Over the past century, the United States has established itself as the leading world expert in technological innovation. From as early as the industrial revolution, America has changed the world with innovations ranging from cars, planes, spaceships, semiconductors, and so much more.
Much of the United States’ success in becoming the world leader in innovation can be attributed to the way that we cultivated and encouraged new ideas from unlikely inventors such as the Wright Brothers and Henry Ford. But with the advent of the semiconductor in the last few decades, technological innovations have been improving at an exponential rate, fundamentally shifting the way that we live and work. In much of our history, America has been the place for immigrants to work on their grand ideas, whether it be Einstein’s contributions to science or Elon Musk’s attempt to improve the energy systems of our planet. The crucial aspect of this observation is that innovation in America has always been closely related to immigration, and continues to be. Currently, the technology sector is growing faster than any other sector, largely because of the mass transition of all industries to a more digital approach. But with the technological age that we are currently experiencing, the 20th century immigration framework will no longer satisfy the growth that we are currently experiencing.
Today, foreigners looking to pursue high-skill careers or start their own companies in the United States have limited options to enter the US market. If the foreigner is a student, she or he has the ability to get work authorization while studying at a US institution on an F-1 visa through Optional Practical Training (OPT). The student is allowed to work for up to 29 months of OPT after graduation from their institution. If the foreigner is not a student, H-1B visas allow corporations to sponsor a visa for foreigners whom they can prove to be of high skill for up to 6 years or more. The other option for visas as a foreign high-skill worker is the O-1 visa. The O-1 visa is granted under special circumstances for individuals with extraordinary ability or achievement. But even after securing an H-1B visa, foreign workers are still limited to the amount of time they can remain in the United States until they are able to get a green card, and unfortunately, only 140,000 employment based green cards are granted annually in the United States, with an extremely long waiting list of people trying to get green cards.
Though the existing visas have provided many high-skill immigrants with the ability to enter the US to work for existing corporations, the system has become increasingly difficult to go through due to abuses to the various visa processes and has sent many valuable high-skill workers away. Additionally, individuals coming to start businesses in collaboration with US venture capital firms have had difficulty finding the proper visa granting admittance into the US. The need for a startup and STEM visa is apparent in these circles, and H.R.962 and S.181 are bills in the House and the Senate that propose such changes.
The Need for Startup and STEM visas
Visas for Startup Founders
Startup accelerators in Silicon Valley offer their programs and investments to foreign founders, but are often unable to keep them in the country after the program is over, losing a significant number of tech companies to other countries because they are unable to remain in the United States. For entrepreneurs, the US economic system is set up in a way that is attractive to people starting new companies with new innovative ideas, and should continue to encourage startup companies to try new things. Foreign founders looking to start businesses in the US often face difficult immigration challenges in starting companies in the US, and are often forced to start companies in other countries as a result. And unlike the other options for high-skill employment outlined in the introduction, allowing foreign individuals to come and start companies would not take jobs away from Americans if the startup visa prohibited people with the startup visa from working in other companies. In fact, between 1980 and 2005, companies less than 5 years old accounted for nearly all net job creation in the United States. Thus, allowing more people to start companies in the United States would create not only more economic activity, but more jobs for Americans because there would be new corporations for Americans to work in. The fact that there still is not a special visa geared toward foreign entrepreneurs interested in starting companies in the United States is becoming increasingly detrimental to potential economic growth. Startup founders are unable to use the H-1B visa system because as an H-1B visa holder, you are not allowed to sponsor yourself.
Countries such as Canada and the UK have already implemented immigration programs for entrepreneurs to obtain visas, and can serve as an example for the US. The Canadian system qualifies anyone who has a letter of support from a designated angel investor or venture capitalist, owns a business entity in Canada, meets Canadian language requirements, and has an adequate amount of money to settle and provide for cost of living. The UK, employing a similar system for international startup founders, also allows foreign founders to start businesses in the UK or the basis of knowing English and having access to investment funds.
Visas for STEM Workers and the H-1B System
For STEM workers who are not necessarily entrepreneurs, many of the same motivations exist. Foreigners are drawn to US companies because of the level of impact, prestige, and significance that American companies carry in global markets. A recent study from Burning Glass shows that the demand for STEM skills is approximately double the amount of students graduating American universities with degrees in STEM related areas. This finding suggests that the high demand of STEM skills can be filled by foreign workers to generate more economic activity for US corporations without damaging the careers of American workers.
