Harvard’s William Kerr Discusses the Benefits of Attracting Global Talent

By TAP Staff Blogger

Posted on February 17, 2021


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In “Global Talent and U.S. Immigration Policy,” Harvard Business School professor William Kerr discusses how the United States has benefitted from high-skilled immigration since the 1970’s. In this article, Professor Kerr shares data on immigrant contributions, examines the important roles played by universities and firms, and he concludes with suggestions for how the U.S. immigration policy could be improved.

 

Below are a few excerpts from “Global Talent and U.S. Immigration Policy:”

 

Introduction

 

Talent is the most valuable resource in our modern, knowledge-intensive economy, and the global distribution of talent shapes the competitiveness of firms, the strength of our economy, and the social fabric of our communities. This chapter describes the movement of talent and the policies that shape these people flows, which are among the most important decisions countries make. While America has benefitted substantially from inflows of global talent since the 1970s, this lure has often been because of the economic or social features of our country, rather than a particularly effective policy environment. US leaders have an opportunity to design a better immigration system that will improve US competitiveness in the decades to come.

 

Most of this chapter focuses on employment-based migration for skilled work. Employment-based migration is a modest share of immigration to America, with family-based migration accounting for the majority of green cards granted each year.

 

Background on Skilled U.S. Immigration

 

Even in a country of the United States’ size, immigrants account for a significant share of US talent and thereby influence the economy substantially. Immigrants make up about 17% of US college-educated workers and 14% of the total workforce. This 17% represents a substantial shift from 1980, when immigrants represented 7% of the college-educated workforce (Hanson and Liu 2018; Ruggles et al. 2019). The immigrant concentrations are even higher in more skill-intensive and technical fields: 29% of college-educated STEM (Science, Technology, Engineering, and Mathematics) workers and 52% of doctorate holders were born outside of the United States. The WIPO data also show a large share of American-based inventors are immigrants (Wadhwa, Jasso, et al. 2007; Wadha, Rissing, et al. 2007), and about 33% of US-based Nobel Prize winners are foreign born.

 

Immigrants have also had a substantial impact on US business creation. Kerr and Kerr (2020) measure that about 25% of US entrepreneurs are foreign-born in recent years, and Partnership for a New American Economy (2011) calculates 40% of current Fortune 500 companies were founded by first- or second-generation immigrants. In Silicon Valley, immigrants lead half of engineering and technology start-ups (Wadhwa, Rissing, et al. 2007). This example illustrates a broader pattern of global talent concentrating spatially in a few key clusters. These talent clusters can enhance the productivity of talented workers working in close proximity (Carlino and Kerr 2015), and Kahn and MacGarvie (2016) show how access to a frontier economy boosts scientific productivity.

 

Innovation and Entrepreneurship

 

While immigrant inventors play an important and growing role in most every technology field, they are especially important in advanced technologies and software. Companies located in major tech clusters and with a computer- and software-heavy focus tend to have the highest shares of ethnic inventors. Since 2005, ethnic inventors who are not of Anglo-Saxon or European origin account for more than 40% of patents from Google, Intel, and Oracle, compared with less than 20% from 3M, Boeing, and Procter & Gamble. Most large companies fall in between these extremes.

 

Innovation and entrepreneurship raise long-run standards of living and boost US competitiveness. A 2019 survey conducted by Harvard Business School on US competitiveness polled business leaders and members of the general public on foreign skilled workers and their role for US competitiveness (Porter et al. 2019). Business leaders and respondents across the political spectrum all showed net agreement that foreign skilled workers have a net positive effect on the US economy, especially with respect towards innovation. There was also broad agreement that the United States should emphasize more employment-based migration to the country. Unfortunately, there was less agreement about how best to move forward in the short-run, with the general public also expressing confusion/uncertainty on multiple policy topics. This survey thus confirms a broad-based recognition of the core benefits discussed up to this point in the chapter, but also foreshadows the complexity of designing and achieving further policy improvements.

 

Gatekeepers for U.S. Talent

 

The vast majority of immigration to the United States comes through family-based migration. The United States grants about one million “green cards” (permanent residency) each year. Immediate family members of US citizens receive the majority and there is no annual cap on visas granted for family reunification. By contrast, the United States reserves only 140,000 green cards for employment-based migration, and family members of the employment-based migrant count towards this cap.

 

… the two most important gatekeepers for US talent flows: universities and firms. In many ways, these gatekeepers are as important, if not more so, than government under the US system for long-term employment-based migration given their role in selecting candidates.

 

Universities as Gatekeepers

 

Universities shape the skilled immigration pool through their selection of international students who receive F1 (student) or J-1 (exchange visitor) visas (Bound et al. 2015, 2016). Including renewals, the United States issued 362,929 F1 visas in 2018 (US Department of State 2019). While an F1 visa does not offer students long-term work authorization or residency, it often is a first step to a temporary employment visa. In 2018, two-thirds of H-1B petitions approved for initial employment (58,214) were filed on behalf of immigrants already in the United States and in 2017, the most recent year for which data is available, 34,488 H-1B visas were allocated to individuals transitioning directly from an F1 visa (USCIS 2018, 2019).

