Why We Should Worry About the Drop in Immigrant-Led Start-Ups
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I had the pleasure of hosting an event last week for Vivek Wadhwa to discuss his important and troubling new book, The Immigrant Exodus. Wadhwa, an entrepreneur turned scholar, has done more than anyone else to call attention to the critical role that immigrants played in the rise of Silicon Valley and the vibrant tech economy that is rightly such a source of pride for many Americans. And his warning that we are now in danger of killing the goose that laid the golden egg needs to be widely read and addressed with urgency in Washington.
The importance of immigrant scientists, engineers, and entrepreneurs to the U.S. economy is now generally accepted, but much of what we know today is the result of pioneering survey work done first by AnnaLee Saxenian of the University of California, and later by larger teams assembled by Wadhwa, Saxenian, and other scholars. In a seminal 1999 study, Saxenian found that immigrants, particularly Indians and Chinese, comprised roughly one-third of the total scientific and engineering workforce of Silicon Valley. A 2007 survey by Wadhwa and others discovered that from 1995 to 2005, more than half of all Silicon Valley startups had at least one foreign-born founder; across the country the figure was just over one-quarter. These were astonishing findings given that just 13 percent of the U.S. population is foreign-born.
In theory, immigrant entrepreneurship should be growing even stronger. Wadhwa’s work has suggested that, on average, an immigrant who launches a company does so roughly 13 years after moving to the United States – a period of time long enough to build the skills and contacts necessary for entrepreneurial success. In the late 1990s, there had been a big surge in skilled immigration due to a temporary increase in the cap for H-1B visas. In theory, that should have resulted in an explosion in new immigrant founded companies over the past several years.
Instead, their latest survey – Then and Now: America’s New Immigrant Entrepreneurs — shows a drop in the number of immigrant-found companies in Silicon Valley, from 52.4 percent from 1995 to 2005 to 43.9 percent from 2006 to 2012.
What is going on? Some of it certainly reflects the growing opportunities for Indian and Chinese students and immigrants who wish to return home. The explosive growth in China and the opening of the Indian economy, especially in high technology sectors, has created possibilities for engineers and entrepreneurs that were unthinkable fifteen or twenty years ago.
But much of the wound is self-inflicted, created by quotas and other restrictions that have made it increasingly difficult for talented immigrants to remain in the United States. How much harder is it? Vivek writes that when he moved to the United States in 1980 after graduating from the University of Canberra in Australia, he immediately found work as an entry-level programmer at Xerox and had his green card in eighteen months, allowing him to pursue better jobs. Today, he notes, if he had come on an H-1B visa, he would have been stuck in his entry-level job for as much as a decade waiting for his green card, and his wife would have been unable to work for the duration.
He writes in the book about one young Indian immigrant, Anand Chhatpar, who graduated at the top of his class in computer engineering in Mumbai and entered the University of Wisconsin-Madison in 2001. By his junior year he had launched a company, and was named by Business Week as one of the “top 5 young entrepreneurs” in the country. In 2008 he and his new wife jointly created Fame Express, which grossed about $1 million in two years building Facebook applications. But in September 2010 – still without permanent status in the United States — they had to return to India to apply for EB-1 temporary visas, reserved for skilled workers. Despite having companies and employees back in the United States, they were denied. Today, they are trying to run their companies from Bangalore.
Some of Wadhwa’s recommendations for clearing away these immigration hurdles are familiar – increasing green card quotas for skilled immigrants, eliminating the current cap that only permits 7 percent of green cards each year for any one country (huge ones like India and China included), and allowing spouses of H-1B holders to work. These remedies generally enjoy bipartisan support, but in the funhouse mirror politics of Washington, they still can’t get through Congress. Just before the congressional recess, Judiciary Committee chairman Lamar Smith proposed an increase in green cards for skilled workers, but tied it to elimination of the diversity visa, which is supported by many Democrats. No serious effort was made to cut a deal, resulting in just one more symbolic vote.
But Wadhwa has some novel approaches as well. Instead of “stapling a green card” to the passports of foreign students who graduate with science and engineering degrees from American universities (which he fears would create “diploma mills”) he would extend the Optional Practical Training program to allow students to remain and work in the United States for up to four years. Those who are successful would then be able to apply for a green card on the merits. And he supports changes to the H-1B program that would allow visa holders to switch jobs and advance their careers without risking their immigrant status. In all likelihood, this would raise wages as companies vie to retain talented workers, addressing the legitimate concerns of some American tech workers that H-1B holders comprise a kind of captive, low-wage workforce.
There is much more in the book, and I urge you to read it. You can also see the full October 5 discussion with Vivek Wadhwa at the Council on Foreign Relations here: The Immigrant Exodus.
This post originally appeared on the Council on Foreign Relations' Renewing America blog, an Atlantic partner site.