In 1965, the Immigration and Nationality Act allowed nonimmigrant temporary workers to work in the United States for three years, with the option to renew it once for a total of up to six years. This was done to allow US companies to employ talent from immigrants to help American businesses grow. In recent years, however, most companies seeking H-1B visas for foreign workers have not been able to secure visas for their foreign employees due to a large number of outsourcing firms flooding the application pool with candidates that merely try to underprice American workers. As a result, companies trying to secure high-skilled workers from foreign countries have begun voicing their desire for a reform to the H-1B visa system in Congress.
Introduced in November 2015 by Senator Chuck Grassley (R-IA), S.2266 seeks to address the abuse of the H-1 and L-1 visas. The abuse is apparent: The H-1B visa system works on a lottery, and while the number of H-1B applications has increased, the number of visas has remained at 85,000 a year, meaning that more people are competing for these spots, the large majority of which are submitted by a small number of firms that dump thousands of applications. Out of the top 20 firms that receive the most H1-B visas, 13 are global outsourcing firms who bring in foreigners to work for a cheaper rate than American workers are willing to work for, essentially taking jobs away from American workers. Therefore, S.2266 seeks to address this abuse by putting stricter restrictions on the wage, salary, fees, and more to prevent abuse as much as possible.
History of Immigration Legislation
In 1952, the Immigration and Nationality Act defined what later legislation referred to as the “nonimmigrant temporary worker”, which would form the basis of the H-1B visa. The act defined the nonimmigrant temporary worker as “an alien having a residence in a foreign country which he has no intention of abandoning, who is of distinguished merit and ability and who is coming temporarily to the United States to perform temporary services of an exceptional nature requiring such merit and ability.”
A decade later, the Immigration and Nationality Act of 1965 was the first system that considered immigrants’ skills and relationships with family in the United States. The Immigration and Nationality act did away with the quota system that specified the number of people that could come from each nationality in favor of a system that considered familial relationships and career objectives. In terms of foreigners coming to pursue careers, the Immigration and Nationality Act had two primary conditions specified in section 10. The first condition was that foreigners applying for visas to work in the United States must fill a role that does not currently have “sufficient workers in the United States who are able, willing, qualified, and available at the time of application for a visa.” The second condition is that “the employment of such aliens will not adversely affect the wages and working conditions of the workers in the United States similarly employed.”
In 1990, facing a need to be competitive in the growing global economy, Congress redefined what it meant to be a nonimmigrant temporary worker. The biggest change was removing the temporary nature of the visa as many H-1B visa holders were progressing to becoming permanent residents. This is known as a dual-intent visa in which the visa holder intends to use the visa to work while also eventually progressing to obtain permanent resident status through a green card. Additionally, Congress also changed the legislation to allow visa holders to stay past their sixth year if a labor certification has been pending for at least 365 days.
It’s hard to understand this issue without understanding the broader context of immigration reform. Immigration, a long-standing debate tied in with issues relating from xenophobia to economic growth to citizenship, is a very complex issue. The reason immigration has proved itself to be such a difficult discussion is due to the inclusion of everything from refugee immigration to illegal immigration to high skill immigration to national security and more. The birthright citizenship, a provision of the United States Constitution from its inception, is being challenged by Republicans as more immigrants, often undocumented, are giving birth to children in the States and ultimately using their children as their ticket into the country. But if we make immigration more restrictive to the people coming into the United States, Democrats argue that leaving the 11 million undocumented people in the US will continue to cost the US millions of dollars if they cannot properly assimilate into the systems that the US has set up.
The DREAM Act was a highly controversial bill designed to provide undocumented children a pathway to permanent residency. It was introduced into Congress in 2010, 2011, and 2012 without successfully getting the votes it needed to pass. However, the Obama administration has chosen to not deport children who met the criteria specified in the DREAM Act, using an executive order to allow undocumented children to remain.
Current Immigration Legislation
H.R.962 and S.181 are bills in the House and the Senate respectively that seek to address the gaps in the current immigration options for foreigners seeking technical careers in the United States. The two bills propose changes to both how foreign entrepreneurs gain admittance into the United States to start businesses as well as how foreign technology workers gain admittance to join companies.
