Why the U.S. Is Losing Foreign Graduates

[varun]

Source: Businessweek

A new report says foreign science and engineering graduates are leaving the U.S. to start companies at home. Could a U.S. policy fix keep them here?
By Moira Herbst

Foreign students who graduate from U.S. universities with degrees in science and engineering are increasingly leaving the U.S. to pursue job opportunities in their home countries, according to a report released on Mar. 19. The report, called "Losing the World's Best and Brightest," warns that "the departure of these foreign nationals could represent a significant loss for the U.S. science and engineering workforce, where these immigrants have played increasingly larger roles over the past three decades."

Duke University Professor Vivek Wadhwa, one of the report's authors, says the U.S. should be trying to keep foreign graduates in the U.S. so they can create companies. "Rather than inciting populist sentiment against foreigners and fostering a new nativism, policymakers could instead provide incentive programs to encourage foreign immigrant entrepreneurship, perhaps pairing fast-track residency status with launching of companies," says Wadhwa. "This would help ensure that those who want to stay and start companies can do so."

Wadhwa points out that immigrants have helped found many prominent companies, particularly in the technology field. Among them are Google (GOOG), Intel (INTC), eBay (EBAY), and Yahoo (YHOO). The report also recommends loosening restrictions on temporary work visas, such as the H-1B visas that are used by highly skilled workers from other countries.

The Lure of Permanent Residence
His analysis is controversial. Some experts believe the issue of foreign students leaving the U.S. after graduation has less to do with immigration policy than with the dynamics of the global economy. "The survey shows the obvious: Rational people will go where the jobs are, and the jobs are in India and China," says Ron Hira, assistant professor of public policy at Rochester Institute of Technology...



Read more: http://www.businessweek.com/technology/content/mar2009/tc20090318_162454.htm?chan=top+news_top+news+index+-+temp_news+%2B+analysis

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It takes 5-10 years to become a legal permanent resident in US now. Why would foreign students stay here?

[TechBear_Seattle]

1. The whole point of foreigners coming to the US to study...

Is for them to leave the US when they have graduated and use their knowledge and skills at home. That is why the US gives student visas rather than student citizenship.

And why the bloody hell should we be encouraging foreigners to stay in the US and create companies, when we are still stripping US citizens of their means of support by shipping jobs to other lands? Why isn't this numbskull pushing to support Americans to start businesses?

[9119495]

3. Because if they start companies...

they create jobs. Whether the job is VP of ______, or custodian, the money stays here. We should be seeking to raise up American workers by any means necessary.

[Alcibiades]

5. The money does not all stay here.

Foreigners send plenty of it to their families back home.

How about making it easier for American graduates to start up companies? Or making it easier for Americans to become graduates in the first place? The Ivies, Duke and the other wannabe Ivies all turn away lots of qualified students every year and give their spots to foreign students.

Import substitution has gotten a bad rap from the ideologically motivated free traders, but it does work. Facilitate the growth of American companies started by Americans in America. "Nativism?" Or is it the same path of economic development followed by every successful nation on the face of the earth?

[Kalyan]

11. not in this global environment...

see the other side of the picture.

why should other countries import from US? Why not impose restrictions on US imports and have their own industries build their products? so we will have 100 Boeings (much smaller in size!) instead of one.

In this knowledge economy protectionism isn't going to work. what will work is to have more Americans take up engineering & science courses (the last i heard, the american nos were dropping). By the way - while i am not American educated, i know of my classmates who went there. They had to pay higher tuition fees than Americans. If that is the case always, then US universities lose revenue as well.

I hope you will see the big picture rather than the populist one.

Have a nice day.

[Alcibiades]

18. The populist picture is the big picture

Protectionism has worked. It has created the economies of every developed nation, and is creating new modern ones in the developing world.

We're not talking about tariffs here, though, we're talking about the development of human capital. I agree with your comment on engineering and science education. A large part of the reason why the "best" colleges and universities seem to prefer foreign born students in these disciplines is because we've done such a shoddy job of identifying and developing our young people to the point where they can do well in these subjects at the university level.

