An Outflow of Talent

As the world hurtles headlong into the deepest global recession since the Great Depression, the controversial cultural and economic tensions that have always existed around the sensitive topics of immigration and immigration policy are again coming to the surface in the United States. A land of immigrants, religious outcasts, and refugees fleeing wars, poverty, starvation, and oppression abroad, the United States has long been viewed as the most welcoming country in the world. Immigrants always believed that their children would have a chance at a more prosperous life than the one their parents led—the ultimate American Dream. Today the political clouds of nativism are swirling in Washington, DC. President Obama and the US Congress, reacting to the ongoing political backlash against financial institutions, have passed a bill restricting US financial companies from hiring foreign nationals on H-1B visas. These visas are the most common type of employment permits for foreigners and have traditionally been a pathway to full citizenship. Before the ink on the bill had dried, the country’s largest financial institution, Bank of America, announced it would rescind job offers from foreign MBA students. The nativist logic is clear: with US unemployment heading towards 10 percent and perhaps beyond, nativists question why US companies hire foreigners to perform jobs that out-of-work Americans could perform. I personally have experienced the building xenophobia. Articles that I have published explaining the economic benefits of open doors immigration policies have created enormous backlash. I have received overtly threatening emails and hundreds of unpleasant messages telling me, in no uncertain terms, that skilled immigrants are no longer welcome here. I have received arguments that are familiar derivations of the nativist logic. Xenophobes claim that immigrants on H-1B visas are paid less than comparable American workers and depress wages. Others argue that immigrants crowd out Americans in similar positions, causing US-born students to lose interest in Science, Technology, Engineering, and Math (“STEM”) fields and to stop seeking education and employment in those critical areas. They add that immigrants filing for patents are displacing Americans who might have filed for patents but could not get good science-related jobs. The xenophobic tide could not have come at a more inopportune time. Even before the nativist sentiment emerged, growing numbers of talented immigrants had been abandoning lives in the United States to return to their homelands. They returned due to growing perceptions that brighter economic futures and greater chances for career and professional advancement lay abroad. With America no longer having the huge economic advantage it once had, other factors are coming more into play, such as the inconvenience of current restrictive visa policies and the anxiety associated with living far from friends and family in an unfamiliar culture. The United States is experiencing a brain drain for the first time in its history, yet its leaders do not appear to be aware of this. The ramifications of this brain drain are critical and will be long-lasting. The current generation of foreign students matriculating at US universities—some of the students on which the United States currently relies to provide scientific manpower for critical research and development efforts in a slew of science and technology fields—will likely return home faster and in greater numbers than any generation of foreign students in recent decades, according to recent research completed by my group. This exodus will also expand to other fields as diverse as finance and agriculture and impact a large set of industries. Furthermore, the new visa restrictions and the message they carry come at precisely the time when many highly educated and skilled non-US citizens are already losing their jobs due to the economic difficulties. Now, with the new unfavorable policies toward immigrants, they have additional incentives to leave. Unfortunately, their exit represents a net loss in growth that could have created jobs, filed patents, and founded companies in the United States, growth that will now occur elsewhere in the world. The economic growth and dynamism of these US-educated immigrants will depart, possibly forever, at the moment when the US economy needs as much exogenous assistance as possible in pulling out of its tailspin. America’s Skilled Immigrants The stereotype of the striving immigrant has long been a fixture of the US psyche. Over time the image morphed from a striving shopkeeper arriving shoeless in the United States to a striving computer programmer arriving with a degree from prestigious universities such as Beijing University in China or Indian technology institutes. In the information age, immigrant inroads into the US economy have only increased. Between 1990 and 2007, the proportion of immigrants in the US labor force rose from 9.3 percent to 15.7 percent. The United States has undoubtedly been a big winner in benefiting from the arrival of ambitious and often highly educated immigrants. Never has this effect been as pronounced as in the past three decades, when information technology became among the fastest growing sectors in the US economy. Immigrants came to the United States to study in science and engineering fields, primarily at the graduate level or working at US companies as computer programmers, engineers, or scientists. They stayed to work and have played a larger and larger role in both driving research and development efforts at large US corporations and in founding innovative start-ups. In return, the immigrant class in the technology sphere has enjoyed the fruits of their labors. The two ethnic groups that represented the highest percentage of immigrant tech workers, Chinese and Indian, both occupy high socioeconomic rungs. Indian households are the highest-earning racial group according to the 2000 US Census; Chinese households are significantly above the Census average. The bargain was simple: Immigrants would come to the United States and offer up their talents. The United States would offer them a higher standard of living, a good education for their children, and numerous other benefits. A Fraying Relationship In the late 20th century, the economies of the developing world began to emerge as growth engines. Economic reforms in India unleashed a slew of technology companies. The first handled mundane back-office tasks for foreign multinationals at a fraction of the cost of their previous cost. These so-called “body shops” evolved into dynamic technology innovators. For example, Infosys and HCL, leading Indian technology outsourcing companies, are now performing not only database administration capabilities but also high-level research and development functions, involving top grade researchers and work from large global industrial and technology brands. In China, the government