The Century of the Highly Skilled Immigrant

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24 oktober 2012 | Around the globe, policymakers are looking for ways to stimulate their economy. The solution is to invest in high-skilled immigration states Nick Schulz from the American Enterprise Institute. What can Europe learn from America’s ambitious plans?

Nick Schulz pleads for more highly skilled immigrants to secure the future and wealth of the United States. “The United States is rich in many natural resources, but it needs more of that ultimate resource to thrive in the 21st century”.

The power of Human Capital

Often capital is thought of as factories and machines but in today’s economy human capital has become far more important. The human capital stock now exceeds $750 trillion, in comparison, the physical and financial assets owned by American households is $70 trillion.

As important as human capital is to economic success, it is not evenly distributed around the world. There is ample human capital already in the United States, but there are also enormous stocks of human capital found overseas. Immigration holds the potential to broaden and deepen the stock of human capital in the United States. Immigrants have a profound impact on the American economy, but not the sheer growth in number is important. India and China, for example, have way more citizens while their economy is much smaller.  It are skilled immigrants that contribute to productivity growth.

Immigrant company founders

One of the factors that skilled immigrants contribute above average to the economy is that they are 30 percent more likely to start a business than those who are native-born. Research from the Kauffman Foundation shows that new firms are responsible for the vast majority of net new jobs in the United States.

Several of the most well-known and largest American companies are founded by immigrants. Think of Levi Strauss who forever changed American retail, culture, and fashion when he started selling denim jeans. Also Yahoo! founder Jerry Yang or Intel’s Andy Grove are not born in the United States. 

Science and Technology
Skilled immigrants can be found in every line of work, but many either work or start businesses in some of America’s key growth sectors. Immigrants accounted for well over 50 percent of the growth in employment in science, technology, engineering and mathematics between 2003 and 2008.

The OECD looked at the role that immigrants play in promoting innovation and economic growth in advanced countries. It reported that “migrant enterprises are no longer confined to the lower segments of markets, and they are increasingly found in high-value activities which characterize advanced urban economies. In the United States, skilled migrants outperform college-educated natives in terms of starting companies, commercializing and licensing patents”.

“Migrant entrepreneurs are in a good position to personally stimulate trade with their countries of origin,” the OECD continued. “Moreover, they can serve to show the way for other firms that want to engage in trade with their former home countries, by strengthening business networks and disseminating knowledge about markets in migrants’ country of birth.”

Still the promised land?
George Mason University economist Alex Tabarrok recently put the matter this way: “The U.S. has an immigration policy that treats these potential citizens with something between indifference and hostility”.

On some measures, the United States is losing its edge. skilled immigrants are tired of bureaucratic hassles in their quests to become permanent residents, coupled with growing opportunities in their native countries and are increasingly leaving the United States to work and start businesses elsewhere. They found that “foreign national students are planning to leave the U.S. after graduation in numbers that appear to be higher than the historical norm as measured in STEM disciplines”. 

Tim Kane and Robert Litan of the Kauffman Foundation aptly summarized the situation that the country faces today when they wrote, “The single most important policy reform that will boost long-term economic growth in the United States is to reduce the barriers facing highly skilled and highly educated immigrants.” They point out that “at least 50,000 workers with advanced degrees are sent out of the United States each year, although they have already passed security tests and become part of the productive fabric of the U.S. economy. In a world where the knowledge economy adds more value to national incomes than physical labor, the current U.S. stance of exiling many of the smartest people in the world imposes self-inflicted wounds on our currently troubled economy.” 

The late economist Julian Simon was one of the nation’s great growth theorists. He was fond of saying that “the ultimate resource is people, especially skilled, spirited, hopeful young people who will exert their will and imagination for their own benefit and in doing so, will inevitably benefit the rest of us as well.”

As Alex Tabarrok states: “the world is now competing for highly skilled workers”. Making the inflow of highly skilled immigrants one of Europe’s top priorities, both in words and deeds, might be one of the only ways to secure Europe’s wealth for future generations.

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