Colleges and universities in the US don't pay taxes, but they do get a large sum in taxpayer monies, from student aid, research grants, capital improvements, public support for state institutions, etc. Even foreign students paying full tuition are net consumers of taxpayer dollars, at least during their college years. Rather than find a way to get US students to study the sciences, they have opted for the easy way out by recruiting students who are "shovel ready." To the extent that these students remain in the US, it is a gain for us, but too few see that it is also a loss for their home nations, who educated them to the point where they were prepared to do well at an American university.

If other countries showed some reciprocity in this regard, though, I think it would be reasonable to accommodate them.

[Kalyan]

26. taking it forward ...

(1): protectionism - it is difficult to go back to protectionism. the minute you do, your exports come under threat. For eg: India is building it's own 100 seater aircraft. that will deprive Boeing of revenue. Or the business might go to Embraer. It is next to impossible for developed nations to embrace protectionism while asking developing economies to open up. Not going to happen.

(2): The experience i have had & i don't have data here: Only 10% of US educated engg & science graduates return home immediately. Most work a few years before coming back. So, even if they are net consumers of taxpayers money, they should have compensated for it. The only way to counter the globalization of US universities is for the govt to increase investments in high-school & middle-school where the kids learn fundamentals. That's where talent is nurtured & identified and if you don't spend money there, the kids are going to start lagging their counterparts from other countries.

(3): Usually, the students in at least the top US universities are the creamy layer from their respective countries. In fact, it is easier for a student from India to get into US top school than to get into equivalent Indian institution (too much competition for too few seats). While brain drain was lamented in the mid-90s & early-2000s, these countries have done well with the residual talent.

[Alcibiades]

31. At a minimum, we should not have incentives

for outsourcing. I think it's an unknown whether the supposed efficiencies outweigh the transactional costs and externalities associated with globalization, which currently appear not on the books of any given company, but are assumed by the public at large.

I agree with you on support for US students at the secondary level. In the words of GW Bush, I think the pie would be grown higher if we did this.

What I've learned from teaching is that the kids at the average small college or regional university are not too different in their latent ability than the ones at supposedly top-notch schools. They've been beaten down, though, and been passed along, along with a culture of lowered expectations, whereas the kids from the "creamy layer" would do well wherever they went. What I'd like to see is an educational system that tells them they can succeed, and gives them the tools to do so. We know that Americans will eat cockroaches or sell out their mother for money, or work as hard as anyone. The problem I see is a culture associated with lower SES students that says "no you can't!" We need to let kids from all walks of life know that hard work and determination actually does pay off.

[Kalyan]

33. agree

incentives for outsourcing human capital doesn't exists. incentives for outsourcing manufacturing does exist.

Let me explain: If US MNC wanted to set up a unit in India for their BPO operation, it is a cost center. The India center doesn't generate profit. Even in the unlikely event that it generates profit, the profit remains in the geography to whom the india center is providing services (as profit increase due to reduction in cost). Because of international laws, the Indian operation, a subsidiary is a legally seperate entity & hence the US operation has to pay for the services. Typically, to adhere to local laws - the markup is 10-20%. Including all the companies over the last decade, the total amount won't exceed a few $ billion in India. I know that the same is the case for low-cost operations in Eastern Europe.

When the $900+ billion is talked about, that comes mainly from manufacturing companies and manufacturing operations rather than service outsourcing

[9119495]

12. Stuff the Ivies

They are choked with legacies. Lagacy students take more spots of American kids than foreign students do. Why not advocate prohibitions on special treatment for legacies (like a certain former President Bush--actually it works for both of them)?

Now for the economic argument you make...we can simply reform the system. Look at the DU homepage the last few days. Every country in South America, as well as South Africa, Russia, and several EU states are already reforming their economies to grow things at home through nationalization, greater public sector spending, and progressive taxation plans. The free-market ideology is dying...and it can die without us worrying about the cultural background of someone who runs a good company.

