How to kill the US economy in two simple steps

There’s a good article in today’s Boston Globe (Start-up India) about the dramatic contribution Indian immigrants make to the US economy. It starts with the story of Ganesh Venkataraman, who did graduate work at MIT, then stayed to found a biopharmaceutical company.

Venkataraman’s journey from India to America, and his transformation from engineer to scientist-entrepreneur, is emblematic of a generation of Indian-born immigrants who arrived in the United States for graduate school and stayed to become a key part of high-tech start – ups in fields like life sciences and telecommunications.

Many of these immigrants, and their companies, have become the gold standard for venture capital investment…

But Venkataraman’s story isn’t unique. In fact, people of Indian origin play a central role in US-based growth companies.

Neeraj Agrawal , partner at Battery Ventures in Waltham, estimated that roughly a quarter of the start – ups funded by Battery have chief executives of Indian origin, while half have Indians in their senior management ranks. “You want to fish in a good pond,” Agrawal said. “These are guys who will run through walls to make things happen.”

Sounds great, doesn’t it? Highly-educated, hard-working people creating jobs and wealth? The article cites several other examples and demonstrates that it’s no surprise that things have worked out this way. The entrepreneurial culture of the US combined with the technical training and stiff competition in India have formed the business equivalent of Reese’s Peanut Butter cups. And it’s not just Indian entrepreneurs, but people from many other countries as well.
The Globe paints a purely positive picture. But let’s face it, this great success story is under threat. There are two main things that could wreck it. One is happening.

  1. Make it harder for foreign students to come to US schools in the first place
  2. Make it harder for them to stay after they graduate

There was an initial dip in foreign students in the US after 9/11. Luckily the schools understand full well that they need foreign students and have been active in advocating for continued entry. Recently, student visa issuance has been increasing again.
However, it is definitely harder to stay on after graduation. There used to be a fairly clear path from student to worker to green card holder to citizen. Now it’s so much harder to get the H-1B visa in the first place. As a result the US is sending people home (or to third countries) who’d rather stay and make a contribution here.
And this change isn’t happening in a vacuum. As India and other developing countries have seen their economies improve, there are more and better opportunities for well-educated, motivated people to return to their native lands. So even if the US weren’t making it harder, there would still be increased competition. We should be working on how to make the US more attractive to such immigrants, not less!
The secret to US economic success has been an embrace of foreign-born talent and a dynamic, capitalistic economy. That model can and should be sustained. If it is, we can look forward to continued economic success. If not, we are in serious trouble.

A Harvard Crimson editorial from last month sums things up quite well:

Many members of the Class of 2007 effectively received deportation orders and lost their post-graduation jobs last week when it was announced that the supply of a key type of work visa had dried up in a single day—months before all but a handful of Harvard students could apply. The federal policy of cutting off educated and productive workers from overseas isn’t only unfair to those across the world who want a share in the American dream—it’s a bad policy for those of us who already live here. The federal government should dramatically raise the Congressionally-mandated cap on the H-1B high-skill work visa if not lift the cap entirely.

To many highly-educated professionals around the globe, America has long been a beacon of opportunity. Unfortunately, the United States has become a victim of its own popularity: last week, U.S. Citizenship and Immigration Services reported receiving 133,000 applications for H-1Bs on the first possible day, filling the cap of 65,000 more than two times over. Those lucky enough to have submitted an application will be entered in a lottery. But everyone else—including thousands of college seniors across the country who have yet to complete their graduation requirements—will be sent home to reapply next year.

This is a misguided policy because high-skill immigrants and guest workers contribute tremendously to our economy. For instance, one-third of Microsoft’s domestic employees are foreigners. And a 2004 study revealed that more American-born Intel Science finalists had parents who came to America on an H-1B visa than had domestically-born parents. Congress must recognize that the halo effect around these talented, innovative workers benefits the entire American economy. If we turn H-1B applicants away, they will take their training and high-paying jobs elsewhere—and shape global markets from places outside of the United States.

Let’s not kill the goose that lays the golden eggs.

May 7, 2007

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