President’s Economic Report Includes International Students, Post-Doctoral Students and Researchers

February 13, 2006

The Economic Report of the President, released February 13, 2006, stresses the importance of immigrants in the U.S. workforce. The report specifically focuses on the positive impacts of international students, post-doctoral students, and researchers. The report stresses the critical role of immigrants in promoting innovation, especially in science and engineering. The caps on H-1Bs and on employment-based green cards are specifically addressed.
Full Report (5MB )

Excerpt (Chapter 2)   

Immigrants in the U.S. Workforce

Legal immigrants are a critical part of the U.S. workforce. Although both low- and high-skilled immigrants contribute to the U.S. economy, this chapter focuses on high-skilled immigrants. Chapter 4 of the 2005 Economic Report of the President covered immigration in greater depth, with a particular focus on illegal immigrants, who tend to be low-skilled, as well as the fiscal impact of immigration, immigrants and the U.S. labor market, and immigration policy and the enforcement of immigration laws.

Immigrants living in the United States can be divided into four groups: naturalized American citizens, immigrants who have become citizens by passing a citizenship test and fulfilling other requirements; permanent residents, immigrants who have “green cards” and the legal right to reside permanently in the United States but have not become naturalized citizens; temporary residents, people admitted to the United States temporarily for a specific purpose, including visitors, students, and temporary workers (referred to as nonimmigrants by immigration authorities); and illegal immigrants, people residing in the United States illegally. This chapter uses the terms immigrant and foreign-born according to the Census Bureau’s definition: Any person who is in the United States who was not a U.S. citizen at birth, that is, was not born in the United States or of U.S. parents.

Immigrants are prevalent in every education group but are particularly represented among the least-educated workers (those with less than a high school degree) and among the most-educated workers (those with a doctoral or professional degree). As U.S. workers have become more educated and increasingly work in jobs requiring higher education levels, many low-skilled
jobs continue to be filled by immigrants. At the same time, high-skilled immigrant workers are a significant part of the skilled U.S. workforce, especially in the science and engineering fields. Many of the nation’s university and private research laboratories rely heavily on immigrant graduate students, post-doctoral students, and researchers.

Immigrants in Science and Engineering

Innovation is crucial to U.S. economic growth and competitiveness, and the United States is a leading innovator. Innovation depends, in part, on scientific research, which in turn requires smart, creative people proficient in science and technology. One way in which the United States is able to maintain its position as a leader in innovation is by attracting the best and the brightest from around the world. Policies that welcome the world’s “best and brightest” can contribute to future U.S. competitiveness. More than one-fifth of America’s scientists and engineers come from abroad.

Chart 2-2 shows the share of immigrants among scientists and engineers aged 25–44 by education in 1996 and 2002. Immigrants tend to come to the United States as young adults, not as older workers. As the younger, more recent immigrants age, they should make up a larger share of older workers as well. Thus, restricting Chart 2-2 to workers aged 25–44 provides a glimpse at the future of the U.S. scientific workforce.

Immigrants make up an increasing share of the scientific workforce (see Chart 2-2). In 2002, immigrants made up about 24 percent of scientists and engineers aged 25–44, an increase from 17 percent in 1996. The higher the education level, the larger the share of immigrants: Among scientists and engineers with only a bachelor’s degree, 17 percent were immigrants (up from 11 percent in 1996), while among those with doctoral or professional degrees, 43 percent were foreign born (up from 38 percent in 1996). Immigrants are especially prevalent in the fields of engineering and math/computer science and in the physical/biological sciences. Among those aged 25–44 with professional or doctoral degrees and working in these fields, immigrants made up about half of workers.

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International Science and Engineering Students

The United States is a top destination for science and engineering students from around the world. In 2003, almost 150,000 students from abroad were enrolled in science and engineering graduate programs at U.S. universities. Nonetheless, new enrollment of such students has been falling. Between 2001 and 2003 (the latest year available), first-time international graduate student
enrollment in U.S. science and engineering programs declined by 13 percent. This decline may be the result of increased training opportunities in other countries and visa restrictions for foreign students and scholars put in place in the United States following the September 11, 2001, terrorist attacks.

After completing their studies in the United States, some students return to their countries of origin and others join the U.S. workforce. According to the National Science Foundation, about
three-quarters of non-U.S. citizens who obtain science and engineering doctorates from U.S. universities plan to stay in the United States, at least for the short term. In order to remain and work in the United States, these students must get temporary work visas or become permanent residents. This process is described in more detail in the section below.

Regulation of Legal Immigration

The H-1B Program

Temporary work visas allow foreigners to work in the United States for a limited period of time. A commonly used temporary work visa for high-skilled foreigners is the H-1B visa. The visa lasts for three years and is renewable once, for a total stay of up to six years. U.S. employers hiring H-1B workers must attest that they will pay the H-1B workers at least as much as similarly employed U.S. workers and that the working conditions of such workers will not be harmed. In order to hire an H-1B worker, U.S. employers must also pay government fees of $1,435 to $2,185, depending on
the size of the firm, plus an additional $1,000 fee for faster processing of the H-1B application. These costs help to ensure that employers are unlikely to hire H-1B workers unless suitable U.S. workers are not available.