[WilmywoodNCparalegal]

17. And you know this how...?

FYI, in order to obtain the form that allows a foreign student to then get an F-1 visa (student visa) in his/her home country, s/he must first be admitted by that school.

I don't know of anyone who got turned away in favor of a lesser qualified foreign student. I have gone to an institution with a heavy science and engineering emphasis (NC State) and a so-called wannabe Ivy (Duke). Being that I am not a US citizen myself (though I did not have a F-1 visa, but another visa as a dependent of a foreign worker - my dad), I mixed a lot with the foreign student population. Most were in the U.S. on scholarships (because a foreign student must show enormous monetary funds prior to enrolling, including fully paid health insurance and housing) given by their home countries and were superbly qualified, much more so than many of the U.S.-educated counterparts. I did not once meet anyone who was lesser qualified.

Incidentally, a few of my fellow NC State friends who ended up with majors in computer science and engineering founded companies right here in the U.S. and have remained here. Happily for them, they are doing quite well with their start-ups and provide jobs to several U.S. programmers and analysts.

[Alcibiades]

22. Lesser qualified than whom?

It's called selection bias. You probably don't know anyone who got turned away to give a spot to a lesser qualified student because they are not at NC state, but are at a community college or flipping burgers.

I think that much of the problem is due to the lack of reciprocity. If we gave out stipends for students to study abroad similar to those received by students studying here, this wouldn't be such an issue for me.

Assessing student qualifications in admissions is always fungible. Grading systems differ across school systems, and admissions already make allowances for that. The issue for me is that our secondary institutions do a rather poor job at getting students ready for science and math, and, until such time as that changes, our universities should do a better job at accommodating American students, rather than leeching off the best and brightest from the entire planet.

[Kalyan]

23. another point ...

do you honestly think that foreigners send more money home than they spend in the US?

[Alcibiades]

27. No, of course not

But they would send more money abroad than my hypothetical American entrepreneurs would, until such point that these hypothetical American entrepreneurs decide to source production globally.

The assumption is that these foreign students staring up companies in the US are not replacing companies that would have been started by Americans in the first instance. I do think that they are a net gain for the US economy, but there's also the question of whether they represent a loss to their home countries. Counterfactuals aside, though, the question is whether all people, in the US and abroad, are well-served by the underdevelopment of American human capital.

[Kalyan]

30. since we are dealing in the world of hypothetical situations ..

how are you certain that Americans would have started the same companies that foreign students started? but that is a hypothetical situation.

aside from that point, i agree with you: Under-development of American human capital is the issue here. The under-development is however at the middle & high-school level rather than at graduate & university level.

[Alcibiades]

34. We don't

Nor do we know that, absent the foreign students, no companies would have been started at all. We're starting from a hypothetical. I do think that many of the foreign students have an advantage in starting any enterprise, which is that, while Americans love money, few have the faintest idea anymore about how to acquire it.

We could go around and around on this, but by the time we get them at the university level, it's waaay too late. It might be a start if we could get science classes in the afternoon rather than the morning to accommodate the drinking patterns of US college kids, but that will never, ever happen, because it interferes with lab time.

[TechBear_Seattle]

7. So why not....

A) STOP SHIPPING US JOBS OVERSEAS

B) Make college educations more affordable for US citizens

C) Help US citizens start companies with their college educations



This three step plan will go a lot farther to raising up American workers than by continuing the sell-out of American assets to foreign owners.

[9119495]

10. It's a global marketplace...

a poor run "American" company will not survive any better than a poorly run foreign-owned American company.

College campuses need the diversity of thought, opinion, and culture that foreign students bring. You'll never get me to take a nativist argument on education. We would first have to prove that some credible study exists to show Americans can't start companies that compete with foreign-owned ones and that colleges turn away American students in favor of foreign ones. This is not the case.

[Alcibiades]

14. It's a global marketplace

because the bosses have made it so on purpose so that they can locate sites based on lowest cost, access to markets, profitability, etc. They make their money off these international transactions, and so every time the money churns around, they get their skim.

