled immigrants are also entrepreneurial. To back this assertion, Mr. Schulz cites a study from Duke University that examines the new science, technology, engineering, and mathematics-related (STEM) companies founded in the decade between 1995 and 2005.  The study’s authors found that fully one-quarter of those firms had at least one immigrant founder.  In addition, the paper also cites a study from the National Bureau of Economic Research which shows that immigrants with advanced degrees are also more likely to file patents for new inventions than native-born Americans.

Mr. Schulz’s main concern is that although immigrants still come to the United States in order to study at some of the finest universities in the world, the United States is still rapidly losing its competitive edge.  There is a growing recognition echoed by other groups, such as the Council of Foreign Relations, that existing immigration laws hinder the ability of foreign-born nationals to work following the completion of their studies.  Perhaps most alarming is the fact that Indian and Chinese nationals currently studying in the U.S. have indicated that they are intending to leave this country and start businesses elsewhere, directly competing against our nation’s economic interests.

In short, foreign-born nationals supplement the skill sets of those individuals born in the United States.  It is an economic imperative that highly-skilled, foreign-born individuals, especially those studying in the critical STEM fields, remain in this country so that they may expand economic growth and create new job opportunities for all Americans.

Re-Posted from Paper Finds importance of Keeping Foreign-Born STEM Students in U.S.

Nick Schulz on the Human Capital Imperative

January 18, 2012

By Michael Hendrix, Research Manager

The National Chamber Foundation (NCF) is unveiling a white paper today authored by Nick Schulz, NCF Scholar and DeWitt Wallace Fellow at the American Enterprise Institute, on the benefits of high-skilled immigrants to the American economy. In The Human Capital Imperative, Schulz argues that America’s immigration policy needs to adopt a welcoming stance toward the skilled human capital found overseas if the country wishes to remain competitive in the 21st century.

Schulz examines “what scholars and the public have learned over the years about the economic effects of adding new skilled immigrants to the work force.” He concludes that “the United States will need to take steps to make sure it can compete,” including increasing the number of visas available to skilled immigrants.

The paper follows up on the conclusions reached at a recent event at the U.S. Chamber called“Immigration & American Competitiveness: The Challenge Ahead.” The remarks of New York City Mayor Michael R. Bloomberg and U.S. Citizenship and Immigration Services Director Alejandro Mayorkas focused on how high-skilled immigration is important to our nation’s economic recovery.

Schulz finds that skilled immigrants make inordinate contributions to American prosperity. They “start businesses at higher rates than the native-born,” “work or start businesses in some of America’s key growth sectors,” “help create new intellectual property,” and add to broader productivity growth and innovation throughout the economy.

“When any economy faces challenges, the first thing it should do is determine if it has any self-inflicted wounds, as those are the easiest to correct. The evidence is clear that the benefits of skilled immigration are high. The costs of bad immigration are also high. It is past time for the nation to stop shooting itself in the foot.”

You can read the rest of the paper below on our blog or on its own page here.

The Economic Benefit of Immigrants

December 21, 2011

By Michael Hendrix, Research Manager

A recent study by Giovanni Peri, an economist at the University of California-Davis, found that immigration has no effect on poverty rates and in fact has increased employment among native-born Americans from 2000-2009:

“There is essentially no effect of immigration on native poverty at the national level. At the local level, only considering the most extreme estimates and only in some localities, we find non-trivial effects of immigration on poverty. In general, however, even the local effects of immigration bear very little correlation with the observed changes in poverty rates and they explain a negligible fraction of them.”

The American Enterprise Institute and the Partnership for a New American Economy similarly found that increasing the intake of high-skilled immigrants leads to a rise in the employment rate of native born citizens.  The same is true for temporary H1-B workers.  While Peri’s study did not cover the length of the recent recession, this AEI study did and still found a net increase in native employment from skilled immigrants.

As Nick Schulz, NCF’s Scholar, noted in Forbes before these studies were released, “There is wide consensus among those who have studied the issue that skilled immigrants are a net positive for the receiving country.”

Immigration & American Competitiveness: Labor Markets

November 7, 2011

The National Chamber Foundation recently hosted New York City Mayor Michael Bloomberg, US Citizenship and Immigration Services Director Alejandro Mayorkas, and a set of esteemed panelists to discuss high-skilled immigration and American competitiveness.

