October 21, 2012 11:56 pm

US immigration policy is killing innovation

An Indian-born entrepreneur aims to shock Americans by showing the effects of closing the doors to talented foreigners

The Immigrant Exodus: Why America is Losing the Global Race to Capture Entrepreneurial Talent, by Vivek Wadhwa, Wharton Digital Press, RRP$15.99

 

As a rule, open economies tend to grow faster than closed ones. Those, such as the US, that take the huddled masses to its bosom, have an unbeatable advantage over societies that shut them out. Until they stop doing so, that is.

There is no better monitor of America’s shifting immigration regime than Vivek Wadhwa. Born in India, the entrepreneur and Duke University scholar fell in love with the US as a child when his father was on a posting to New York. “I also fell in love with the American people,” he writes in this new book, The Immigrant Exodus. “They were kind and open-minded.” Today, Wadhwa says, he would be unlikely to get a green card, let alone US citizenship.

In The Immigrant Exodus, Wadhwa hopes to shock and shame Americans into recapturing that spirit of openness. Nothing would be more American than to reopen the country’s doors to entrepreneurial foreigners. Unlike, say, tackling the nation’s rusting infrastructure, or reversing the decline in high school education, it would cost nothing to fix America’s perverse immigration regime. Given enough political will, it could also be achieved in a matter of days.

As a bonus, it would boost the country’s waning patent filings, which have fallen from 42 per cent of the world’s total at the end of the last century to just 27 per cent today. It would also generate billions of dollars in new tax revenues.

Alas, that prospect seems as far off as ever. Bipartisan attempts to carve out a “start-up” visa for foreign entrepreneurs – a modest imitation of what other countries are doing – get killed in committee. Several Democratic and Republican senators, such as Mark Warner of Virginia and Scott Brown of Massachusetts, have tried and failed to pass bills along those lines.

Much of the blame goes back to the effects of the terrorist attacks of September 11 2001, which pushed the country into a more security-conscious and often deeply paranoid mindset. Yet the restrictions on highly skilled immigration had been building up steadily throughout the booming 1990s.

The annual H1B quota for skilled overseas workers has dwindled to just 65,000 from 200,000 at its peak. But that understates the scope of the change. The rules specify that no single country can take more than 7 per cent of the quota, which puts a severe limit on applicants from China or India, which make up a near majority of overseas students in the US. Moreover, those lucky enough to get an H1B may have to wait a decade or more to be given a green card – compared with about a year when Mr Wadhwa was young.

During the waiting period they cannot change jobs. Their spouses are unable to work and in some cases even to get a driving licence. Why bother with such pettifogging when places such as Australia, Canada, Singapore and Chile will pay you to come to their shores? As a result, the US now has fewer foreign-born graduates as a share of its workforce than many of its competitors.

With less than a 10th of America’s population, Australia hands out 126,000 green cards a year, compared with 140,000 in the US. In Singapore, they handle your paperwork and reduce your taxes. In China, they welcome “sea turtles” – or returning graduates – as long-lost offspring and subsidise their housing.

It is thus little surprise that many Chinese and Indians have given up even trying to stay in the US.

According to a compendious survey of foreign graduates, fewer than 10 per cent of Indians and Chinese “strongly” desire to stay on in the US. This is an extraordinary shift from as recently as the 1990s. And it is a troubling signal of how unpragmatic Washington has become.

More than half of Silicon Valley’s start-ups are founded or co-founded by an Indian or Chinese-born entrepreneur. For every 1 per cent increase in immigrant college graduates there is a 9-18 per cent rise in patents. So open-and-shut is the case for skilled immigration, and so tangible is the damage to US competitiveness, that it is a struggle to understand how this could persist for so long.

To their credit, both Barack Obama, the US president, and Mitt Romney, his electoral challenger, say they want to fix the problem. But green card applicants should not hold their breath. America still welcomes some of the world’s brightest students and gives them the best education available. Then, as Wadhwa describes it, it puts them on an aeroplane back home.

It is not so much an immigration regime as a system of spectacularly generous foreign aid. As long as the US continues to subsidise its competitors in this way, there will be reasons to fear the country has taken leave of its senses.

The writer is the chief US commentator of the Financial Times

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