'Shooting Itself in the Foot': Is U.S. Turning Away Entrepreneurs?

Some argue better immigration policies are needed for skilled foreigners.

ByHuma Khan
April 20, 2010, 5:18 PM

WASHINGTON, April 21, 2010— -- Microsoft founder Bill Gates famously declared last year that U.S. immigration policy should have "an exception for smart people."

And now with immigration reform poised to possibly be the next political hot button issue, a growing chorus of people is saying just that. They're calling on lawmakers to address what they see as a growing economic problem -- the flight of highly skilled immigrants from the United States.

It's a trend that not only hurts the U.S. economy but also stifles entrepreneurship and job growth, proponents argue.

"Good-paying jobs don't come from bailouts. They come from start-ups," journalist Tom Friedman wrote in an op-ed earlier this month. "And where do start-ups come from? They come from smart, creative, inspired risk-takers. How do we get more of those? There are only two ways: grow more by improving our schools or import more by recruiting talented immigrants."

Many large U.S. companies are the brainchild of foreign-born entrepreneurs -- think Yahoo, co-founded by Chinese-American Jerry Yang; eBay, created by French-born Iranian Pierre Omidyar; and Google, co-founded by Russian-American Sergey Brin.

Immigrants across the United States own 12.5 percent of all businesses, both big and small. In the technology and engineering fields, nearly a quarter of all businesses are founded by immigrants and they account for a significant chunk of jobs.

Many of these entrepreneurs came to the United States as students and stayed. But now, much of this labor force is eyeing returning to their home countries because of better opportunities there and visa constraints in the United States.

A report conducted last year found that more foreign students than in the past wanted to return to their home countries after completing their education, worried about their visas and job opportunities.

"We are suffering a massive reverse brain drain," said Vivek Wadhwa, a visiting scholar at Berkeley University and a senior research associate with the Labor and Worklife Program at Harvard Law School, who co-authored the report. "The best and the brightest don't see America as the best land of opportunity. They see equal or better opportunities back home."

Another report by the Technology Policy Institute in 2009 found that in the absence of green card and H1B visa constraints, roughly 182,000 foreign graduates of U.S. colleges and universities in science, technology, engineering and math would have remained in the country.

H1B visas are temporary work visas that allow foreign workers to remain in the United States for six years. The study found that these workers would have earned roughly $13.6 billion in 2008, raised the gross domestic product by that amount and would have contributed $2.7 billion to $3.6 billion to the economy.

"Highly skilled immigrants contribute very strongly to economic activity and economic growth in particular in the innovation sectors," said senior fellow Arlene Holen, who directed the project.

But because it's getting harder for this group of immigrants to stay in the United States legally, she said, "a lot of them come here and take higher education and then they leave. We don't let them stay. It's kind of a shooting yourself in the foot scenario."

While Americans are divided on the issue of immigration and how laws should be overhauled, most agree that highly skilled immigrants benefit the economy. There has, however, always been concern that such immigrants take away American jobs or depress wages, but experts say that's not always the case.

"I think there's a certain level playing field. A lot of these high skilled immigrants we're talking about start companies, they're making more jobs for Americans," said Dane Stangler, a manager in the office of the president at the Kauffman Foundation, which focuses on advancing entrepreneurship and education.

"If we're going to either affirmatively shut the door or somehow ignore this source of entrepreneurship and source of job creation, then we will be losing jobs because we won't have this subset of entrepreneurs," Stangler said.

The numerous immigration bills in the Senate and House of Representatives have attempted to address this issue but with the immigration reform debate in limbo, few are optimistic that any progress will be made in the near future.

Immigration Reform Prospects Look Bleak, Many Say

The bipartisan framework for immigration reform drafted by Sens. Chuck Schumer, D-N.Y., and Lindsey Graham, R-S.C., proposes that certain immigrants who are receiving degrees in fields like math, science, engineering and technology receive a green card immediately upon their graduation, instead of having to get an H1B visa through an employer.

A comprehensive immigration bill drafted by Rep. Luis Gutierrez, D-Ill., expands green cards for skilled immigrants and seeks to cut the backlog that goes into processing these visas.

In February, Sens. John Kerry, D-Mass., and Richard Lugar, R-Ind., introduced the Start Up Visa Act of 2010. The bill would allow immigrant entrepreneurs to receive a two-year visa if he or she can show that a qualified U.S. investor is willing to dedicate a minimum of $250,000 to their start-up venture.

If, after two years, the immigrant entrepreneur can show that the venture has attracted $1 million in additional capital investment or achieved $1 million in revenue and generated at least five full-time jobs, the entrepreneur would get legal permanent residency.

"There are those little things that can expand the pipeline without revisiting the giant debate over immigrant reform," Stangler said. "The Start Up Visa Act is a hugely responsible act."

But across the board, there is little optimism about whether such an act or piecemeal measures can pass.

"Congress has its plate pretty full and I don't know if they have the stomach for another big debate," Stangler said.

Immigration reform proponents such as Gutierrez argue that a comprehensive overhaul is the way to go because all the different components are related, and that immigration shouldn't just be about high skilled workers.

That, some say, could be the death of reform for high skilled immigrants altogether.

"I'm pessimistic that anything will happen. Our leaders used all their bullets on health care and this is a very contentious issue," Wadhwa said. "Both political sides agree on the need for skilled immigrants and they create jobs and they are good for the economy.

"The trouble is that some lawmakers are worried if they just allow debate of skilled immigrants, this will pass and everyone will declare success and forget about illegal immigrants," Wadhwa said. "I see it being more contentious than the health care debate. How many battles can one government fight?"

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