has taken the huge surplus of foreign currency accumulated from serving as factory floor to the West and poured this money into top-notch university laboratories and research facilities. China has also taken the lead in a wide array of electronics manufacturing industries once considered high up on the economic food chain. Both economies have grown rapidly, far more rapidly than the economies of the West and the United States. With this growth has come a burgeoning middle class, entrepreneurial opportunities, and lifestyle improvements, placing China and India on far more equal footing with the West than previously imagined. Even while the immigrant contributions to the US technology sector grew from 2000 to 2008, anecdotal evidence of a growing number of immigrants considering or actually returning to their home countries began to surface in professional networks and in the media. Encouraged by the development of high-tech industries in their home countries and by the prospects of rapid career advancement and roughly comparable standards of living, immigrant technology workers began to view their homelands as places of greater promise than the United States. As these immigrants recognized the possibility of pursuing career and economic objectives elsewhere, other factors, such as closeness to relatives, cultural appeal, and quality of life, became more important in determining where they chose to live. Currently, equally important factors are the US immigration policies that restrict over 500,000 highly skilled immigrant workers from opportunities to advance or change jobs. Why They Came and What They Contributed With financial support from the Kauffman Foundation, a research team including AnnaLee Saxenian of University of California at Berkeley, Richard Freeman of Harvard University, Guillermina Jasso of New York University Gary Gereffi of Duke University, Ben Rissing of the Massachusetts Institute of Technology and myself, spent three years conducting multiple surveys in thousands of technology and engineering startup companies. The team interviewed hundreds of company founders, surveyed more than 1,000 foreign students and more than 1,000 returnees, and made multiple trips to India and China to understand the on-the-ground situations in these countries. This research built on AnnaLee Saxenian’s 1999 report titled “Silicon Valley’s New Immigrant Entrepreneurs,” the first broad assessment of the critical role that immigrants played in Silicon Valley’s regional economy. She found Chinese and Indian engineers at the helm of 24 percent of the Silicon Valley technology businesses started from 1980 to 1998. We expanded this research with a nationwide survey of 2,054 randomly selected engineering and technology firms founded between 1995 and 2005. In one of four firms, the chief executive officer or chief technologist was foreign-born. In Silicon Valley, the proportion of immigrant-founded companies had increased to 52 percent. From this information we extrapolated that by 2005, immigrant-founded tech companies generated $52 billion in revenue nationwide and employed 450,000 workers. We also examined the World Intellectual Property Organization (WIPO) Patent Cooperation Treaty (PCT) records for the international patent filings by US residents. We found foreign nationals residing in the United States were named as inventors or co-inventors in one quarter of WIPO patent applications filed from the United States in 2006, up from the 7.6 percent of applications filed in 1998. Foreign nationals working at some US corporations contributed to a significant majority of such patent applications for those companies. Patent filings with immigrant authors represented 72 percent of the total at Qualcomm, 65 percent at Merck, 64 percent at General Electric, and 60 percent at Cisco Systems. More than 40 percent of the international patent applications filed by the US government had foreign authors. These numbers do not include immigrants who had become citizens at the time of filing. Clearly, immigrants are contributing significantly to US intellectual property, a key ingredient for the country’s economic success. Why They Left and Life after They Returned As a team, we sought to determine why immigrants decided to leave and how they felt about their decision to return home. We located, via the online social network LinkedIn, 1,203 highly skilled Indian and Chinese workers who had worked or received education in the US and subsequently returned to their home country. Although our method of identifying returnees did not produce a rigorous scientific sample, we believe they are representative of an important group of technologically proficient young professionals. The average age of the respondents was in the low 30s, and more than 85 percent had advanced degrees. Among the strongest factors cited by these immigrants as reason for originally coming to the United States were professional and educational development opportunities. They returned home for a variety of reasons. Surprisingly, visa status was not the most important factor: Three of four indicated that considerations regarding their visa or residency permit status did not contribute to their decision to return to their home country. In fact, 27 percent of Indian respondents and 34 percent of Chinese respondents held permanent resident status or were US citizens. For this highly select group of returnees, career opportunities and quality of life concerns were the main reasons for returning home. In this vein, the ability to better care for aging parents and the desire to be closer to friends and family were strong incentives to return. Indians respondents, in particular, perceived that their social situations in India were significantly superior to those in the United States. The move home also served as a career catalyst. Respondents reported that they had moved up on corporate organizational charts by returning home. Only 10 percent of the Indian returnees held senior management positions in the United States, but 44 percent found jobs at this level in India. Chinese returnees went from 9 percent in senior management in the United States to 36 percent in China. Opportunities for professional advancement were considered to be better at home than in the United States by 61 percent of Indians and 70 percent of Chinese. Importantly, these respondents also felt that opportunities to start a business were significantly better in their home countries compared to the United States. Having surveyed returnees, we also wanted to gain insights into the next generation: foreign nationals currently enrolled in US universities. We were curious about how they viewed the United States, how they viewed their home countries, and where they planned to work after they graduated. This cohort is of critical importance to US prospects in the future. During the 2004–2005 academic year, roughly 60 percent of engineering PhD students and 40 percent of master’s degree students