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Hopping on the Brain Drain Train


Friday, October 5, 2012

Americans are often accused of taking things for granted: Their freedom… their standard of living... their nation’s preeminence in the world… and their wealth of immigrants.

But now their trainload of foreign-born talent may be irreversibly heading out of town.

Earlier this month, the Washington Post highlighted a new study by the Kauffman Foundation that uncovered the sudden decline in immigrant entrepreneurship in America (http://www.washingtonpost.com/business/on-small-business/decline-in-immigrant-entrepreneurship-threatens-us-competitiveness/2012/10/02/bbe32c72-0cb8-11e2-a310-2363842b7057_story.html?wpisrc=emailtoafriend). During the last six years, researchers have discovered that the number of start-ups established by immigrants has decreased from 25.3% to 24.3%. This decline is even greater in Silicon Valley, where the proportion of new companies with at least one foreign-born founder dropped from 52.4% to 43.9% in 2005.

While a superficial glance at the relatively small decline nationwide might lead one to downplay its significance, closer examination of immigrant entrepreneurship trends over the last few decades reveals the underlying reason for concern: any reversal stands in stark contrast to the past. In fact, the study’s authors today wonder if “the period of unprecedented expansion of immigrant-led entrepreneurship that characterized the 1980s and 1990s has come to a close.”

Such a reversal poses serious troubles for an economy that is already sputtering. Young enterprises are a highly reliable generator of jobs, and many of them have an immigrant connection. According to a study by the National Foundation for American Policy, almost 50% of the nation’s top venture-backed, early-stage firms were founded by at least one immigrant. And the number jumps to 74% if one includes rapidly growing start-ups with immigrants in upper-management positions.

Strict immigration laws are discouraging many potential entrepreneurs from setting up shop in the United States (and subsequently hiring native workers). The bitter irony is that many of those entrepreneurial individuals who came to America to study science, technology, engineering and math in our top universities find themselves no choice but to return home. And once they do, they set up companies that often compete with similar firms based in the U.S.

Earlier this year, a bipartisan group of senators drafted the “Startup Act 2.0” bill that would create two new visas for foreign graduate students earning STEM degrees and those individuals who launch successful companies that create jobs here. The measure is currently stalled because of concern that its passage would undermine future impetus for broader immigration reform. Once again, politics is stalling our recovery and undermining our economic security. And talented immigrant entrepreneurs have no option but to leave the United States.

The brain drain train is about to leave the station – is it too late to keep any more passengers from boarding?



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