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The Trump administration has put a temporary freeze on new foreign workers who come here through the H-1B visa program. The administration argues that if the United States stops the flow of immigrants, there will be more jobs left for Americans in this recession.
But researchers say the policy may backfire, because American tech companies have a shortage of high-skilled talent. Also, immigrants frequently bring new ideas, start companies and attract new investment money.
I spoke with Zeke Hernandez, who studies this subject as a professor of global strategy at the University of Pennsylvania’s Wharton School. The following is an edited transcript of our conversation.
Zeke Hernandez: Immigrants are involved in the founding of about 40% of all startups in the U.S. There are about a quarter of startups that are [founded] solely by immigrants. They’re involved in the founding of about 55% of all unicorns. If we’re looking at firms that grow to be very large, the estimate is that of the Fortune 500 firms right now, about 45% to 47% of them were founded by immigrants. They’re only about 14% of the population, so they’re way overrepresented in creating the firms that give us the new products and services that we all use.
Molly Wood: Do we have a sense of why that is?
Hernandez: I think there’s basically three reasons. One of them is that immigrants are disproportionately represented in innovative activities. They engage in what we call recombination. They have different experiences than others. They have had certain experiences where they grew up, then they come to the United States and they are able to recombine experiences that they’ve seen in both locations and identify opportunities. The other reason is that immigrants are overrepresented in STEM fields, and since a lot of startups these days are technology startups, there’s just an overrepresentation of people born abroad in those fields who have the skills to start technology companies. And then, the U.S. just educates a lot of these people, too.
Wood: Can I circle back once more to this idea of innovation through recombination? It’s so compelling.
Hernandez: I’ll give you an example that hits a little bit close to home. One of my children has celiac disease. My son might never have been diagnosed with that disease in the United States had it not been for an immigrant. The immigrant who introduced knowledge about celiac in the United States was a doctor, who’s now at Massachusetts General, named Alessio Fasano. He’s Italian. Dr. Fasano was a [gastroenterologist], and he had been trained to know a lot about gluten and celiac disease because that’s a common condition in Italy. He actually came to the U.S. to escape celiac. He was a little bit sick of working on it. As he started seeing patients here in the United States, he was puzzled by why the United States would not have as high incidence of celiac disease. So he ran some studies, and he found that actually, the United States had as high of an incidence of celiac as Italy did. He was the one who brought the knowledge that he had from Italy and recombined it with what he was seeing in patients here. Thanks to him, we know about this disease. That’s a classic recombination story of taking from the experience you had in your home country, combining it with the experience you’re seeing in the host country.
This wasn’t just good for Dr. Fasano, who I’m sure was handsomely rewarded for his contribution. But now what did Dr. Fasano have to do? He had to start a center to study celiac disease. What does that mean? It means there’s a new medical specialty in the United States. And what does that mean? It means you need a lab with lab workers and new scientists and new doctors trained in this new specialty. So what did that do? It created new jobs for American doctors and lab workers. These were high-paying jobs because it was a specialty. One of the things that illustrates is that highly skilled immigrants not only bring new ideas, but in introducing those ideas, they create new jobs that tend to increase the wages of natives. That’s also been documented. This process of recombination ends up having effects on the labor market because it creates new opportunities for jobs, so it’s a pretty big ripple effect if you add those immigrants over multiple years.
Wood: Tell me about how this affects investments. You’ve also looked into the link between immigrants coming to the U.S. and then the subsequent investment by non-U.S. investors.
Hernandez: This is, I think, one of the great untold stories about immigration, and this is both skilled and unskilled immigration. In a study that I did several years ago, I found that in the United States, for every 1% increase in the share of immigrants from a certain country, firms from that country were 50% more likely to invest in the state where those immigrants live. And 8% more likely to survive, meaning to stay longer in that place and remain in business. Immigrants are a leading indicator of where capital will flow in the future.
Wood: I feel like that is something that, like you said, is not well known and not commonly discussed. Is it your feeling that any of these things have been fully considered, with respect to, for example, this existing ban on these visas?
Hernandez: I wouldn’t think so, or if they were known, they were ignored. Because I think the stated purpose of the ban was to protect American workers and help the economic recovery. But anyone would tell you that two of the very best things you can have for an economic recovery are investment and innovation. And the evidence is pretty incontrovertible that immigrants increase both. In some ways, it’s counterproductive by the very purposes of the ban to ban immigrants if you want to improve the economic recovery. I can’t say how this was considered or why, but certainly all the evidence points that this is contrary to the purposes of the ban.
Wood: I really want to put a fine point on this. What you’re saying is [that] if the U.S. decided we’re just not allowing high-skilled workers in any more, full stop, even if there was a corresponding investment in education and innovative thinking in U.S. students, that it wouldn’t balance out? That the point here is really a cognitive diversity? That the value is not just finding a person to hire, it’s finding a person to hire who has a life experience and a set of stories that is different, and that is, in fact, the value?
Hernandez: Very well said. It’s not just about the numbers, it’s about the diversity of thought and experiences. That’s why another thing that we see in the research on H-1B workers, we see two interesting things. One of them is that when companies hire H-1B workers, they actually hire more skilled workers in general. What does that mean? It means that foreign workers are not substitutes for American workers, they’re complements to them, because the knowledge and ideas of the foreign worker recombine with those of the local worker. There’s a win-win in that sense. If I were to suggest changing our thinking about immigrants, it’s that they are not identical to local workers in their ideas and training, and therefore they don’t substitute for them, they complement them.
Related links: More insight from Molly Wood
Zeke Hernandez wrote a paper related to venture capital called “Mi Casa Es Tu Casa: Immigrant Entrepreneurs as Pathways to Foreign Venture Capital Investments.” It looks at the investment network that’s created as a result of immigrants coming to a new place.
Also, the Trump administration says that the ban on foreign workers will free up over 500,000 jobs for Americans. But some analysis from CBS News says it’s not that simple. The ban assumes that a bunch of unemployed American workers have the skill set to fill some of these highly technical jobs, and any Silicon Valley recruiter can tell you that’s not necessarily the case. And if companies can’t find people to fill those jobs, they’ll remain empty.
Things are really moving fast in the world of social media around hate speech after years of inaction and stagnation. Reddit announced Monday that it’s shutting down one of the biggest communities devoted to President Trump, the infamous r/The_Donald, and several other forums. It’s part of the site’s evaluation of its hate speech policies. Also, Twitch said it was temporarily banning Trump’s official stream, saying it was airing “hateful content.” Twitch also came under fire this month as more than 70 people shared horror stories of harassment and sexual assault by competitive gamers and streamers on the platform. At least one has been banned, but Twitch hasn’t confirmed the reason.
Over on YouTube, no word about the president, but the site will ban several sites belonging to prominent white supremacists, whom I decline to name, who have racked up hundreds of millions of views promoting racist beliefs and conspiracy theories. I have to be honest, this is heartening, and it’s progress, and it’s a recognition that online speech can have real consequences in the real world, like harassment, violence and even murder. What is not heartening is that back in 2014, when Gamergate was happening, it was being dismissed as a strictly digital problem that only affected ladies — pretty sure this is what folks were trying to say.
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