America’s Loss is the World’s Gain

Vivek Wadhwa

Fellow, Arthur & Toni Rembe Rock Center for Corporate Governance at Stanford University

Recently, President Obama made a startling concession to the Republican Party: that he would accept a piecemeal approach to overhauling America’s immigration system. "If they want to chop that thing up into five pieces, as long as all five pieces get done, I don't care what it looks like", Mr. Obama said.

This is startling because, for the past few years, Democratic Party leaders have insisted on an all-or-nothing approach to immigration. They would not agree to increase the numbers of visas for skilled workers unless the Republicans agreed to legalize the more than 10 million immigrants who are in the country without documentation. The Republicans refused to provide “amnesty” to the unskilled, so the Democrats let the skilled immigrants — and U.S. competitiveness — suffer. This is no different from the juvenile behavior you see in other democracies.

The President realizes the political reality and is trying to get whatever he can through the system. But it is unlikely that he will have any success on immigration, because House leaders are still reeling from their loss on the fiscal shutdown and will not hand the President any kind of political victory.

This is bad for the U.S. but is good news for countries such as India, China, and Brazil. That’s because the U.S. has been giving these countries an unintended gift: highly educated and skilled workers with experience in U.S. markets. It has been sending would-be immigrants back home, exporting its competitive edge.

Immigrants have always given America its economic advantage. Skilled immigrants made it into a technology superpower. Wave after wave came to America’s shores and brought with them their education, knowledge of global markets, and determination to achieve success. They made the natives think smarter and work harder and contributed to practically all of its technology breakthroughs.



Over the past three decades, immigrants have been fuelling the majority of Silicon Valley’s innovation and growth. My research team at Duke, Harvard, and UC-Berkeley documented that from 1995 to 2005, immigrants founded 52% of Silicon Valley startups, and 25% of startups nationwide (read this research paper). They contributed to 72% of the WIPO patents filed by Qualcomm, 65% of those by Merck, 64% of General Electric, and 60% of Cisco Systems. Incredibly, 40% of the international patent applications filed by the U.S. Government also had foreign-national authors (more data here).

Indians thrive in Silicon Valley. They have founded 33.2% of its immigrant-founded startups—more than immigrants from any other ten countries combined have, including China, the U.K., Canada, Germany, Israel, and Russia. Indians also co-author 13.7% of America’s global patents.

Despite this amazing contribution, the U.S. is allowing itself to bleed competitiveness. It admits hundreds of thousands of students and workers on H1-B visas, but it doesn’t provide enough permanent-resident visas to let these skilled foreigners make the U.S. their new home. The result is that there are more than a million skilled immigrants and their families stuck in “immigration limbo”. The U.S. only issues about 140,000 permanent-resident visas to educated and skilled workers per year, and there is a 7% per-country limit. This means that applicants from high-population countries such as India, China, and Brazil get the same numbers of visas as those from Bhutan and Mauritius do: about 10,000. It takes decades for people from these countries to become permanent residents. While they wait, they are generally stuck in the same position with the same employer.

I explained the reverse brain drain that is in progress and the consequences of this in my book The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent. In a nutshell, because of improving opportunities in countries such India, China, and Brazil — and out of frustration with the delay in visa processing — the tide has turned. Skilled workers are returning home in record numbers. In research that my group at Stanford completed recently, we found that the proportion of companies founded in Silicon Valley from 2006 to 2012 that had been founded by immigrants had fallen to 44%. This was not because immigrants had become less entrepreneurial, but because they could not get the visas necessary for starting companies.

America’s loss has been a huge gain for other countries. If you visit any top Chinese research lab, you will find returnees from the U.S. at their helm. The tech centers of both India and China are growing rapidly with the infusion of Silicon Valley-trained talent. These returnees are bringing America’s best practices and entrepreneurial culture back home with them.

American leaders are well aware of the damage that the brain drain is doing to U.S. competitiveness. The President has cited my research in his speeches, and I have been asked to testify to both the House and Senate. The problem is that in addition to the issue of amnesty, there is also a xenophobic element in the U.S. that wants to keep foreigners out. And there are technology workers prevented from getting jobs by their location, age, or skills. They are all rallying against immigrants and complicating the factional battles in Congress. This is creating the stalemate.

So America’s loss is the world’s gain.

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