Immigration Provisions in the America COMPETES Act Could Help Remedy a Recession

Last Updated on February 23, 2023

With economists predicting an imminent recession, U.S. policymakers will be pressed to take actions to relieve the impacts of the coming economic downturn. While often overlooked, immigration can play a vital role in the road back from a recession.
Congress is currently considering the America COMPETES Act, which includes a provision that would establish a dedicated visa for foreign entrepreneurs and certain employees of startups. It also proposes streamlining the green card pathway for immigrants with Ph.D.s in STEM fields.

In Envoy’s 2022 Immigration Trends Report, we surveyed over 300 HR professionals and found that U.S. employers are eager to hire foreign talent in the current economic climate. Some of our key findings showed the following:

  • 50% of employers said they expect their foreign national headcount to somewhat increase (37%) or significantly increase (13%) in the next year versus only 15% indicating they expect any decrease.
  • 55% of employers indicated that sourcing foreign talent is very important (36%) or extremely important (19%) to meeting their goals for candidate recruitment.
  • 40% of employers expect to become more reliant on universities and exchange programs as sources of talent through F-1 and J-1 visas in the next year.
  • 61% of employers view Canada’s immigration policy as more favorable to employers than that of the U.S.
  • 54% of employers are considering Canada for their company’s expansion or already have at least one office there.

Despite the desire to hire foreign talent, employers are stifled by burdensome regulatory barriers in the U.S. immigration system. Meanwhile, international competitors like Canada continue to open new pathways for foreign talent like its own startup visa program that is attracting a wave of innovative and rapidly growing new businesses into its markets.

The immigration provisions in the America COMPETES Act offer some important solutions that could remove barriers to immigration and help stem the tide of an economic downturn. Welcoming more of the world’s best and brightest into the U.S. – from highly educated STEM professionals to ambitious and talented foreign entrepreneurs – could serve as a key strategy for renewing the nation’s economic engine in the face of a recession.

Empowering Foreign Entrepreneurship

The robust growth of technology companies was one of the driving forces that helped lead the U.S. out of the Great Recession. While other industries struggle during times of recession, many technology companies look to invest more in R&D, hiring talent and expansion opportunities.

An often-overlooked component of the tech sector boom is the role played by foreign talent. Some of the world's most successful technology companies emerged from the Great Recession, including those with immigrant founders like WhatsApp and Venmo.

As of 2019, immigrants comprised nearly one-fourth, or 23.1%, of all STEM workers in the U.S. according to a report from the American Immigration Council. Moreover, more than half of the billion-dollar startups in the U.S. have at least one immigrant founder according to a 2018 analysis from the National Foundation for American Policy (NFAP).

Given their proven track record of starting innovative businesses that create more jobs for Americans, policymakers should be empowering foreign entrepreneurship in the U.S. A 2020 National Bureau of Economic Research (NBER) paper on Immigration and Entrepreneurship in the United States found that immigrants in the U.S. are 80% more likely to start a business than native-citizens and the total number of jobs created by immigrant-founder firms is 42% higher than that of native-founder firms, relative to each population.

Despite the success of immigrant entrepreneurship in the U.S., the current immigration system lacks a dedicated startup visa to attract and empower foreign entrepreneurs to start businesses here. Instead, the majority of foreign talent is filtered through the annual H-1B lottery system, which requires employer-sponsorship and offers just a one-in-five chance to obtain an H-1B visa.

The startup visa program included in the America COMPETES Act would address this gap in the system by offering a dedicated pathway specifically for foreign entrepreneurs. The proposed “W” startup visa would closely mirror the stalled International Entrepreneur Parole (IEP) program, which was first initiated by the Obama administration. At its inception in 2017, the Department of Homeland Security estimated that nearly 3,000 foreign entrepreneurs would be eligible for the program annually.

Officially introducing a startup visa program through the passage of the America COMPETES Act will enable the inception and growth of thousands of innovative new businesses in the U.S. In an economic analysis of the IEP program, the New American Economy estimated that 85% of foreign entrepreneurs in the program would start firms in STEM-related industries and would create nearly 410,000 jobs over 10 years.

The Downstream Benefits of Foreign STEM Talent

Along with the introduction of a startup visa, the America COMPETES Act offers a provision that would exempt immigrants with Ph.D.s in STEM fields from the burdensome green card backlog.  However, the legislation has yet to move forward in Congress.

This delay is concerning in the face of an economic downturn, especially given that key groups of foreign talent – particularly STEM talent – have slipped through the cracks of outdated U.S. immigration processes like the H-1B lottery and per-country green card caps.

A loss of foreign talent is especially harmful to the U.S. in the face of a recession, given that about 50% of foreign students in the U.S. study STEM fields according to the Congressional Research Service. Moreover, a report from the Center for Security and Emerging Technology at Georgetown University found that foreign students studying STEM fields make up 42% of Ph.D. graduates from U.S. institutions.

In examining past recessions, researchers have found that high-skilled foreign talent – specifically STEM talent – remain in high demand for businesses in a variety of industries, regardless of the economic downturn. A 2018 NBER paper that analyzed job postings and economic data during the Great Recession found that employer demand for computer-related skills increased. Furthermore, a 2014 report from New American Economy and the Immigrant Learning Center found that the U.S. tech industry would have grown substantially faster in the years immediately after the Great Recession if not for the restrictive H-1B visa cap that stifled the ability of employers to hire highly skilled foreign talent.

These findings mirror the results of Envoy’s 2022 Immigration Trends Report, which found a steady increase in the demand for foreign talent amongst employers despite the economic uncertainty caused by the COVID-19 pandemic in 2020 and 2021.

Given the high number of foreign graduates and professionals with STEM expertise, this group could be more highly sought after if the coming years produce a recession. The provision offered in the America COMPETES Act to exempt immigrants with Ph.D.s in STEM fields from the green card backlog could help thousands of foreign professionals to secure authorization to stay and work in the U.S., and thus continue contributing to the economy here.

The benefits offered by foreign talent are well-documented, and government action to promote foreign entrepreneurship and retain STEM professionals would help the U.S. economy hedge against the uncertainty ahead.

Read the 2022 Immigration Trends Report

Content in this publication is for informational purposes only and not intended as legal advice, nor should it be relied on as such. For additional information on the issues discussed, consult an attorney at one of the two U.S. Law Firms working with the Envoy Platform or another qualified professional. On non-U.S. immigration issues, consult an Envoy global immigration service provider or another qualified representative.