Obama's immigration reform plan: He should admit lots of super-immigrants, the highly educated, future entrepreneurs.

Commentary about business and finance.
May 10 2011 2:37 PM

Let in the Super-Immigrants!

The best way to improve the U.S. economy fast is to poach entrepreneurs from the rest of the world. So why do we make it so difficult for them to immigrate?

Our immigration policy puts us at a disadvantage. Click image to expand.
Our immigration policy puts us at a disadvantage

This winter, George Mason economist Tyler Cowen published The Great Stagnation, an ebook arguing that the United States has exhausted all its easy sources of growth. We have, Cowen says, no more low-hanging fruit: no more cheap frontier land to farm, no more places to build new interstates, no rural homes to electrify, no more girls to send to school and then add to the workforce. From now on, Cowen says, growth will be slower, and transformative innovations like toilets and telephones will be rarer.

Cowen is alarmingly convincing, and The Great Stagnation received a round of queasy applause from the chattering classes—including from this publication. But maybe there remains one last shiny, fat apple hanging right in front of our faces, one last endeavor that would bring us fast, costless, and easy growth. It is immigration reform. The United States can grow faster by stealing the rest of the world's smart people.

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Today, the Obama White House is reaffirming its pledge to do just that. In the past year, the government has ramped up enforcement checks and deportations, in the hope of winning Republican support for a comprehensive immigration-reform bill. (The logic is this: If the government appears to be serious about keeping undocumented immigrants out, then Republicans will give them leeway to manage those already here.) In the past few weeks, President Obama has held meetings with business leaders and advocacy groups to raise awareness of the issue. Today, he is giving a banner speech in El Paso, Texas, pushing Congress to consider reform legislation as soon as possible.

The low-hanging fruit of immigration is not simply an open-door policy, but rather letting in—or, really, rolling out the red carpet for—highly skilled and educated workers and entrepreneurs. Back in 1999, Berkeley scholar AnnaLee Saxenian published one of the first comprehensive studies of the economic contributions of highly skilled immigrants, such as computer programmers, in California. Her paper found that foreign-born entrepreneurs were at the helm of a full quarter of Silicon Valley start-ups founded between 1980 and 1998—start-ups like, say, Google. In 1998 alone, those companies created $17 billion in sales and accounted for 58,000 jobs.

Since then, the contributions of highly skilled immigrants—let's call them super-immigrants—have only grown. A comprehensive study published by the Kauffman Foundation found that 25.3 percent of engineering and technology start-ups opened between 1995 and 2005 had a foreign-born founder. In California, the proportion was 39 percent. Immigrant-founded companies across the country produced $52 billion in sales and employed 450,000 workers.

The pro-super-immigrant data abounds. According to the Hamilton Project, immigrants are 30 percent more likely to start a business than U.S.-born citizens. Immigrants with college degrees are three times as likely to file patents as the domestically born. And all that entrepreneurial gusto really adds up. Economist Jennifer Hunt of McGill estimates that the contributions of immigrants with college degrees increased the U.S.'s GDP per capita by between 1.4 and 2.4 percent in the 1990s.

Despite these success stories, the United States still discourages foreign-born entrepreneurs. The H1-B visa program allows employers to bring in highly skilled workers but grants only 85,000 new temporary visas per year. Many recipients need to leave the country when their contracts end, giving them no incentive to put down roots and start businesses. The student visa program also allows in tens of thousands of the most talented, driven students from overseas, only to push most of them out again once their education is finished.

There are paths to permanent residency for many highly skilled immigrants and their families. But here too the United States has far too tight restrictions. The country does not cap the number of "family-based" green cards, available to relatives of U.S. residents. But it does cap the number of "employment-based" green cards—the ones often needed by entrepreneurial super-immigrants—at 140,000 per year. Wait times get very, very long. The think tank Third Way estimates that a tech entrepreneur from India looking to stay in the United States and found a business needs to wait until 2020 to get the OK to do so. There are about 1 million highly skilled immigrants waiting in limbo for green cards. Increasingly often, they just give up and go home, taking their know-how and business ideas with them, a phenomenon known as the "reverse brain drain."

Every once and a while, Congress decides to change the system to keep these motivated, educated, and valuable people around. This spring, for instance, Sens. John Kerry and Dick Lugar reintroduced the Startup Visa Act, designed to welcome in and keep foreign-born entrepreneurs.

The legislation provides a few new paths to permanent residency for entrepreneurs. For instance, a prospective immigrant could win a temporary visa if she raises at least $100,000 from a qualified investor for a new business. Her visa would become permanent if, within two years, her business created five jobs and raised $500,000 in additional investment, or had sales of $500,000. The bill also encourages entrepreneurs on temporary and education visas to stay, and foreign business owners to move and expand operations here.

It is a good idea, but perhaps still too restrictive. For one, the Startup Visa has inflexible rules about sales, capital investment, and job creation. What if a foreign-born computer scientist created the next Google in her garage, but by the end of two years only had a few thousand dollars in investment and one other worker? Second, the bill does not recognize the importance of failure. Most new businesses don't make it off the ground. But many entrepreneurs try again, and some succeed the second or third or 20th time around. Better to keep those aspirational workers on our shores. Third, and most important, the bill does not actually expand the number of available visas, just 9,940 in the relevant program. It just makes them easier for entrepreneurs to get.

Will Obama's immigration reform bill be smarter? The White House is pushing the benefits of keeping highly skilled and educated immigrants in the United States. In a call with reporters yesterday, a White House senior official stressed the point. "Immigrants are major job creators," he said. "It makes little if any economic sense for us to train and educate the top entrepreneurs and job creators of the next generation or this generation, and then force them to leave to compete against us and create jobs elsewhere."

But the prospects of a comprehensive bill passing are not good, and the White House knows it. On the call with reporters, senior administration officials talked about trying to "elevate the debate," "lean into the issue," and "raise the dialogue." "Passing a bill" did not really figure into the conversation. Other politicians are more honest about it. "I'm not going to be disingenuous with the public," Rep. Luis Gutierrez told the Journal. "It's not going to happen."

Even if comprehensive reform does not pass, though, expanding programs for super-immigrants should. Traditionally, because giving highly skilled workers a way to stay in the United States is the least controversial part of immigration reform, Democratic politicians have refused to decouple the priorities. If you want the high-skill immigrants, you need to figure out how to deal with the millions of less-skilled and undocumented workers, mostly from Latin America. It is good political logic, perhaps, but awful economic logic. The country needs about 10 million jobs, and the rest of the world has hundreds of thousands of educated, motivated, smart workers who want to come to our shores, use our capital, and hire our workers.

Why not pick the low-hanging fruit?

Annie Lowrey is a contributing editor for New York magazine. She can be reached at annie.lowrey@gmail.com.

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