Study: U.S. Immigration System Limits Benefits Foreign Students Could Provide
BOSTON – The U.S. immigration system, with visa pathways and restrictions that discourage business creation, hampers the nation’s ability to maximize the enormous benefits foreign-born graduates of U.S. colleges and universities can provide, according to a new study published by Pioneer Institute.
International students are responsible for nearly a quarter of all current billion-dollar private startups in the U.S. On average, those 143 companies each created 800 jobs and have together generated $591 billion in value.
“The founders of 25 of those 143 unicorns were educated at Massachusetts colleges and universities,” said Aidan Enright, who co-authored “International Students: Poorly Suited Pathways Stymie Formation of High-Growth Businesses” with Joshua Bedi. “In fact, 59 percent of the former international students who founded venture capital-backed startups in the commonwealth were educated here.”
The U.S. educated 28 percent of the world’s foreign students in 2001, but that number fell to 21 percent by 2021. In all, foreign students comprise about 5 percent of post-secondary enrollment in the U.S., compared to around 20 percent in places like Australia, Canada and the U.K.
International students are disproportionately represented in science, technology, engineering and math (STEM) programs, whose graduates are in great demand. They earned 36 percent of all STEM degrees conferred by U.S. master’s programs during the 2021-22 academic year. Similarly, 46 percent of doctoral degrees in STEM fields were conferred to U.S. international students.
U.S. immigration policy has not fundamentally changed since early this century. Meanwhile, other developed countries made it a priority to attract and retain top global talent by reforming their immigration systems. Some offer a fast track to legal status and citizenship. Countries like the U.K. and Canada offer much more efficient visa application processing and entrepreneur-specific visas.
In terms of attracting foreign students, other countries offer more secure employment opportunities or even guaranteed employment after graduation.
In addition, visa processing often takes twice as long in the U.S. as in other countries. When more than 500 U.S. colleges and universities were surveyed about the declining share of foreign students in 2019, 87 percent mentioned visa processes, delays and denials.
The Optional Practical Training (OPT) program allows foreign students to work for one-to-three years after graduation from a U.S. college or university, but employers are less likely to sponsor those in the program because of longer-term uncertainty about graduates’ ability to remain in the country. OPT applications generally take 213-426 days to process.
H-1B visas are targeted at immigrants with bachelor’s or master’s degrees, but strict caps mean that 80 percent of those seeking the visas were rejected by lottery in fiscal 2023 before their cases were even adjudicated.
“The U.S. immigration system likely delays foreign-born graduates from creating incorporated firms by as many as five years,” said Joshua Bedi. “We conservatively estimate that the system delayed the creation of 150,000 incorporated firms and 580,000 jobs between 2013 and 2021.”
Immigrants are up to twice as likely to start new businesses than those born in the U.S. and more likely to own a STEM firm. Immigrants holding a master’s degree are 57 percent more likely to own an incorporated high-growth business than their U.S.-born peers.
But our current system offers no visa pathways that are well suited to entrepreneurship. Student visas often expire before the holders can start a business, employer sponsorship requirements for the most accessible visas effectively bar immigrants from starting their own firms, and new ventures must be well established before founders can qualify to sponsor themselves or for other investor category visas that also require a high bar of capital investment.
The authors’ recommendations include creating an entrepreneurship-specific immigration lane, raising the cap for H-1B visas and speeding up the processing time for visa applications.
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About the Authors
Aidan Enright is Pioneer’s Economic Research Associate. He previously served as a congressional intern with Senator Jack Reed and was a tutor in a Providence city school. Mr. Enright received a B.S. in Political Science and Economics from the College of Wooster.
Josh Bedi began his undergraduate career with the International Business Program at Mississippi State University and received a Bachelor of Business Administration in business economics and a Bachelor of Arts in German. At MississippiState, he worked with Germany Trade and Invest as a Service Industries Intern. He earned his Ph.D. and was a Mercatus Center Fellow at George Mason University. He is now working at Copenhagen Business School as a Postdoc in Entrepreneurship at the Department of Strategy and Innovation. There, he works under the Mærsk McKinney Møller Chair in Entrepreneurship.