Having gone through four iterations and re-introductions of this startup act since 2011, Senators Jerry Moran and Mark Warner have been persistently pushing this new bill that would tweak the tax code, immigration, and regulatory system in an effort to better stimulate growth and encourage startups in the United States. Senator Jerry Moran has been advocating for this bill since its conception, arguing that the implementation of this bill could generate over 1.6 million jobs in the next 10 years. Although the first version of the startup act did not include a proposal for a startup visa, the Startup Act 2.0 that was introduced to Congress in 2012 was the first version that introduced such a concept.
H.R.962 was referred to the Committee of the Judiciary, Ways and Science, Space, Technology, Appropriations, and Energy and Commerce. Receiving bipartisan support in the House of Representatives, the push from the members seems to be as a result of constituent interest rather than for political advantage. Specifically, both S.181 and H.R.962 propose a few concrete changes to immigration. The first is allowing up to 50,000 people with graduate degrees in STEM every year gain conditional permanent resident status as long as they are “engaged in a STEM field”. The second is allowing 75,000 “alien entrepreneurs” to start companies. A “qualified alien entrepreneur” is defined as an individual who registers at least one new business entity in a state, employs at least two full-time non-relative employees within one year, employs at least five full-time non-relative employees within three years, and invests or raises at least $100,000 for the company.
In the House, the last action the bill has seen was March 10th of 2015, with a referral to the Subcommittee of Research and Technology, where it has stuck for the past eight months. In the Senate, the bill was read twice and introduced to the Committee on Finance on January 16th, 2015. It is hard to say whether or not the act will pass these committees due to the wide range of changes that this bill proposes. Moreover, the bipartisan support of the startup act may be a challenge in our modern-day polarized Congress.
Another bill, known as the EB-JOBS Act of 2015 (H.R.3370) would change the legislation around immigrant entrepreneurship in the United States. Introduced on July 29th, 2015, H.R.3370 proposes to make EB-6 permanent resident visas available to startup entrepreneurs based on investment, job creation, and commercial activity. This bill also outlines the specific definition of investments that companies receive, or characteristics they must have if they are bootstrapped (when companies are completely self funded). H.R.3370 is sponsored by Zoe Lofgren, whose constituency includes the heart of Silicon Valley. Thus, when comparing H.R.3370 to H.R.962, H.R.3370 is much more specific in the different ways immigrant entrepreneurs can be qualified, likely because she has worked closely with tech industry leaders in her constituency to deeply understand the need for immigrant founders. For example, the text of H.R.3370 mentions and defines “qualified seed accelerators” as an organization based in the US and owned by US citizens that has at least 5 individual investments that are worth over $100 million or at least 20 investments that are worth over $150 million in aggregate. Although it is clear that this bill is exactly want Silicon Valley wants, it is still difficult to anticipate what Congress’s general attitude is.
President Obama has supports allowing immigrant entrepreneurs to start companies in the United States. Obama has shown his support by working with the Department of Homeland Security to improve the visa process for immigrant entrepreneurs. Among some of his actions include clarifying the eligibility criteria for H-1B visas, strengthening the EB-5 investor visa program, extending OPT for students, and more. While these efforts make the processes clearer, the power to establish a new class of visa resides in Congress, and is solely dependent on Congress’s ability to pass the Startup Act.
Arguments Surrounding Startup and STEM Immigration
Position of the Technology Industry
Paul Graham, founder of what is currently the most successful startup accelerator known as YCombinator, writes essays that are seen as “the bible” of Silicon Valley. YCombinator, an organization that finds early stage startups and invests $120,00 and a 15-week mentorship program for 7% equity stake in all of their startups, takes applications from founders all over the world and selects companies based on their potential success. To date, YCombinator has funded over 800 startups with a combined valuation of over $30 billion, giving credibility and weight to the things that Paul Graham writes. In an essay titled “The Founder Visa” written in April of 2009, Graham suggests that the “biggest constraint on the number of new startups that get created in the US is not tax policy or employment law or even Sarbanes-Oxley. It’s that we won’t let the people who want to start them into the country.” Graham argues that letting 10,000 startup founders into the country would have a visible effect on the economy and the jobs that are available in the United States.
