The Exchange

Is U.S. Immigration Policy Holding Back Economic Growth?

The Exchange

By Susan Cohen and Michael Klein

In these final days of the presidential campaign, both President Obama and Governor Romney are becoming more vocal about their support for immigration reform. While there is still distance between their stances, both agree that it is important to encourage foreign entrepreneurs to come to America and launch their dreams here.

View photo

.
This is smart and sound. By providing a fair and unencumbered immigration path for entrepreneurs and emerging foreign businesses, we lay a foundation both for stimulation of the local economy and for U.S. job growth.

But the best policy intentions are thwarted when the immigration bureaucracy slams the door in the faces of foreign business talent.

A Growing Problem

Here's an example. A foreign technology company with a very exciting proprietary software product received three rounds of venture capital funding and was ready to launch a major presence in the U.S. They planned to transfer the two founders and several of their technology experts to New York for a few years to solidify the new U.S. operation, gain U.S. customers, and hire and train new U.S. employees. The rest of the company's staff would remain abroad. They wanted to spend their new infusion of several million dollars in venture capital in the U.S. market. But they wouldn't just spend the company's money to buy office equipment and furniture and hire U.S. workers, lawyers and accountants. They were prepared to lease apartments, buy cars, buy furniture for their apartments, eat at New York restaurants, and take vacations in the U.S.

But before any of this could play out, a U.S. immigration officer denied the visa applications of these talented and eager entrepreneurs. The official rejected the applications because he did not believe that the applicants' technical knowledge was specialized enough to qualify for a visa, even though they invented and created the technology from scratch.

It's Time for Reform

Visa scenarios like this one are disturbingly common and out of step with encouraging investment in the U.S. The Department of Homeland Security recently published statistics on the approval rates for visa applications for companies seeking to transfer expert personnel to the U.S. Over the last four years the approval rate for these applications has dropped more than 20 percent!

The cumulative effect of this increasingly hostile attitude toward foreign entrepreneurs and businesses is significant. According to a recent study published by The Kauffman Foundation, immigrant-led businesses have generated $63 billion in sales and have generated a whopping 560,000 jobs since 2006. But the study goes on to say that immigrant-run high tech companies are no longer growing. Since 2006, the proportion of new companies founded by foreign-born entrepreneurs has begun to decline, after two decades of consistent growth. Silicon Valley experienced an especially steep decrease.   Some of the most exciting new high tech companies are now launching their operations abroad. We are missing out on all of the economic gains that we would have enjoyed had we opened our doors to these companies.

Our immigration bureaucracy is not in step with the administration's approach of encouraging investment and opportunity in the U.S. Until this is remedied, it's not just foreign entrepreneurs who lose out when their visa applications are denied; our U.S. economy loses as well.

Susan Cohen is Chair of the Immigration Department at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. Michael Klein is a Professor at the Fletcher School, Tufts University, and a Senior Fellow at the Brookings Institution.

View Comments