were foreign nationals. Foreign nationals make up a significant share of the US graduate student population in all “STEM” disciplines. Traditionally, the overwhelming majority of these students worked in the United States after graduation. In the recent past, the five-year stay rate for Chinese PhDs was 92 percent and for Indians 85 percent; most also ended up staying permanently. Our survey found evidence that this could change dramatically, with serious consequences for the United States. We used the social networking site Facebook to find 1,224 foreign nationals who are currently studying at US universities or who graduated in 2008. The respondents included 229 students from China and Hong Kong, 117 from Western Europe, and 878 from India. Again, this is not a rigorous scientific sample, but the group is large and random enough to make the results worth considering. The overall consensus among respondents was that the United States was no longer the destination of choice for professional careers. We learned that most students in our sample want to stay, but not for very long. An encouraging 58 percent of Indian, 54 percent of Chinese, and 40 percent of European students said that they would stay in the US for at least a few years after graduation if given the chance, but only 6 percent of Indian, 10 percent of Chinese, and 15 percent of European students said they want to stay permanently. The largest group of respondents—55 percent of Indian, 40 percent of Chinese, and 30 percent of European students—wants to return home within five years. More than three-fourths of these students express concern about obtaining work visas, and close to that number worry that they will not be able to find US jobs in their field. But their concern over work visas could only have been exacerbated by the ongoing attempts to curtail work possibilities for foreign nationals in the United States. Furthermore, the students’ assessment of their individual opportunities mirrored their view of the US economy’s future. Our survey found that only 7 percent of Chinese students, 9 percent of European students, and 25 percent of Indian students believe that the best days of the US economy lie ahead. Conversely, 74 percent of Chinese students and 86 percent of Indian students believe that the best days for their home country’s economy lie ahead. Our survey results led us to some alarming conclusions. The United States is in danger of losing large numbers of talented foreign-national students, particularly those from China and India. The students planning to leave cite the same reasons as the workers who have already done so: career and economic opportunities and the desire to be closer to family. When they look to the future, they see much more potential for economic growth in their home countries than in the US. The pull of growing opportunities at home is reinforced by the push of immigration and visa rules—and now the xenophobic sentiment expressed in Washington—that make the students uncertain about their ability to work in the United States. Our study was not longitudinal, so all we can do is compare the stated intentions of current foreign-national students with the paths actually followed by their predecessors. If we accept the results at face value, the United States is facing a potentially disastrous exodus of young scientists and engineers who are likely to be among the world’s most productive inventors and engineers in the future. Even if the loss of foreign nationals is only half as bad as our surveys indicate, their exodus will still have serious economic consequences. Prescriptions for Retention and Return The United States did have some advantages according to the returnees we surveyed. One area was gross salary and compensation: 54 percent of Indian and 43 percent of Chinese returnees indicated that total salary and compensation in their previous US positions were better than at home. US health care benefits were also considered somewhat better by a majority of Chinese respondents. And one somewhat surprising US advantage was the ease of settling into the culture. Only 17 percent of Chinese respondents and 13 percent of Indian respondents found it difficult initially to settle in the United States, whereas 34 percent of Indians and 35 percent of Chinese reported difficulty settling in when they returned home. Significant numbers cited difficulties encountered by themselves and their family members. Indians complained about traffic and congestion, lack of infrastructure, excessive bureaucracy, and pollution. Chinese complained about pollution, reverse culture shock, inferior education for children, frustration with government bureaucracy, and health care quality. Because neither China nor India can improve these conditions significantly in the near term, the US should advertise these relative advantages to foreign-born students and temporary workers. One encouraging characteristic of the returnees is their mobility; one in four says that he or she is likely to return to the United States in the future. Offering those who have left the United States better career opportunities and permanent resident status could entice a significant percentage to return. Further, those who left seemed amenable to returning to the United States. When asked how they would respond to the offer of a suitable US job and a permanent resident visa, 23 percent of Indians and 17 percent of Chinese said they would return to the US, and an additional 40 percent of Indians and 54 percent of Chinese said they would consider the offer seriously. Considering that this group of people has already made the decision to make the difficult move back home, the number willing to consider returning to the US indicates that US immigration reforms could have a significant effect. If the US were to create a fast track for highly educated and skilled immigrants—a step Canada has enacted to great effect—this would eliminate many visa concerns and, by extension, concerns about obtaining employment. Eliminating the flaws and restrictions of the H-1B visa system would further allow immigrant workers to switch jobs and while making it harder for US employers to pay the immigrants sub-standard wages, as occurs under the current system where workers are at the mercy of their employers to sponsor permanent residence applications. To address concerns about family and culture, the simplest step would be to allow talented immigrants to more easily bring in their extended families. After all, care of aging parents was a polarizing factor in decisions to return home, with an overwhelming proportion of respondents citing this as a strong reason for their departure from the United States. At a bare minimum, the US government must acknowledge the contributions of immigrants and embrace the view that adding smart people to the workforce generally has very positive consequences. Raising immigration barriers will only weaken the US economy and damage the US in the long run.