Almost all workers with H-1B visas have at least a bachelor’s degree, and half have an advanced degree. H-1B visas have been particularly important to the high-tech sector, with over half going to scientists, engineers, and people in computer-related occupations. According to one study of H-1B workers, many such workers do not come to work from abroad but are hired as they
graduate from U.S. universities.

The number of high-skilled temporary workers is constrained by the caps on the H-1B program. The number of H-1B visas is capped at 65,000 annually for private companies seeking to hire high-skilled foreign workers, after having been temporarily raised to 195,000 during 2001–2003. Since May 2005, an additional 20,000 visas have been available each year for foreigners
who have a U.S.-earned master’s degree or higher. H-1B workers are not subject to the cap if they are employed at institutions of higher education, or at nonprofit or governmental research organizations.

Since reverting to 65,000, the H-1B cap has been reached earlier and earlier with each fiscal year. The cap for fiscal year 2004 was reached less than five months into the fiscal year. The cap for fiscal year 2005 was filled on the first day of the fiscal year, and in fiscal year 2006, the cap was reached almost two months before the year even started. That the H-1B cap has been reached so
quickly suggests that it is no longer sufficient to meet U.S. demand for high-skilled workers.

Some have proposed to increase the number of high-skilled workers by replacing the current H-1B cap with a market-based cap. A market-based cap would increase or decrease with demand for H-1B workers. If the cap were reached in one year, the cap would be increased by a set percentage—say, 20 percent—the following year. If the cap were not reached in a given year, it
would fall by a similar amount the next year. In this way, the number of H-1B workers would depend on demand for such workers. Any such change would require congressional action.

Employment-Based Green Cards

A temporary visa allows a foreigner to remain in the United States for a specified period of time. To stay permanently requires becoming a permanent resident. In determining who can become a permanent resident, U.S. immigration law prioritizes family- and employment-based immigration. Under family-based immigration, new permanent residents must be sponsored by family members who are themselves U.S. citizens or permanent residents. Under employment-based immigration, most workers must be sponsored by their employer and have at least a bachelor’s degree. From 2000-2004, about two-thirds of new permanent residents received their green cards through
family-based immigration, about 15% through employment-based immigration, and the remainder through various other programs such as those for refugees.

Caps on employment-based green cards limit the number of high-skilled foreigners who can become permanent residents. The cap is set at 140,000 visas per year, including visas for the workers’ spouses and children. Each country’s nationals can make up no more than 7 percent of total immigrant visas. These caps have led to long delays for applicants, especially for workers
from over-represented countries. For instance, some workers who became eligible in January 2006 for EB-2 employment-based green cards (for workers with advanced degrees or persons of exceptional ability) had applied for permanent residence five years earlier.

A variety of proposals have been advanced for permanent employment-based immigration to allow for more high-skilled workers and to reduce wait times. Any changes to the cap on the number of employment-based green cards would require legislative action. First, workers’ spouses and children
could be exempted from the cap, as is currently done for the H-1B program. Spouses and children make up about half of the recipients of employment-based green cards, so this change would roughly double the number of workers able to get employment-based green cards. Second, the fixed 140,000 cap could be replaced with a flexible market-based cap that would increase or decrease with demand for workers eligible for employment-based green cards. Finally, under current policy, nationals of no single country can receive more than 7 percent of green cards. This share could be raised to reduce the long delays for employment-based green cards for applicants from countries with large numbers of desirable, high-skilled workers. Careful enforcement of limits on foreign nationals’ access to sensitive technology would provide continued protection for our national security.

Skilled Immigration and Innovation

Legal skilled immigrants play an important role in the U.S. economy. They add to the process of scientific discovery, technology development, and innovation, which in turn lead to greater productivity growth. Greater productivity growth improves the standard of living for the U.S. population as a whole.

A recent World Bank study attempted to quantify immigrants’ contributions to innovation and the generation of new ideas, as measured by the number of patents applied for or received in a given year. (Patents are a commonly used proxy in studies of innovation.) According to the study, a 10 percent increase in the number of graduate students from abroad, as a share of total graduate
students, increases the number of patents granted to U.S.-based universities, firms, and other institutions by about 6–7 percent. Skilled immigrants overall have a smaller but still positive effect: a 10 percent increase in the number of skilled immigrants, as a share of the U.S. labor force, raises the number of patents granted to U.S.-based institutions by about 1 percent. The results of
this study may be partly due to a higher concentration of foreign graduate students in the science and engineering fields, as compared to domestic graduate students who are found in a wide variety of fields including humanities and liberal arts.

Skilled immigrants not only contribute to the innovation process themselves, they also help train our own future innovators. The foreign-born make up about one-fifth of science and engineering faculty at U.S. universities, including more than one-third of engineering faculty. As faculty, they teach both undergraduate and graduate students, training the next generation of U.S. scientists and engineers.

U.S. immigration law, by restricting the number of high-skilled immigrants authorized to work and settle in the United States, limits how many foreigners can contribute to the innovation process. Increasing the caps on the H-1B program and on the number of employment-based green cards would allow more high-skilled immigrants into this country. By welcoming more of the best and the brightest from around the world, these changes to the caps would enhance U.S. competitiveness and result in productivity gains for both immigrants and natives, raising the standard of living for the population as a whole.