We’ve posted recently about how our current immigration policy is hurting Silicon Valley. But when the United States lets in more immigrants, what happens? Often it’s not what you would expect.
A new NBER paper by economists at the University of California Davis and Colgate University studies the effect of skilled H1-B immigrants in STEM occupations on more than 200 cities across the country. In cities with more STEM immigrants, wages for college-educated workers went up 7-8 percentage points, wages for non-college-educated workers went up about half as much, and there was no significant effect on employment.
Why this counterintuitive result? Economics 101 says that when the supply of something grows, the price should decrease, not increase. As is too often true, however, Economics 101 in this case tells us very little about the real world. Figuring out cause and effect in many types of markets, particularly labor markets, is tough because economies are not as simple as the textbook models might have you believe.
What actually happens is that when immigrants enter an economy, they do more than just offer their labor at a (potentially) lower price. They increase … Read the rest
In today’s fast-paced, globalized world, knowledge workers can choose to work anywhere. In fact, being an appealing place for people to locate, especially those with advanced skills, is a valuable national resource. Highly skilled workers earn high wages, spend those wages locally, pay domestic taxes, and contribute to spill-over effects that benefit everyone in the area. Most engineers will tell you that the most appealing location for tech workers is located right here in the United States. Some countries strike oil. Others find diamonds. The United States hit it rich with Silicon Valley.
However, Silicon Valley has a weakness that threatens this preeminence: the lack of enough skilled workers to promote expansion and innovation by existing firms and industries and the development of new ones. One of the chief causes of this problem is America’s growth-stymying, restrictive immigration policies toward high-skill, foreign-born talent. For example, for the first time in American history, there are fewer startups founded by immigrants than there were 10 years ago. The effect is especially apparent in Silicon Valley, where immigrant-founded startups dropped from 52.4 percent to 43.9 percent from 2005 to 2012. And unfortunately for … Read the rest
Sometimes statistics just make sense. For instance, the revelation that spending more on education is correlated with a more highly educated workforce is hardly a surprise. To be sure correlation is not causation, but as more states look to cut corners on education spending, it is important to remember the relationship between spending and results.
Using the 2014 State New Economy Index’s workforce education score (a weighted score of the educational attainment of the workforce), there is a significant positive correlation of 0.46 between the education levels of a state’s workforce and the state’s current spending on education per student.
Of course, with a simple correlation it is impossible to attribute any directional causality. Part of the correlation could derive from higher incomes earned by a more educated workforce. Much of education spending comes from property taxes, so wealthy areas where land is more valuable tend to have higher education spending. For instance, education spending is highest in Northeastern states, led by New York ($19,552), where schools spent over three times as much per student as in Utah ($6,206). Resource rich Alaska and Wyoming also spent heavily, though … Read the rest
For a long time, I and many other Washington tech policy types believed that our nation faced a shortfall in the number of highly skilled scientists and engineers (e.g., the STEM workforce) and that this shortfall hurt U.S. innovation and competitiveness. But as Keynes once said when asked why he changed his mind, “when the facts change, I change my mind, what do you do sir.” So I am grateful to Rutgers professor Hal Salzman for pointing out the error of my thinking.
Salzman tells us that only one out of four STEM graduates works in their field (it’s actually 1 out of 2 and he knows this). He tells us wages for STEM workers have been flat for the last 16 years (STEM wages actually increased about twice as fast as non-STEM wages). He tells us that engineering colleges produce 50 percent more graduates that are hired into engineering jobs each year (actually its one to one, not 1.5 to one). He tells us that IT employment is below its 2002-2003 peak (actually between 2003 and 2010 IT workers grew by 19 percent while total employment fell by 0.8%). … Read the rest
A new data release by the Census Bureau which claims that only 26 percent of STEM workers end up in STEM fields has seemingly strengthened arguments that America does not face a STEM-worker shortage. The surprising statistic has generated coverage from major news sources (including the USA Today and the Washington Post) which have pounced on the new data as evidence that there is no need to encourage students to study science, technology, engineering, and math. The data, however, is highly misleading and skews the reality of demand for and scarcity of a highly skilled math and engineering workforce.
First, let’s start with the definition of STEM graduates. To the Census Bureau, that means not just individuals with a degree in computers, math, statistics, engineering, biology, or the physical sciences (what the average person thinks of when they STEM) but also psychology and social sciences like economics and anthropology.
While psychology and social sciences graduates do technically study science in the respect that academic research in these fields attempt to rigorously and empirically tests hypotheses using the scientific method, these fields are a far cry from what readers imagine … Read the rest
The H-1B visa program, which allows a limited number of high-skilled workers to work in the United States temporarily, is controversial because some claim that it lowers wages for high-skilled workers. However, a new paper by Peri, Shih, and Sparber of UC Davis and Colgate University shows just the opposite—that additional H-1B visa recipients raise wages in cities where they come to work.
