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Engagement Reframed

March 8, 2022

Engagement Reframed #4: Securing America’s demographic and economic future

By Mathew Burrows

Key points

  • US immigration law needs to be revised to ensure that the United States maintains its technological edge. Immigrants have played an outsized role in US technological prowess and in founding new job-creating businesses. The current tight labor market and a shortage of workers with tech and other skills provides an opportunity for expanding the H1-B visa and green-card programs, allowing the United States to remain a magnet for the world’s talent.
  • The damage to the United States’ reputation as an “immigrant” nation by the Trump administration’s entry and visa restrictions, compounded by the travel ban imposed during the pandemic, has not yet been undone, though the Biden administration has made a start.
  • Building a bipartisan consensus on immigration is needed more than ever in light of recent data on declining US birth rates and rapid aging. Although US immigration law has not undergone a major overhaul since 1990, House Republican support for the passage of the Dream and Promise and Farm Workforce Modernization Acts suggests that a basis for more cross-party cooperation is possible.

What is the opportunity?

Throughout US history, many American entrepreneurial heroes have been immigrants or the children of immigrants—from Alexander Graham Bell and Andrew Carnegie, both born in Scotland, to Intel’s Andy Grove and Google’s Sergey Brin, originally from Hungary and Russia, respectively. Indian immigrants comprise only about 1 percent of the US population but 6 percent of Silicon Valley’s workforce, and, as the appointment of Twitter Chief Executive Officer Parag Agrawal exemplifies, they disproportionately dominate the top echelons of tech corporate leadership. With increasing competition from China and elsewhere, immigrants are even more critical today to the future of US technology excellence. According to the nonpartisan National Foundation for American Policy (NFAP), “Immigrants have started more than half of America’s startup companies valued at $1 billion or more and are key members of management or product development teams in more than 80 percent of these companies.” 

The United States can maintain its competitive edge by revising its immigration laws. Ironically, there is no reliable way under current law for immigrants to start a business and remain in the country after founding a company. Successful immigrant entrepreneurs must be refugees who qualify for staying, or be sponsored by employers, or have family ties in the United States. A “startup” visa, for example, which would allow foreign nationals to start companies and create jobs, would be an important addition to the US immigration system. The long wait for employment-based green cards prevents many individuals in H-1B status from having the employment status that allows them to start a business.

The relatively low cap on the number of annual H-1B temporary visas—65,000 plus 20,000 for those with advanced degrees—can make it difficult for startup companies to hire new personnel in their fast-growing businesses or for international students to remain in the United States. Moreover, restrictions on H-1B immigration have caused multinational companies eager for talent to hire US-educated foreign scientists and technologists at their foreign affiliates when these individuals cannot attain H-1B visas for employment in the United States. In these situations, the other countries where the affiliates are located reap the benefit. Many of the companies facing the most difficulty in obtaining H-1B visas for their employees are concentrated in highly H-1B-dependent and R&D-intensive sectors operating offshore tech service sectors. In most cases, the affiliates to which the new hires are sent are in Canada, India, or China.

Without more skilled immigrants, US businesses run the risk of not being able to expand and remain competitive in the global economy.

Distinct from nonimmigrant foreign workers with H-1B visas, another important avenue for immigrants coming to the United States has been as international students. A quarter of the “unicorn” founders in the NFAP study originally enrolled in top US universities. Like foreign jobseekers requiring a work visa, international students have faced hurdles in the past few years. In 2018, the Trump administration reduced the duration of student visas from five years to one. Even more harmful was President Donald Trump’s anti-immigrant rhetoric, which many experts believe dampened international students’ interest in studying in the United States (while raising parental fears for their children’s safety). “After years of phenomenal expansion starting in the mid-2000s, enrollment growth [of international students at US universities] slowed to less than 1 percent by 2019-2020.” Arguably, the pandemic—which led to a halting of immigration for a time—took a bigger toll on the number of international students coming to the United States than Trump’s anti-immigrant policies. Some 2 million fewer working-age immigrants are living in the United States today than in 2019. Pandemic restrictions also caused “a staggering 15-percent decline in international students in the 2020-21 academic year.” Fortunately, enrollment partially rebounded in fall 2021 with a 4-percent increase over last year’s earlier level. If enacted by Congress, proposals to reduce the number of Chinese students coming to US shores could substantially affect US universities because the Chinese comprise the largest group of foreign students in the United States, approximately 30 percent.

