Immigration, Innovation, and Job Growth

It is a truth universally acknowledged that election-year politics add more heat than light to the issues of the day, and in that respect, this election year is little different from others – especially where immigration is concerned. Although there are many legitimate concerns about the state of our immigration system, one can’t help thinking that some politicians and pundits want to continue the debate to stoke the fires of popular discontent – not so much because they want to resolve our immigration problems.

What’s being lost in this national shouting match, amid nativist rants and populist fear-mongering, is a clear-eyed view of the economic benefits of immigration. In a recent Bloomberg Businessweek Viewpoint article. (See Immigration Can Fuel Innovation – and Job Growth, 09.Jul.2010.) economist Chris Farrell seeks to correct this, calling immigrant entrepreneurs “the vanguard in America’s global competition for entrepreneurial talent and innovative ideas.” If anything, Farrell says, we should “encourage more entrepreneurs from other nations to call America home.”

Farrell points to a recent study by the McKinsey Global Institute that looked at multinational corporations in the U.S., finding that, while only 1 percent of U.S. companies count as big businesses, multinationals contributed 31 percent of the gains in gross domestic product (GDP) from 1990 to 2007, on an inflation-adjusted basis. Moreover, Farrell notes, the McKinsey study found that U.S. multinationals represented 41 percent of labor-productivity improvements since 1990. Farrell says the study credits skilled immigrant labor – engineers, scientists, and business professionals – with “bolstering the competitiveness of American multinationals.”

The success of our high-tech economy depends on our ability to cherry-pick the best and brightest minds from other countries, Farrell argues. This reverse brain drain redounds to our benefit, and to maintain our lead in technological innovation, he says, we must continue to welcome talented foreigners to study here, and stick around after graduation. Farrell says that “…the degree that the nation’s cutting-edge industries, from semiconductors to biotechnology, depend on immigrant scientists, engineers, and entrepreneurs to remain competitive is stunning. For example, a quarter of the engineering and biotechnology companies started in the U.S. from 1995 to 2005 had at least one founder who was foreign-born.” (citing research by scholars Vivek Wadhwa, et al.)  During that same period, in Silicon Valley, more than half of the all high-tech companies were founded by immigrants, according to Farrell. Foreign-born inventors and co-inventors accounted for 24 percent of all international patent applications in the United States in 2006, Farrell says.

Immigrant success stories are not confined to high-tech fields, Farrell is careful to point out. Immigrant entrepreneurship has fuelled urban revitalization efforts, bringing small businesses into poor, blighted neighborhoods, like the Lake Street corridor in Minneapolis, and helping to turn them around, with successful shops and restaurants started by Latino and East African immigrants.

Farrell warns that we need to “put out the welcome mat” – or else! “The danger is that during a period of anger and vilification of immigrants, fortified by post-9/11 fears of immigrants, America will lose out in the global war for innovative brain power and entrepreneurial hustle. It’s all too easy for overseas innovators and entrepreneurs to stay home and pursue their dreams there, particularly in fast-growing emerging markets with modern universities and high-tech clusters.” Sounding a bit like Ronald Reagan lecturing Mikhail Gorbachev many years ago, Farrell calls for America to “tear down the walls that place obstacles to immigrants attending American universities and set up procedures for rapidly granting educated workers permanent resident visas.”

Farrell concludes his Bloomberg Businessweek piece with a call for “a permanent ‘entrepreneurial’ visa” for immigrants who want to start businesses here, and create jobs. Farrell also makes an impassioned plea for reform of the cumbersome H1B system: “Instead of piling on more obstacles to prevent abuses of the current temporary H1B system, why not streamline the whole process and eliminate many of the restrictions that make it difficult for workers to travel, change jobs, or earn a promotion? Let’s turn down the rhetoric and put out the welcome mat again.” Hear, hear! Perhaps when the mid-term elections are finally over, Congress will get back down to business on immigration reform. Time is money, and these reforms can’t wait forever.