America is bleeding competitiveness

With anti-immigrant sentiment building across the nation, and clouds of nativism swirling around Washington, D.C., skilled immigrants are voting with their feet. They are returning home to countries like India and China. It’s not just the people we are denying visas to who are leaving; even U.S. permanent residents and naturalized citizens are going to where they think the grass is greener. As a result, India and China are experiencing an entrepreneurship boom. And they are learning to innovate just as Silicon Valley does.

Some call this a “brain drain” others say it is “brain circulation.” It is without doubt, good for these countries and it is good for the world. But this is America’s loss: innovation that would otherwise be happening here is going abroad. Without realizing it, we are exporting our prosperity and strengthening our competitors.

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There are no hard data available on how many skilled immigrants have already left the U.S. My estimate is that 150,000 have returned to India and China, each, over the past two decades. The trend has accelerated dramatically over the past five years; tens of thousands are now returning home every year. Most authorities agree with these estimates. For example, the Chinese Ministry of Education estimates that the number of overseas Chinese who returned to China in 2009 having received a foreign education reached 108,000: a sharp increase of 56.2% over the previous year. In 2010, this number reached an all-time high of 134,800 (a significant proportion studied in the U.S.).

Why is this important? Because, as research conducted by my team at Duke, UC-Berkeley, Harvard, and New York University has shown, 52.4% of all startups in Silicon Valley, from 1995 to 2005, were founded by immigrants. With all these immigrants leaving, and the next generation of foreign-born entrepreneurs trapped in “immigration limbo,” we won’t have as many immigrant founded startups in the future. The xenophobes who are lobbying against skilled immigration will cheer; but there won’t be more jobs for Americans; just less startups in the U.S. and more abroad. The U.S. pie will be smaller.

My team researched the backgrounds of immigrant founders, and the U.S. immigration backlog. We learned that the majority came to the U.S. as students; 74% held graduate or post graduate degrees, of which 75% were in science, engineering, technology, or mathematics. On average, immigrants started their ventures 13 years after entering the U.S.

During the last twenty years, we admitted record numbers of international students and highly educated foreign workers on temporary visas. But we never expanded the number of permanent resident visas that allow them to stay permanently. The result is that we have a backlog of more than one million skilled workers—doctors, scientists, researchers, and engineers, who are trapped in immigration limbo. They are working for the same companies and doing the same jobs as when they filed their paperwork for gaining permanent residence; this may have been 10-15 years ago. A foreign student who graduates with a masters or PhD in engineering from Duke or Stanford and joins the queue today will have to wait 10-20 years, perhaps longer, to gain permanent residence. They can’t start companies or progress their careers during the most productive period in their lives. Why would anyone put up with that?

Indeed, a survey we conducted of 1,224 foreign nationals who were studying at U.S. universities in 2009, or who had just graduated, revealed that they believed that the U.S. was no longer the destination of choice for professional careers. Most did not want to stay for very long. Fifty eight percent of Indian, 54% of Chinese, and 40% of European students said that they would stay in the U.S. for at least a few years after graduation if given the chance, but only 6% of Indian, 10% of Chinese, and 15% of European students said they want to stay permanently. The largest group of respondents— 55% of Indian, 40% of Chinese, and 30% of European students—wanted to return home within five years. This is very different than what used to be the norm in previous decades: the vast majority of Indians and Chinese stayed permanently.

Our surveys, in 2008, of 1,203 Indian and Chinese immigrants who had worked in or received their education in the U.S. and returned to their home countries revealed that although restrictive immigration policies had caused some returnees to depart, the most significant factors in the decision to return home were career opportunities, family ties, and quality of life. The move home also served as a career catalyst. For example, only 10% of the Indian returnees held senior management positions in the U.S., but 44% found jobs at this level in India. Chinese returnees went from 9% in senior management in the U.S. to 36% in China. The vast majority thought that quality of life, professional advancement, and family ties were at least as good at home as in the U.S.

The majority of the people we surveyed said they planned to start a business within five years. When we published our research, many experts said that this is where returnees would face the greatest frustration—that the weak infrastructure in India; authoritarianism in China; and corruption and red tape and lack of funding in both countries would be a severe handicap. In other words, when it came to competition from startups in India and China, the U.S. had nothing to worry about.

So, last September, we initiated a project to learn how the entrepreneurship landscape in India and China compares to the U.S. We wanted to learn why these entrepreneurs returned, what their perceptions of the entrepreneurial climate in their home countries were, what the advantages and disadvantages of working in India and China were over working in the U.S., and what types of ties they maintained to the U.S.

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We were really surprised at what we learned. In the next installment, I’ll discuss our findings.

Vivek Wadhwa  is a visiting scholar at the School of Information at UC-Berkeley, director of research for the Center for Entrepreneurship and Research Commercialization at the Pratt School of Engineering at Duke University, and senior research associate for the Labor and Worklife Program at Harvard Law School.

[Image via spierzchala/Flickr]