If the United States did allow 10,000 foreign founders into the United States each year strictly to start companies, assuming 4 people per startup and a 9/10 failure rate, we are left with around 250 new startups a year solely from foreign founders in the United States. To the technology sector, this is an opportunity to continue the exponential growth that the technology sector has been experiencing in the past decades.
Paul Graham is not the only one in the tech industry that is advocating for more open immigration policies. On the front of tech employees, Mark Zuckerburg, founder and CEO of Facebook, has created an organization called FWD.us along with Marissa Meyer, Bill Gates, and others that is seeking more comprehensive immigration reform for immigrant workers. According to FWD.us, immigration reform would create 3.22 million jobs by 2024, reduce the federal deficit by $897 billion, and add $329 billion into the American economy. The potential benefit for the tech industry is significant, especially as tech companies continue to look for top talent to fill the roles in their companies.
As the US hesitates to make the reforms that the tech industry is asking for, many companies are setting up international offices and outsourcing labor as a workaround to the problem. One example for this is Automattic, the tech company behind the popular online content management software system known as WordPress. WordPress, used by over 25% of the whole internet, is developed by a company whose headquarters are in San Francisco but people work from all over the world. By employing a completely distributed workforce allowing employees to work from anywhere in the world, Automattic does not have to deal with any visa or immigration issues, making it an increasingly popular method of hiring top talent while avoiding federal jurisdiction. It can be argued that establishing offices in other countries in order to attract talent is a greater loss for America than people competing for jobs in the US. A foreign worker who comes to the US pays US companies for living expenses and more, while a foreign worker who works from outside the US brings economic growth to their home country rather than the United States. This argument is valid for both tech companies as well as venture capital firms, because the nature of the 21st century tech job means that the work can be done from almost anywhere in the world.
Another key stakeholder pushing for startup immigration reform is the Kauffman Foundation. The Kauffman Foundation, founded in 1966 by Ewing Marion Kauffman, seeks to advance entrepreneurship in the United States through teaching entrepreneurship, entrepreneur communities, and immigrant entrepreneurs, to name a few issues. According to the Kauffman Foundation, more than 40 percent of the Fortune 500 companies were started by an immigrant or the child of an immigrant, and 25 percent of technology companies created between 2006 and 2010 were founded by foreign-born entrepreneurs. Thus, their argument for immigrant entrepreneurs is that the contributions would have a very significant impact on the US economy.
Opponents to Immigrants in the Workforce
However, critics of workforce immigration argue that foreign workers push Americans out of their jobs. If we look at the majority of the H-1B visas that are issued every year, we find that outsourcing firms receive most of the visas. Outsourcing firms are able to hire overseas talent to fill positions that pay at least $60,000 a year, which in 2015 is at the lower bound of STEM jobs in the United States, meaning that there are people who come into the US to undercut the compensation, which beats out American workers. This is seen as highly unfavorable to many, and the evidence behind the pushback to a more comprehensive work immigration reform. One narrative that describes the way that the H-1B visa is being abused in the US is a recent turnover of the workforce at Disney World in Orlando. At one point, Disney laid off 250 engineers that kept their systems running and replaced them with foreign workers with H-1B visas. As more outsourcing firms game the H-1B system, stories like this are becoming more common, putting a sour taste in America’s mouth toward immigrant workers. Opponents to the H-1B system also proposing raising the minimum wage under an H-1B visa in order to minimize its potential for abuse.
But even with skilled labor there still exists significant pushback. In many ways, whether to allow foreign immigrants take high-skill technology jobs is an ethical question. Although allowing immigrants to take American jobs can be beneficial from a macroeconomics perspective, each job that is filled by an immigrant worker is a job that is not filled by an American worker. Even if an American employee would not perform as well as a immigrant at a job, should the job be given to the American employee because he or she is a citizen of the United States? This is a somewhat reasonable argument because existing Americans that are unable to find jobs can also be a drain on the economy. If this is the case, then at what level of superior skill should the job be given to the immigrant? These are difficult ethical questions to answer regarding immigrant labor that pose challenges to attempts to allow immigrants to work in the United States.