The authors’ interest in immigration is a side effect of their interest in a more general labor market question: they use fluctuations in high-skill immigration due to the H-1B visa program as an instrument to examine whether the supply of STEM workers affects productivity growth. In essence the question is, what happens when you increase the amount of high-skill STEM workers: do wages fall as one would assume in a standard supply/demand framework? Or do they increase because of the effect that the high-skill workers have on productivity, demand for innovative workers, and economic growth?
To answer this question you can’t simply look at the amount of STEM workers in a city and average wages for those workers, because you can’t tell which way causality is going. … Read the rest
In the United States the national debate on immigration often overlooks one of its most important effects: its impact on our innovation economy. A new NBER paper by William Kerr highlights the crucial role that immigration plays in national economic growth.
High-skilled immigrant workers, that the United States allows in through the H-1B visa program, make significant contributions to economic growth in a number of ways. First of all, there is a disproportionate amount of “superstar” scientists such as Nobel Prize winners that come from immigrant backgrounds. These scientists make breakthrough contributions that often have enormous impacts on our science and technology and thus ultimately our economic growth. Second, immigration provides a large number of other STEM workers, workers that form the backbone of our productive capacity. Since 1995 immigrants have provided the majority of the increase in stem workers in the United States.
These inflows of workers clearly benefit the economy. The paper finds that “immigration is associated with higher levels of innovation for the United States and that the short-run consequences for natives are minimal.” Long-run consequences are less well understood—high-still immigrants do still compete with U.S. natives … Read the rest
Recently Robert Charette penned a blog post on IEEE Spectrum titled “The STEM Crisis is a Myth,” which makes the case that rather than having a shortage of STEM (science, technology, engineering and mathematics) workers, the United States has a surplus. Unfortunately his analysis is flawed. Indeed, the post is strikingly similar to a report published by the Economic Policy Institute (EPI) (which Charette cites) in April, and about which the Information Technology and Innovation Foundation published a comprehensive rebuttal.
First, like EPI, Charette argues that STEM graduates are not obtaining STEM jobs:
In the United States, you don’t need a STEM degree to get a STEM job, and if you do get a degree, you won’t necessarily work in that field after you graduate. If there is in fact a STEM worker shortage, wouldn’t you expect more people with STEM degrees to be filling those jobs?
Yes, it’s true: some STEM graduates don’t obtain STEM jobs. But Charette is missing a baseline for comparison of this figure. Sure, some STEM graduates work in fields outside their major, but is this more or less than graduates in … Read the rest
Making Innovation Part of Climate Hawks Policy Pitch
In a previous article I argued that climate policy advocates should make energy innovation part of their policy elevator pitch. A good opportunity to start is now available through the debate on reforming and re-authorizing the America COMPETES Act.
Within the climate advocacy community there are those that argue for aggressive clean energy innovation policy (such as myself) and those that argue for aggressive deployment of existing clean energy technologies (such as Center for American Progress’s Joe Romm and 350.org’s Bill McKibben). Each provides different policy emphasis and nuance. Today, deployment policies receive higher priority, reflected in it dominating the narrative among advocates as well as dominating the portfolio of U.S. public investments in clean energy. As a result, conflict occurs over what policy changes should be made.
As Grist’s Dave Roberts argues (correctly to a degree), both “camps” agree on a lot and everyone should aggressively work for clean energy to be a national priority to “lift all boats,”—both innovation and deployment of today’s technologies alike. How then should this consensus be reflected in our pitches to policymakers?
In my … Read the rest
It appears that Congress may actually take up the issue of immigration reform and with it the issue of high-skill immigration. And toward that end Senators Hatch (R-UT), Klobuchar (D-MN), Rubio (R-FL) and Coons (D-DE) have taken the lead on the Immigration Innovation Act of 2013 (known as I-squared) which would make it easier for foreign science, technology, engineering and math (STEM) students and workers to come and stay in America, while at the same time raising increased funds from the U.S. high-tech industry to support programs to help train Americans in STEM skills.
And not surprisingly this common sense and needed legislative proposal has provoked the usual opposition from the some on the left. Take Ross Eisenbrey’s recent New York Times op-ed, “America’s Genius Glut.” Eisenbrey, of the liberal Economic Policy Institute, argues that I-squared is not needed, because, he claims: 1) America’s technology leadership is not endangered; 2) We aren’t turning away foreign students, or forcing them to leave once they’ve graduated.; and most importantly 3) there is no labor shortage in high-tech occupations. Let me address these fallacies of each of these arguments.
America’s technology leadership … Read the rest