You can access global thought, opinion and culture in other ways than by stocking your schools chock full of foreign students. You can hire foreign professors, which has always been done. There are exchange programs. There's something called the Internet. There are semester abroad programs. And, yes, we should have foreign students as well, but the question is in what numbers, and studying what subjects? The "best" schools in the US seem to have a preference for international students, and that seems to have more to do with their desire to get paid than a great love of diversity. Moreover, if they really wanted to encourage cultural diversity, they would bring scholars who were interested in culture, rather than technology. We would have great numbers of foreign students intending to major in the arts and humanities, rather than in such highly technical fields such as chemistry, mathematics, engineering and medicine. We need to find a way to encourage and prepare American high school students for these majors, rather than stealing qualified students from other countries. Our higher education system is sucking these folks out of their home countries like a vampire, rather than developing the strength of the students who are already here, but who are discouraged by the cost of higher education.

It was not for nothing that our country has invested so heavily in higher education. The graduates of our various colleges and universities have enriched our economy, our culture and our thought. We have enormous sunk costs embodied in the edifices of granite, marble and glass that loom over our university towns. These institutions don't pay taxes, and get lots of funding from state and federal coffers. Is it too much to ask that they educate young Americans in not only the social sciences and humanities, but also the sciences?

[Kalyan]

19. illogical (?)

If you can pay $1 for a service, would you pay $5? regions that specialize in particular skills are able to provide advantage of scale operations. So, US has find it's USP to stay ahead & the USP till a decade ago was innovation.

Over the last decade, as a side-result of globalization, other regions are catching up with US on the innovation cycle. For eg: apart from Blackberry & Apple, most mobile phones today are designed in South East Asia; Don't you associate Blackberry & apple with innovation.

As i said earlier, don't other countries allow blackberry & apple to sell the products designed in US in their local markets. As per you - most countries should actually ban import (or at least punish them with tax cuts) and allow local companies to produce innovation.

[Alcibiades]

24. We're getting rather technical here

Much of the supposed competitive advantage in pricing for outsourcing is the result of currency differences that are the result of different levels of capital development and government policy rather than real competitive advantage. Since shipping costs are less than these differences, it is often profitable to outsource, at least from the perspective of the balance sheet of a given company. I think, and there is legitimate disagreement on this, that the dollar is the wrong metric, and that the real metric should be use value or real cost of production measured in human terms rather than artificial ones, in which case transportation costs usually wipes out the advantage associated with outsourcing.

Hidden costs and imperfect information have made globalization appear to be profitable in dollar terms, but we are seeing lately that this system is not sustainable on a long-term basis. It's a bit beyond my ambition at this point to propose a fully fleshed-out alternative to globalized capitalism, but I think a good start would be to focus on localized capitalism, one that develops industries and sectors for domestic consumption first, which is the exact opposite of the current model for economic development. The end result of all this churning will tend to be an equalization of international wages--for me, the question is whether we do this on a basis that is planned by states to maximize social welfare, or do it on a basis that is planned by multinational corporations for the maximization of profits. Our globalized economy did not happen by accident: it was designed to generate vast profits for a few well-connected insiders who operate internationally. Currently, this system has worked well from this standpoint (and perhaps even well in terms of fostering economic development) but it is also generating externalities that are hurting real people all over the world, at which point it is the business of states to step in.

[Kalyan]

28. valid point ...

however let me point out something to you:

* "that this system is not sustainable on a long-term basis": If the system is not sustainable in the long term, then the companies move to the new model. What it is? i don't know but companies are in for their profits and as long as they don't violate any laws, they will try and maximize their opportunities for profit.

Let me get back to my earlier point: US led (or still leads) in innovation. Apart from naming the obvious, most innovations in the past came from developed economies. Since the rest of the world is catching up, US needs to find newer pastures for innovation. GREEN TECHNOLOGIES is one of the most obvious areas. As long as product innovation & ownership comes from US, you will stay ahead in the race else get lapped up by whoever comes up with next innovation. Remember, pre-1947, Britain & not US was the global power. Lack of adjustment & innovation cost them their place at the top.

