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An Exodus Of Skilled Immigrants

The term “immigrant worker” tends to conjure up images from the lower end  of the spectrum in terms of skill and pay – farm labor, construction, hospitality  and food services. But the reality is far more complex. Foreign-born workers have, in fact, been a vital source of innovation and entrepreneurship in the U.S. economy. Nearly half of Fortune 500 companies were founded by immigrants, along with a quarter of all new small businesses.

But the United States may be losing ground as a magnet for entrepreneurs from other parts of the world.

In a new book, “The Immigrant Exodus: Why America is Losing the Global Race to Capture Entrepreneurial Talent,” author Vivek Wadhwa argues that increased competition from countries like China and India and more restrictive U.S. immigration policies are driving the most educated and talented entrepreneurial immigrants elsewhere.

Wadhwa argues that, with overall growth conditions remaining very weak in the broader economy, the country should be doing everything it can to encourage skilled foreign workers to stay here. OUTLOOK recently interviewed Wadhwa about immigrant entrepreneurs and how their flight is impacting the economy.

OUTLOOK: Give us an overview of the role of immigrant entrepreneurs in  America and the problem you see today.

Vivek Wadhwa: Over the last 15 to 20 years immigrant entrepreneurs have dominated the American technology scene. From 1995 to 2005 they made up 52 percent of Silicon Valley startups. As their numbers increased, so did America’s competitiveness.

That’s all great news – except while we have brought so many great people on temporary visas, we never expanded the number of permanent residency visas and green cards.And it’s not only in technology. Many of the leading medical researchers in the U.S. are immigrants as are college professors, doctors, and even motel owners.

We currently have a million skilled workers and their families stuck in line for their permanent visas. Many have been in this holding pattern for the last 10 or 15 years. They’re working for American companies, filing patents, and starting their own ventures, but because we won’t give them visas, they’re getting frustrated and they’re leaving. What’s worse, they’re starting companies outside the United States.

The United States is losing a key growth engine right at the moment its economy is stuck in a deep ditch.

OUTLOOK: Give us some examples of successful immigrant entrepreneurs.

VW: In the United States immigrant entrepreneurs have been legendary. There’s Andrew Carnegie from Scotland, who started Carnegie Steel Co., Alexander Graham Bell, also from Scotland who created AT&T and Charles Pfizer, who was born in Germany and created the pharmaceutical giant Pfizer.

Today, you can name great company after great company – eBay, Google, Intel, Yahoo, Sun Microsystems, PayPal – and they all have foreign founders. These companies are creating wealth. A 2011 study shows that first generation immigrants or their children had founder roles in more than 40 percent of the Fortune 500, accounting for $4.2 trillion in revenue and 10 million employees worldwide.

Now you’re seeing a lot of companies in India and China and also Brazil that are founded by returnees who have left the United States. This is a lesson. Give these countries five more years and we’ll be sitting here wondering what we were smoking back in 2012.

OUTLOOK: What countries currently dominate in terms of skilled labor here in the U.S.? What industries are they concentrated in?

VW: The top five immigrant groups that have been founding companies originate from India, China, United Kingdom, Canada, and Germany. Some of the top industries for skilled labor include computers and software, higher education, engineering and health care.

OUTLOOK: Why are immigrants critical to America’s economic development and intellectual capital?

VW: They bring in energy and diversity that in turn creates innovation, and they take risks and boost the economy, driving jobs. In 2011, immigrants created one quarter of all U.S. startups, they started nearly half of America’s 50 top venture-funded companies and they contribute to more than half of the international patents filed by companies like Qualcomm, Merck and General Electric.

OUTLOOK: Do you see any differences between immigrant entrepreneurs and homegrown entrepreneurs?

VW: They are the same. They come over here and assimilate very rapidly. They learn how to network and integrate. But immigrant entrepreneurs are important because they are twice as likely as native-born Americans to start a business, and we need immigrants to drive job growth and to drive innovation in America.

OUTLOOK: Is it easy to attract immigrant entrepreneurs to the United States?

VW: There is no shortage of people who want to come. They spend their own money to come here, and they’ll bring their life savings with them. When they start their companies, they call up their friends and families back home and get them to invest in their startups. We’re talking about transfer of wealth, tens of millions of dollars from all over the world and boosting our entrepreneurship.

OUTLOOK: What is the main difficulty facing foreign-born skilled workers who want to come to the United States and pursue their careers or start companies?

VW: Very simply, they can’t get visas. There is a visa category for skilled workers, the H-1B visa, but the numbers of these visas are very limited and often get exhausted as soon as they become available.  The greatest irony is that an H-1B holder can start a company in the United States, but can’t legally work for it.