 

Kato and Sparber (2013) emphasize how foreign students consider future access to labor markets when selecting colleges. They show that a modest reduction in likely student access to H-1B visas in 2004 upon graduation led to fewer international student applications, especially among the most qualified candidates. This study highlights how talented students are especially sensitive to long-term uncertainty in potential destination countries. Recent US policy uncertainty is similarly dampening foreign student interest in America, and some graduate education fields like business schools have witnessed 2-3 years of consecutive declines in foreign applications, over-and-above any changes in application rates from natives (Jaschik 2019). This vulnerability and uncertainty is very concerning.

 

Firms as Gatekeepers

 

America utilizes an employer-driven system for the selection of migrants for work-based purposes. Indeed, a potential migrant cannot apply for most employment-based visas; instead, the hiring firm files the application to the government on behalf of the worker it selects. This approach places tremendous power and responsibility in the hands of the firm.

 

An employer-based visa system provides significant advantages, including job guarantees for workers, the potential for better candidate selection, and rapid flexibility to respond to shifts in market demands. The US system avoids unemployment for migrants by conditioning all applicants on a guaranteed job offer (e.g., a candidate in a points-based system could have great education credentials but be in a field with few available jobs). The firm-based system also potentially leads to better employer-employee matches and better overall selection because firms are incentivized to evaluate applicants in ways that points systems find difficult to capture (e.g., very special skillsets, soft skills and team work, creativity).

 

The tied employer-employee relationship incentivizes firms to recruit and train foreign workers, but it potentially weakens worker negotiation power. Overtime, reforms have boosted the portability of visas across employers. However, worker mobility is curtailed while waiting for green card processing, which can take 7-12 years (Hunt 2017; Depew et al. 2017). H-1B workers are thus more vulnerable and dependent on their employer during some of the critical phases of this processing.

 

U.S. Immigration Policy Proposals

 

This chapter closes with some potential policy changes that would affect high-skilled immigrants to America and hopefully boost the entrepreneurial and innovation stimulus to our economy. For further discussion and details, please see The Gift of Global Talent and, more recently, Kerr and Kerr (2020b). Many ideas below are adjustments to the existing system, while others necessitate broader reforms, and they work backwards from the green card application.

 

1. Remove country-level caps to employment-based permanent residency. Several recent proposals suggest increasing or eliminating the country-level caps, and such alleviation would decrease migrant uncertainty, increase worker mobility to help facilitate better employer-employee matches, and allow entrepreneurs to gain permanent residency faster and launch their ventures.

 

2. Increase the number of H-1B visas. An expansion of the H-1B program is one of the most frequently proposed and debated proposals. Policy makers should also consider indexing future caps to economic conditions and related factors to eliminate the need for future multi-year debates about nominal changes in the cap level.

 

3. Adjust the H-1B visa allocation mechanism. …mechanisms like wage ranking of candidates would be a substantial boost to the efficiency with which our scarce supply of visas is allocated (Sparber 2018). Under this approach, wages proxy for the worker’s potential value to the US economy… Establishing a minimum H-1B salary level, replacing the lottery with an auction (Peri 2012), and establishing regional visa system are related and sometimes complementary proposals worth considering.

 

4. Adjust school-to-work transitions. Policy makers should consider reforms that provide more guaranteed work time to international students after graduation, especially if also implementing mechanisms like H-1B wage ranking (which would put young new workers at a disadvantage compared to older worker with higher salaries).

 

5. Comprehensive immigration reform. Comprehensive immigration reform would potentially alter the total number of green cards allocated each year and/or the relative shares of family- vs. employment-based slots (along with many other potential changes like using a points-based system, providing permanent status to undocumented immigrants, and so on).

 

6. Visas for entrepreneurs. Countries are increasingly competing to attract the immigrant founders of high-tech and high-growth start-ups. Many countries have introduced targeted entrepreneur visas in the last decade, but US proposals have never made it out of Congress (Kerr and Kerr 2020b).

 

Concluding Thoughts

 

When considering these and other proposals, policy makers need to factor in the larger mix of political, social, cultural, and economic factors that shape these decisions. Immigration can spur the country forward, especially in the face of upcoming demographic changes that will result in an aging population and fewer workers. But, as the United States and many other advanced economies debate the right level of global integration, it is crucial to design the policies to spread benefits out more broadly and thereby generate the necessary political support. I write this chapter during the early days of the COVID-19 pandemic spread, and many different scenarios could lie ahead. Yet, in all of them, policy makers will need to grapple anew with how best to design America’s skilled immigration system, and it would be a mistake to let more years pass by without making important reforms.

 
* * *

Read the full article: “Global Talent and U.S. Immigration Policy” by William Kerr (Harvard Business School Entrepreneurial Management Working Paper No. 20-107, April 9 2020).

 

Note: This paper is a forthcoming chapter for an edited volume being published by the Hoover Institution at Stanford University. The chapter draws from The Gift of Global Talent: How Migration Shapes Business, Economy and Society (Stanford, CA: Stanford University Press, 2018) by Professor William Kerr.

 

William Kerr is the D’Arbeloff Professor of Business Administration at Harvard Business School. He is also the co-director of Harvard’s Managing the Future of Work initiative and the faculty chair of the Launching New Ventures program for executive education. Professor Kerr’s research centers on how companies and economies explore new opportunities and generate growth. In his book, The Gift of Global Talent: How Migration Shapes Business, Economy & Society (2018), Professor Kerr explores the global race for talent and how countries and businesses compete for high-skilled migrants. The book reveals how immigration has transformed U.S. innovation, reshaped the economy through the rise of talent clusters and superstar firms, and influenced society at large in positive and adverse ways.


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