One of those panelists was Dr. Pia M. Orrenius, a labor economist at the Federal Reserve Bank in Dallas.  Dr. Orrenius is an expert on immigration policy and the noted co-author of Beside the Golden Door, a book that “proposes a radical overhaul of current immigration policy designed to strengthen economic competitiveness and long-run growth.”

Check out the video below to hear Dr. Orrenius’ take on how the current skills gap in America’s economy speaks to the need for allowing companies to tap the global labor market:

Immigration & American Competitiveness: The Education Imperative

October 27, 2011

The National Chamber Foundation recently hosted New York City Mayor Michael Bloomberg, US Citizenship and Immigration Services Director Alejandro Mayorkas, and a set of esteemed panelists to discuss high-skilled immigration and American competitiveness.

One of those panelists was Dr. Alfredo Quinones-Hinojosa (also known as “Dr. Q”), a brain surgeon and professor at The Johns Hopkins University and their Bayview Medical Center.  Dr. Q is internationally renowned for his groundbreaking work on the brain, and is currently directing a team of researchers in finding a cure for brain cancer.  He was himself an immigrant once, illegal at that, who went on to graduate from Harvard Medical School.

Check out the video below to hear Dr. Q speak on an issue near and dear to him and his work:

High-Skilled Immigration: Enterprise and Innovation

October 24, 2011

The National Chamber Foundation recently hosted New York City Mayor Michael Bloomberg, US Citizenship and Immigration Services Director Alejandro Mayorkas, and a set of esteemed panelists to discuss high-skilled immigration and American competitiveness.

One of those panelists was Stephen Fleming, a Vice President at Georgia Tech who manages their Enterprise Innovation Institute.  The Institute helps enterprises improve their competitiveness through the application of science, technology and innovation.  In the video below, Fleming offers his own take on the high-skilled immigration issue:

President’s Council Offers Up Good Ideas on Immigration

October 12, 2011

By Nick Schulz, NCF Scholar

The proposal released yesterday from the President’s Council on Jobs and Competitiveness contains some sound policy ideas.  Among them is, according to The Wall Street Journal, a call for “changing immigration rules so all foreign students who earn a degree in science, technology, engineering or math from a U.S. university could stay in the country. The council also called for a new provisional visa program for immigrant entrepreneurs.”

These are great ideas. As became clear at the recent National Chamber Foundation event on skilled immigration, there is a consensus among economists that permitting more skilled immigrants to start companies and work in the American economy is a boon to all.

The report from the President’s council recognizes the challenging political environment for any kind of immigration reform. “We are sympathetic to the political sensitivities around the topic of immigration reform,” the report says. But the Council also rightly believes that current policy with respect to skilled immigrants is counterproductive. “When it comes to driving job creation and increasing American competitiveness,” the Council notes, “separating the highly-skilled worker component is critical. We therefore call upon Congress to pass reforms aimed directly at allowing the most promising foreign-born entrepreneurs to remain in or relocate to the United States.”

Indeed, if we focus on more skilled immigrants we see a win-win result. We are likely to see more new start-ups, rising productivity, and new job creation. It’s the closest thing to a “free lunch” one can find in economic policy, according to Pia Orrennius of the Federal Reserve Bank of Dallas.

The Win-Win of Immigration

October 11, 2011

By Michael Hendrix, Research Manager

What is the ultimate “win-win” proposition in the policy world?  Throwing open the nation’s doors to skilled immigrants.  As Nick Schulz pointed out in Forbes, these individuals are smart, hard-working, and are net job creators.  Not only is current policy turning away scores of talented people, it’s also kicking out those who were educated here.  In pursuit of perfect reforms, we’ve left good policy on the table.

“For too long the nation’s immigration policy has been stuck.  The pursuit of a “comprehensive” immigration reform that would also address concerns about the country’s porous border with Mexico has gotten nowhere. As a result, little has been done to improve the country’s approach to skilled immigrants.”

“Put aside concerns about low-skilled immigration for a moment. There is wide consensus among those who have studied the issue that skilled immigrants are a net positive for the receiving country.”

When New York City Mayor Michael Bloomberg came to the US Chamber a few weeks ago, urging policymakers to reform America’s skilled immigration policy for the sake of our competitiveness, he spoke as the descendant of immigrants.  He talked about how the immigrant ethos not only defines the American dream, but is what helped make him into the 13th-richest person in America.  Why not tap into this same spirit?  With millions waiting in line to enter America, it takes only one Bloomberg or Einstein to prove skilled immigration reform a success.  To paraphrase the lady in the harbor, send these, and we will lift the lamp beside the golden door.