OUTLOOK: Is the visa system broken?

VW: It’s worse than broken; it’s brain dead. We bring people in to study and to work but then when they want to become permanent residents and start companies, we tell them, “Sorry, we don’t have visas for you; go back home and do it in your home country.” They become our competition.

OUTLOOK: What can make the situation better?

VW: Increase the number of visas and bam – you fix the problem. Right now, we allocate 130,000 green cards to people who are working in this country, and those documents allow people to go from working within a company to starting their own business. But the law requires that no nationality can claim more than 7 percent of these cards.

In 2005, Indian entrepreneurs accounted for about a quarter of all immigrant founded companies, and the Chinese about 6.9 percent. Those Chinese and Indian engineers dominate the ranks of H-1B visa holders, and those people who entered on high-skilled H-1B visas are stuck with their sponsoring company, unable to switch jobs unless they can secure another sponsor. They also cannot start their own companies.

Many immigrants would gladly remain in the United States to start and grow companies. So it’s crucial that our government create a startup visa for these entrepreneurs and that we expand the number of green cards for skilled foreign workers. But we are not. We’re just being stupid.

OUTLOOK: How has increased competition from countries like China and India affected this problem?

VW: Not long ago, America was the only place you could see success. Now you can go back to China and India and do better there than you can do here. In 2010, we did a study of foreign students who had studied in the United States for at least a year and later returned to their home country to open a business. More than 60 percent of Indian respondents and 90 percent of Chinese said the economic opportunities in their home countries were an important factor in their return. Many people are doing better back home than they are here. We don’t have a monopoly on opportunity anymore.

OUTLOOK: How many immigrants are leaving America?

VW: We are losing tens of thousands each year. Huiyao Wang, who is the director general of the Center for China and Globalization in Beijing, has studied the trend. He says he has seen dramatic increases over the past decade in the numbers of entrepreneurs returning home. He estimates that 180,000 Chinese students returned to their home country in 2011, up from 50,000 in 2008. Many of them are starting companies and helping China become more competitive.

For my book, I also interviewed hundreds of smart, talented technology entrepreneurs from Brazil, China, England, France, India, New Zealand, and other countries – people who wanted to launch ventures in the United States. Immigration officials had denied their visas. In fact, there was no differentiated status for startups aside from the existing EB-5 visa class, which required significant capital investments to obtain the right to work in America. The EB-5 is a visa for people who invest a million dollars or more in U.S. companies.

They had the option of returning home for business and career opportunities that were often better than those available to them in the United States. So why would they put up with the frustrations of waiting a decade or longer for a green card?

Many people I spoke with said their treatment by the U.S. government was “insulting” or “humiliating,” but yet most really wanted to stay here and build a company.

OUTLOOK: How is this issue different than the standard debate over immigration?

VW: The immigration debate focuses on two things. There are the undocumented workers, those who supposedly jumped over the fence. That’s caustic because some groups argue that we should not tolerate anyone getting amnesty. Then there’s the H1-B visa debate that centers on skilled workers and there’s a fear that foreign people will take American jobs. Some natives say, “We don’t want any more to come in.”

Let’s leave those two debates aside for now. Let’s look at people who are looking to develop startups here. Those startups are starving for talent. If you bring in people with green cards and visas who can work in these startups and then create more companies, you’re going to get more people paying taxes, more innovation, more Googles of the world. It will be a dream for America.

OUTLOOK: What rules need to be changed?

VW: It’s about a lack of green cards and permanent visas. Simple, direct, and obvious changes to our existing immigration laws and policies can stop the entrepreneur and talent shift and secure America’s place as the world leader in innovation. And it wouldn’t cost U.S. taxpayers a dime. It would deliver billions of dollars in taxes into the U.S. Treasury, drive a renewal in U.S. hegemony over global patent filings, and create new jobs at the scale we need in order to revive our economy.

OUTLOOK: How is the rest of the world trying to copy America’s past success of using immigrants to drive innovation and the economy?

VW: A number of countries – Australia, Canada, Chile, China, and Singapore – offer stipends, labor subsidies for employees, expedited visa processes, and other perks to bring in startups. Chile has launched a program essentially bribing immigrants. They say, “Here is $40,000 to stay there for six months” with the hope that they’ll make it their permanent home. Australia and Canada have been the most aggressive about this, revamping their visa systems.

OUTLOOK: What does this mean long-term for the United States and its economy?

VW: It means that unless we get our act together, we are screwed. We are basically holding ourselves back. 

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