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This is because the US ability to attract and retain highly skilled and entrepreneurial individuals worldwide is at the essence of its success. As long as the US can maintain an economic and cultural climate favorable to entrepreneurship, the US can still remain the leader in the innovation of markets for new products and services.
The author documents that the US magnet for talent has broken down due to impairing immigration policies. This is at the same time as other countries have far strengthened their own talent magnet. Historically, the US has attracted the best and the brightest and made it relatively easy to stay. But, this situation has rapidly deteriorated.
The author firsthand experience is interesting. He came from Australia with a degree in computer sciences in 1980. Within days of his arrival, he had applied and gotten a job with Xerox. Within a short 18 months he had gotten a green card. This will provide him total freedom to fulfill his full potential. And, he will soon found two successful high tech companies: Seer Technologies and Relativity Technologies creating hundreds of jobs as a result.
The author indicates that he could not have replicated his own success today. This is because he would have to wait for a decade to get a green card. Stuck in near corporate servitude with a temporary H-1B visa, he would be not only tied to his sponsoring employer but also tied to the specific job associated with his green card application. He would never have started his two companies and hundreds of jobs would not have been created. If he would have to start today, given current circumstances he would have stayed in Australia. This is obviously wrong.
Michael Bloomberg, mayor of New York City, has called our immigration policy suicidal. This is the case because if the US can't attract worldwide talent, it has lost its main competitive edge. The US, having the highest living standard, precludes it from ever being the low cost manufacturer of the World. (Germany's manufacturing prowess overcomes the high living standard handicap by earmarking the majority of its youth for trade manufacturing schools instead of college. That's a solution the US will never accept). The US has to position its economy as the one that constantly renews itself by developing new high margin markets. It can't do that if it is impairing its ability to attract high skilled talent. Yet, that is exactly what it is doing right now.
Let's look at a few numbers to better understand the situation. US citizens account for only 4% of engineering degrees worldwide; Asia (mainly India and China) account for 56% of them. Two thirds of H-1B applicants are issued for related positions in engineering and high technology. And, India and China account for two thirds of those. Thus, over 44% of H-1B applications go to Indian and Chinese engineers. This makes perfect sense since those two nations provide the majority of engineer graduates. However, the US offers only 140,000 green cards per year and limits any nation to only a 7% allocation of such green cards. This means that both China and India with each a population of over 1.2 billion providing the majority of the engineering talent worldwide get only 10,000 green card each, the same allotment as Iceland (pop 320,000) or even Liechtenstein (pop. 35,000). This situation is absurd. As a result, both Indian and Chinese engineers with H-1B visas have to wait around a decade to get a green card if ever. Many will give up and return to their home countries with thriving local opportunities. The author with other researchers estimate there are currently over 1.2 million highly skilled workers waiting in limbo for their green card. This stifles their entrepreneurship and productivity.
The author has documented that the slide in immigrant fostered entrepreneurship has already started. Just a few years ago, immigrants co-founded 52.4% of Silicon Valley companies. Within his most recent 2012 survey, this percentage had abruptly dropped to 43.9%. Similarly, the US share of total patent filings has declined from 42.8% in 1995 to 27.4% in 2010. That's even though foreigners account for a growing % of US patent filed (51% in 2011 vs only 18% in 1964).
If the US is concerned about the emerging economic competition from China and India what could it do? Probably one of the best strategies would be to attract and retain its best and brightest [from China and India] to cause a positive brain drain in favor of the US. Meanwhile, what the US does is actually attract bright Chinese and Indian minds as students and then kick them back home a short while after graduating and acquiring some training in the US. That's like US foreign aid in human capital. This could only accelerate China and India's economic rise relative to the US. In 2011, 160,000 students left China for the US. But, the number of graduates returning to China amounted to 180,000 in 2011 up from only 50,000 in 2008 (pg 42-43). The reverse brain drain has started.
Economic competition is all about international human capital. And, based on immigration policy related to the skilled the US has already lost this race to many other countries such as Australia, Canada, China, Germany, and Singapore (Chapter 5). Australia with only a tenth of the US population issues nearly as many green card equivalents! All those countries have immigration policies related to the skills that are far more hospitable and inviting than the US. Their policies have much in common. First, they recognize and value human capital (their immigration policies are highly selective on that count). Second, they provide permanent residency permits a lot easier and faster than the US does for the targeted skilled workers. In many of those countries, immigrants can apply for permanent residency before moving to the country and often receive such permit while still being in school before entering the labor force. This contrast with the 10 year purgatory Indian and Chinese engineers suffer in the US.
The author does not mention India among those countries fostering immigration. This is for a simple reason: it has an abundance of homegrown talent. And, India has far improved the local opportunities for such talent. Bangalore rivals Silicon Valley. Major US high tech companies such as Google, Amazon, and Microsoft have all huge operations in India. As a result, Indians increasingly stay home. From 1964 to 2001, 30% of Indian graduates from the Institutes of Technology went to the US. Between 2002 and 2008 that number declined to only 9%. This rapid decline is due to both faster relative economic growth in India and really restricting US immigration policies for Indians.
The author's recommendations to fix our immigration policy make a lot of sense. They include boosting the number of green cards available to skilled immigrants. The 7% cap per nation should be eliminated. The spouses of H-1B holders should be allowed to work and have driving licenses. H-1B visas should not be restricted to a specific employer, and related green card applications should not be restricted to a specific job. Those recommendations seem so obvious and humane, it is sad that they are even necessary. Meanwhile, the immigration debate in Washington is solely dominated by the issue of the porous border with Mexico. The US only ignores the issue of skilled immigration raised by the author at its own economic risk.