Additionally, the more competition for venture funding in the US could mean that funding would be more difficult to get, making it difficult for American founders to get the investments that they need for their businesses. Ultimately, allowing immigrants into areas such as Silicon Valley to start companies implies dramatic change for the area. San Francisco, a city that used to be a place for very eccentric people in neighborhoods such as Haight-Ashbury has become flooded with technologists crowding out families that have lived there for decades. Allowing more startup founders to saturate San Francisco would only further exacerbate wealth inequality and resentment toward the immigrants that have entered their city. Even today, San Francisco receives a lot of criticism for being overwhelmingly focused on tech, from people who protest the impact that AirBnB has had on raising rent prices to contract workers that drive Ubers and live without receiving health benefits. Thus, much of the local pushback in the San Francisco Silicon Valley is that allowing more immigrants will damage the area’s culture.
International STEM Students in American Schools
Obtaining an F-1 student visa in order to study in the United States is perhaps one of the easiest ways to enter the country. However, the prospect of staying in the United States after an individual with an F-1 visa graduates is often a very challenging process. The Optional Practical Training program, designed to allow international students to work with the intention of supplementing their education, gives an international student a certain number of months to work in the United States. However, many STEM students who do summer internships in tech companies begin looking for ways that they can establish careers in these fields. To the international students that have invested so much money to start their careers in the United States, many want to be able to continue to work in tech companies. But with the small number of H-1B visas that are being granted each year, many international students decide to pursue graduate school in order to buy more time and credibility in the US.
American institutions of higher education have done a great job investing and training students of extreme technical ability, and it would be a shame to be unable to offer the advanced positions in the companies that they want to be an active contributor in. One of the big markers of success to American institutions of higher education is the rate at which graduates are able to find careers. The more students that are able to get careers after graduation is often seen as a strong indication of an institution’s ability to prepare their graduates for the workforce. Thus, it would be to the advantage of higher institutions to allow international students to work within the US after they graduate.
Looking at Data
This points to the significant question around this debate. The real problem that Congress is trying to solve is: “How do we let foreign workers that have sufficient skills positively contribute to the US economy without disadvantaging the US citizens that need jobs?” In an economy that has so many moving parts, it’s hard to know exactly what the best policies are to address that problem. To better understand the implications of what H.R.962 and S.181 propose, we will need to look into the data for both STEM graduates as well as startup founders.
If we were to allow 50,000 STEM graduate students per year to remain in the United States to pursue STEM careers, we would hit 50,000 STEM graduates almost immediately. Currently, over 50% of the >100,000 advanced STEM degrees per year in the US are given to international students, and the large majority of the seek to work in American technology companies. Predicting whether these 50,000 international students would take jobs away from qualified American workers is hard to predict, but it’s also fair to say that requiring advanced STEM degrees from a US institution would be less likely to be abused than the current H-1B visa system.
However, if we were to allow 75,000 foreign founders into the US in order to start businesses as H.R.962 and S.181 propose, what would be the visible difference to our economy? According to Mattermark, a company that specializes in collecting data about the startup sector, venture capital firms in the United States are on track to invest $85 billion into startups in 2015, a number that has increased every year since 2009. And although $85 billion accounts for less than 0.5% of US GDP, the new startups that are formed create the large majority of the new jobs in the United States annually. Thus, allowing foreign founders to start companies in the United States will almost undoubtedly add more jobs to the US market than they would remove.
Final Thoughts on Startup and STEM Immigration
California, home to over 30 million Americans, is the most populous state in the US. And among the 30 million Americans that live in California, over 10 million of them are foreign immigrants. California also has the largest economy in the United States, arguably largely because of the immigrants that have settled in California. To the rest of the US, California should serve as the case study for the effects of more open immigration policies, showing evidence for enormous economic gains while also bringing in certain social problems. But given the impact of the innovations coming out of California, allowing highly skilled immigrant to work in the US is almost undoubtedly a way to continue technological innovation.
But as Congress seeks to make decisions that are beneficial to the country as a whole, Congress must think about passing policies that would work in favor of economies around the country. Economics is a very dynamic system in the United States, and what the data may be suggesting today is different than what it suggested 30 years ago and what it will suggest in 5 years. Therefore, this is a problem that needs to be continually assessed to determine what kind of impact it is making on the American economy. But, America will continue to benefit from the labor of highly-skilled technology workers as long as the growth of technology jobs continues to grow at the rate that it has been growing. No other country in the world is able to attract the talent that we are able to due to the incredible hubs of innovation that exists, and for the US to remain at the forefront of innovation we must continue to encourage the smartest people in the world to move to the US, benefitting the US as a whole.
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