Going forward, the economic damage to universities from lowered enrollment could be substantial. International students represented nearly 60 percent of all student population growth in 2000–2018. Today, with a declining youth population in the United States, the concurrent drop in the number of international students studying at US universities will be an extra burden on academic budgets. Many science, technology, engineering, and math (STEM) PhD programs depend on international students for their survival. A pre-pandemic study found that 70.3 percent of all full-time graduate students in electrical engineering; 63.2 percent in computer science; 60.4 percent in industrial engineering; and more than 50 percent in chemical, materials, and mechanical engineering, as well as in economics, were international students. If US immigration law is not overhauled to attract more international talent to study in the United States, university funding will not only decrease, but US innovation will stall as well. A World Bank report warned that any reduction in the number of “foreign graduate students” could significantly reduce US innovative activities; conversely, the report assessed that a 10-percent increase in the number of foreign graduate students would raise patent applications by 4.7 percent, university patent grants by 5.3 percent, and non-university patent grants by 6.7 percent. Although the United States remains a top destination for international students, other countries are increasingly competing for such students, particularly those in the STEM field. In trying to recover from the COVID-19 pandemic, Canada has opened additional pathways for enticing older graduates with work experience and others who are French-speakers to apply for permanent residency. Australia—another popular destination for Indians and others—offers permanent residency possibilities for postgraduates, although the process is considered more complex than in Canada. Germany, which has an active program for attracting and retaining highly skilled workers in areas experiencing shortages, is providing a fast track to permanent residency for both international graduates (after two years) and those recruited for their skills (four years). With such competition, US complacency could spell a slow decline in attracting the best and brightest. 

Why now?

Trump cited the hardships suffered by American workers who lost their jobs because of the pandemic as justification for suspending new work visas. Today, unemployment is low, and companies are facing a new crisis in trying to fill vacancies: too few skilled workers for the number of jobs. Shortages exist at all levels: lower-skilled workers are in high demand in the agriculture, construction, hotel, restaurant, and hospitality sectors. 

Even before the pandemic, tech-skilled workers were scarce. A New American Economy report found that “computer-related jobs . . . made up 69.6 percent of all foreign labor requests in FY 2020, a slight increase from FY 2019 despite the COVID-19 pandemic.” Despite lingering criticism that foreign workers threaten to take jobs away from Americans, “The unemployment rate for computer- and mathematics-related occupations was 2.3 percent. By 2020, that had only increased by 0.7 percentage points, to 3.0 percent. By March 2021, the unemployment rate for workers in these occupations was 1.9 percent, lower than it was before the pandemic.” Computer and highly skilled mathematics-based jobs have traditionally been filled in high proportions by immigrants on H1-B and other temporary worker visas. Business groups, such as the US Chamber of Commerce, assess that the need to increase immigration is urgent. Without more skilled immigrants, US businesses run the risk of not being able to expand and remain competitive in the global economy. Angering many traditional Republican supporters, US Chamber of Commerce CEO Suzanne Clark, has, in fact, called for “doubling the number of legal immigrants.”

Despite sharp partisan differences, public views of immigrants have shifted toward greater acceptance, according to a mid-2021 Pew Research Center survey. The share of people who see being Christian and being born in the United States as critical for being “truly American,” Pew found, “has significantly decreased between 2016 and November 2020.” Moreover, this has been the case regardless of a respondent’s party leaning, although less so for Republicans.

How to make it happen

Most every immigration reform has been controversial and has required a modicum of bipartisanship to secure passage. While the post-COVID recovery, tight labor market, and growing worries about competitiveness with China on technology make today a propitious moment for reform, the sharp partisan divide in Congress, as well as the upcoming midterm elections, make even limited legislative efforts parlous. The Biden administration still has some means to address the tech-worker shortage and the declining number of international students coming to the United States and could lay the groundwork for more substantial immigration reform over the long term.

Short-Term Expedients: The Biden administration downplayed H-1B visas in its original Citizenship Act in favor of increasing the number of green cards from 140,000 to 170,000, exempting STEM doctoral candidates. Biden hoped to make H-1B visas less attractive to employers, while promoting the chance of permanent residency, which has traditionally been more appealing to students and workers. The Citizenship Act, which included these changes, has stalled, prompting the administration to expand the types of degrees qualifying for STEM recognition and to allow STEM graduates to remain in the country for up to 36 months. University officials have commended the executive measure, which will help them re-attract the world’s STEM talent.   

