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What Creates Jobs? Welcoming STEM Workers

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Politicians talk frequently about job creation. But what actually creates jobs is a subject of intense debate. Do we need more public spending? Less? Fewer regulations? Smarter regulations? The answer usually depends on the audience and ignores the deeper questions. What kind of jobs are we creating? Do other jobs get destroyed? Would high-skill immigrants take a job from an American or create a new one for him or herself?

A recent report, Technology Works: High-Tech Employment and Wages in the United States, from the Bay Area Council Economic Institute, a trade organization from an area that knows a thing or two about facilitating economic growth, sheds light on these questions by highlighting a tried and true method for creating jobs: attracting and employing technology workers. When a city, community, or region employs a technology worker, this engenders a multiplier effect on employment in the local economy. In fact, the Bay Area Council’s study finds that every one job in the high-tech sector—defined as those most closely related to science, technology, engineering, and math (STEM) fields—leads directly to 4.3 jobs in local goods and services industries across all income groups, including lawyers, dentists, schoolteachers, cooks and retail clerks. That’s much higher than manufacturing’s average multiplier of 1.4.

A multiplier effect describes the cycles of wealth that are introduced to a local economy when money is pumped into it. Workers moving to an area not only receive a wage, but they also spend locally at shops and restaurants. Their local taxes pay for teachers and police officers. Those people in turn spend their increased income locally as well, leading to cycles of increased local income and spending. The result? Economic and employment growth.

While all occupations have a multiplier effect on growth, it is magnified in high-tech industries where wages are very high. In fact, STEM workers earn a median wage twice the national average. In addition, STEM wages are growing 2.6 times faster than the U.S. norm.

The Bay Area Council’s study finds that employment in high-tech fields is expected to grow by 16.2 percent through 2020, more than the expected 13.3 percent job growth over the same period for total occupations. Yet there are currently at least 200,000 unfilled jobs requiring STEM skills in the nation. So the first question policymakers should be asking is how do we increase the number of STEM workers?

A key part of the answer needs to be high-skill immigration reform which can increase the number of talented individuals coming into our nation while also increasing the advanced-degree labor pool that high-tech industries increasingly require. Unfortunately, the importance of reform is clouded by opponents who promote the narrative that American workers will lose jobs if more foreigners are allowed in. However, the reality is that high-skill immigrants actually help create jobs. For example, one study found that from 1995 to 2005, over 52 percent of startup companies in Silicon Valley had at least one immigrant founder. Furthermore, high-skill guestworkers are a complement, not a substitute, to American high-skill labor and are necessary to bridge the gap between STEM demand and the current supply of domestic STEM workers.

This provides all the more reason for Congress to swiftly pass the much-needed, bipartisan Startup Act legislation recently reintroduced by Senators Jerry Moran (R-KS) and Mark Warner (D-VA). Among other provisions, the Startup Act would create an Entrepreneur’s Visa so foreign-born entrepreneurs in the United States can legally remain here, launch businesses, and create jobs. It would also create a new STEM visa so U.S.-educated foreign students in the United States who graduate with a master’s or Ph.D. in science, technology, engineering or mathematics can receive a green card and stay in the United States where their talent and ideas can fuel growth and create American jobs.

In summary, STEM workers represent a vital component of America’s innovation economy and are key drivers of broader employment growth, as the Bay Area Council’s report ably highlights. The United States need to welcome high-skill immigrants, particularly those holding STEM degrees. But at the same time, U.S. policymakers would be well-advised to also enact a comprehensive slate of policies that bring fresh approaches to STEM education and worker production to the United States. The future of America’s innovation economy relies on it.

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About the author

Adams Nager is an economic policy analyst at ITIF. He researches and writes on innovation economics, manufacturing policy, and the importance of STEM education and high-skilled immigration. Nager holds an M.A. in political economy and public policy and a B.A. in economics, both from Washington University in St. Louis.