[Alcibiades]

32. Britan was felled

in part because of the enormous costs of fighting WWII, and the fact that its economy and that of its continental trading partners suffered enormously as a result of the war.

As we've seen, it is companies themselves who set the laws. Regulatory schemes are devised on a post hoc basis. Not all innovations are good: derivatives were an innovation thought to be great by the leading lights of the FIRE sector, but events have shown their faith to be misguided.

I'm not all that sanguine about the stability of the system long term. Companies will adapt, but it may be too late for many. We are in deeper doo doo than we even know, and it will take a while before folks know how it's all going to turn out, until which time it will be hard for any company to undertake new capital-intensive enterprises.

[Kalyan]

35. well said & agree

Derivatives are fine instruments till they were mis-managed. And that is the case with all innovations. if not managed, the results can be disastrous.

[treestar]

21. The jobs are going overseas, that's why the foreign graduates

are now going overseas and starting their companies THERE. Leading to spiraling job loss HERE.

Americans do not start companies any more. They feel entitled to a paycheck and won't take the risk. Even the most minor businesses. Go into any 7-11 or dry cleaner. Listen to IT workers whine they are victimized but never ever consider that if BIGCO has sent their job (allegedly) to India, never noticing they are STILL HERE and could start up their own IT consultancy and have "being American" as its main selling point!

Some people seem to have the goal of having Americans go back to working on the farms and in factories rather than being on the cutting edge in high tech, just so the economy can be all in America sealed within the US and having nothing to do with anywhere else.

Meanwhile, the rest of the world would march into the future.

[NashVegas]

25. Americans Don't Start Companies - We Start Investment Opportunities

Spend a little time reading forums for entrepreneurs and in a very short while you'll understand what's going on: what most of our under 35s who talk about wanting to start businesses *really* want is to attract venture capitalism dollars to start businesses, or shape business ideas into turn-key products, that can be resold for millions/billions. You rarely see *anyone* talking about an idea for a business that they, themselves, want to stick around and run for more than 2-3 years.

[TechBear_Seattle]

42. I would disagree

I expect that such forums target the "get rich quick" type to begin with, so of course the folks who participate in them are all about getting rich and getting out. I know a lot of people who would like to start a business that will stick around for a long time, doing something they love to do anyway.

[treestar]

44. I know of a lot of people who have small businesses

The kind you are running 24/7 or close to it and can't go off for a round of golf ever. The owners of these are overwhelmingly non-American in origin or one generation away from the immigrant.

Maybe a few Americans want to start a business "doing what they love" as so many seminars of feel good 80s stuff say you can do and will become rich so long as you love what you are doing. But these are few and far between, and the reason they get covered in the magazines for the National Association for the Self-Employed, or told of in the feel-good seminars where you learn how to think and grow rich and think positive and the like.

Meanwhile, who runs the realistic businesses, like the stores and services in the strip malls - people who come from other countries with a little bit of capital to invest. Americans with capital sit on it - it stays in the stock market or in the house.

[OhioChick]

29. Bingo! n/t

[ShadesOfGrey]

45. Good post! I agree...

Educating Americans and helping them build American companies SHOULD be a much higher priority than educating foreigers and then trying to keep them here. Boggles the mind.

[pampango]

9. Was there something stopping Americans from starting the companies mentioned in the OP?

Americans could have started Google, Intel, eBay, and Yahoo, but others beat them to it and have employed thousands of Americans and created enormous wealth for the country. Would it have been preferable to send those foreigners home so they could start those companies in their home countries? How would having Google, Intel, eBay and Yahoo based in Europe or Asia be a good thing for Americans?

[TechBear_Seattle]

43. My objection was to the attitude...

"We are teaching foreigners and they are leaving. We should make resources available to keep them in this country, because they will help strengthen our economy."