Under the House’s COMPETES Act, holders of doctorates in certain STEM fields would be exempt from numerical caps on green cards, regardless of whether they earned their degree in the United States or abroad. Whether those provisions will survive the reconciliation process is unclear: the bill’s Senate counterpart contains no analogous STEM immigration provisions and, to become law, at least 10 Republican senators would need to support it to avoid a filibuster.  

The Biden administration should consider asking Congress to raise the cap on the number of H1-B visas. The base number of 65,000 was set more than 30 years ago, in 1990, and the additional 20,000 visas for advanced-degree-holders from US universities was added in 2006. Last year’s (FY 2021’s) H1-B lottery attracted more than 300,000 candidates, representing a 12-percent increase from FY 2020. Raising the cap is not unprecedented: it was raised to 115,000 in 1999–2000 and to 195,000 in 2001-2003. Encouraging more temporary visas can help keep the channel open for needed skilled immigrants in case the provisions favoring STEM PhD candidature for green cards in the COMPETES Act fail. Even if those provisions were enacted, more technically skilled workers would be required than those with PhDs. Expanded H-1B visas would provide such an avenue for a wider spectrum of highly skilled workers to come to the United States.

Needed Long-Term Solution: Close observers of the immigration debates on Capitol Hill believe that Democrats should invest more in building a consensus because there have been potential opportunities to forge common ground with Republicans. In March 2021, the House passed two bipartisan immigration bills to legalize the so-called DREAMers (individuals living in the United States illegally, but who first came to the United States as minors) as well as farmworkers. Nine Republicans joined Democrats to pass the Dream and Promise Act by a vote of 228-197. The Farm Workforce Modernization Act also passed, by a vote of 247-174, backed by 30 Republicans.  

The need for immigration reform is more pressing than ever. During the past decade and a half, demographers, economists, and other experts have grown increasingly worried about the declining birth rate and accelerating aging in the United States. Many had believed that the United States, with its large number of immigrants—who typically have higher birth rates than native-born Americans—would not see its birth rate decline so precipitously. The United States’ birth rate is now more in line with the low birth rates found among US allies and partners in Europe and Asia. Meanwhile, since 2008 the birth rates for immigrant groups in the United States have also dropped. In 2020, according to the Centers for Disease Control (CDC), the general fertility rate in the United States was about 56 births per 1,000 women—the lowest rate on record and about half of what it was in the early 1960s. Moreover, the decline in birth rates is seen across all measured racial and ethnic groups. Births dropped by 4 percent among white, black, and Latina women; 9 percent for Asian women; 3 percent for Hawaiians and other Pacific Islanders; and 7 percent for Native American and Alaska native women. 

Beginning in 2030, immigration is projected to overtake natural increase as the principal driver of US population growth, according to the US Census Bureau. In the absence of any immigration, the US population would stagnate, if not decline starting in 2030. With no population growth, the United States could experience permanently lowered economic growth; this is already occurring in rural counties, whose populations are shrinking. Not only is there a strong argument to allow an increased number of immigrants, but there is also a need to attract immigrants with special skills that could help the United States sustain its competitive edge. Conservative Republicans have been particularly vociferous in calling for skills-based immigration, which could help form the basis for a compromise on other issues that Democrats support—and Republicans largely oppose—such as providing a pathway for the United States’ 11 million undocumented immigrants to obtain citizenship.

The question is: how long does Washington want to wait to reform US immigration policies? The year 2030—when the US population could begin to decline—is only eight years away, and the last major reform of US immigration law was in 1990. Congress needs to better understand the demographic implications of inaction and consider the effects of a shrinking population on the United States’ ability to compete globally. With public attitudes becoming more accepting of immigrants, the Biden administration should begin educating the public on the demographic and economic future awaiting the United States if its immigration policies are not reformed soon. 

Photo by Go Nakamura. Migrants seeking asylum in the US from India, walk to turn themselves in to the US border patrol after crossing the border from Mexico at Yuma, Arizona, US, January 23, 2022. REUTERS

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Image: Migrants seeking asylum in the U.S. from India, walk to turn themselves in to the U.S. border patrol after crossing the border from Mexico at Yuma, Arizona, U.S., January 23, 2022. REUTERS/Go Nakamura