Perhaps. But I believe very much that what will help more is put the resources instead towards helping US citizens. Help them keep the jobs being outsourced to India and Singapore and Malaysia. Do more towards making college educations available and start dismantling the roadblocks that have gone up in the last few decades which have made it much more difficult for small businesses to get started and become successful.

[Blue_Tires]

41. +1

most of the foreign students i knew (especially from the middle east) were studying strictly to work in their own countries upon graduating...even as freshmen, many of them already had jobs promised at the end of four years at a corporation or college

[tom_paine]

2. Why would foreign students remain in an Inverted Totalitarian nation brimming with Nazi-like crazies

They can get that at home.

Plus, now that America's Third-World Economy is joining it's Third-World judicial, media, and voting, material wealth is no longer the draw it once was.

Might as well go to China, which has the same basic government, albeit a little more "classical" totalitarian, than America?

Might as well.

[formercia]

4. The University addiction to big dollar tuition from foreign students.

There would be many more seats available to us citizens in university classrooms if universities weren't so addicted to the revenue that foreign students generate. We even train their terrorists how to make bombs by offering them degrees in Electrical Engineering. Pakistan's nuclear program might have never gotten off the ground if it weren't for the US offering their students degrees in Nuclear Engineering.

[Alcibiades]

6. Yep

Training foreigners while qualified Americans have to go begging is economic suicide.

[Hugin]

8. I beg to differ...

In 2005 the U.S. produced 40,000 Science and Engineering Graduates. (Many of them Foreign Nationals)

China for instance, produced 600,000.

The numbers are probably even more lopsided this year.

The Brain Drain is a mere trickle.

I hope the U.S. isn't like the British Empire in taking 150 years to realize it isn't all it thinks it is...

Of course the solution to this is encouraging domestic students via financial incentives and the promise of more than a service job at the end of a difficult academic journey. Will never happen, tho.

[Kalyan]

36. not true ...

the difference isn't that startling ... read this article

http://www.businessweek.com/smallbiz/content/dec2005/sb20051212_623922.htm

Excerpt: We found that the U.S. was graduating 222,335 engineers, vs. 215,000 from India. The closest comparable number reported by China is 644,106, but it includes additional majors. Looking strictly at four-year degrees and without considering accreditation or quality, the U.S. graduated 137,437 engineers, vs. 112,000 from India. China reported 351,537 under a broader category. All of these numbers include information technology and related majors

[Hugin]

38. My numbers are from the Engineering Associations themselves.

Not from... Business Week.

[Lydia Leftcoast]

13. There is no "shortage" of engineers and scientists

just a shortage of engineers and scientists willing to work cheaply.

[hedgehog]

15. My husband and I make good salaries working in technical professions,

but are going into debt educating the next generation of engineers at a state university.

[ChromeFoundry]

40. Damn Straight. n/t

[Red1]

16. Ha!

The usofa government can do whatever it wants!!

Corporations need qualified cheap workers....Creat work visas, H1B...

They can pass laws that if you enjoy the stellar educational system here you've gotta work for 10 years before goin home.

But thats a bill that'll never get passed because the americun corps don't want them creating efficient...green...factories, with professional motivated people.

That wuld be a dangerous precedence ;-)

[treestar]

20. BBBBBBut those jobs should go to US Americans!!!!!!

:sarcasm:

We don't want foreigners starting companies here to employ Americans in high tech fields!!! We want AMERICANS to work in factories again on assembly lines!! :sarcasm:

Actually that's not far from the truth for some around here.

[Sen. Walter Sobchak]

39. You didn't get the memo?

All we have to do to fix the economy is reclaim the plastic utensil industry from the Chinese and sell each other disposable forks and knives!

[Kalyan]

37. rubbing salt to the injuiry ...

at least China & India don't classify CREATIONISM & INTELLIGENT DESIGN as SCIENCE. At a time when US is worried about under-spending in science education, they def. don't need the distraction called CREATIONISM ..

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3790432

[superconnected]

46. This sounds like propaganda to get more foreign students here, hence H1 & L1 visas.

And of course the big corporations would put out a press release to drive the idea.