Here are two policy changes I would make in order to brighten the long-term economic growth outlook for the United States.
Immigration has been a potent economic force in the United States for our entire history. In particular, immigrant entrepreneurs have added enormous value to the American economy for many decades. Data have shown that in recent years immigrants have had a much higher rate of entrepreneurial activity than native-born Americans. Only ten years ago, in fact, their rates of entrepreneurial activity were nearly identical, but the gap has widened continuously and today immigrants are nearly twice as likely to start a business as natives.1 Immigrant entrepreneurs also carry disproportionate weight in high-tech—Vivek Wadhwa and his colleagues have found that roughly half of Silicon Valley technology companies have an immigrant as a founder or cofounder, and that this is also true for about a quarter of technology companies nationwide.2
Remarkably, the strong inclination of immigrants to start companies appears to have persisted for over a century, back to the late 1800s.3 It is not a leap to imagine that immigrant entrepreneurs have helped sustain a rather steady level of business creation in the United States.
To keep this up—and to reverse stagnant rates of business creation—the United States must reclaim its position as the global destination for entrepreneurs. In recent years, as American policymakers have bogged down in contentious debates over immigration, other countries have fallen over themselves to lure entrepreneurs to their countries. There have been various proposals to create a “startup visa” that would create a new path for immigrant entrepreneurs eager to start their companies in the United States. Both the House and Senate versions of immigration reform that were passed in 2014 contained versions of a startup visa, and such a visa has also been introduced as part of the standalone Startup Act introduced into the Senate on multiple occasions. Rather than create a brand new visa for potential entrepreneurs outside the country, there could be two other options, one incremental, the other slightly more radical.
Foreign students studying in the United States represent low-hanging fruit because many would like to stay here, especially those in graduate school in the STEM fields. And many of them would like to remain in America and either start a company or join an early-stage startup. Current rules around F-1 visas and the two work programs for foreign students—curricular practical training (CPT) and optional practical training (OPT)—limit the options for students and rule out, for all practical purposes, either starting a company or working for a young firm.4
Create a “startup visa” for foreign students to extend their stay in the United States, allow them to start companies and work at startups, and put them on a path to permanent residency and citizenship. Some criteria would need to be attached, of course—perhaps investment raised, jobs created, or “entrepreneur apprentice” milestones reached working closely with a founder.5 These criteria, however, should not be as unreasonable as those proposed in some versions of a startup visa, or as those currently required for the EB-5 visa. The criteria, moreover, should not tie these students to the particular company where they work, in recognition that entrepreneurial ventures fail frequently. The visa should be attached to the individual, not the company.
This student startup visa extends programs already in place—CPT and OPT—and provides an easy way to test the viability of a broader startup visa.
The second option to tap more immigrant entrepreneurial energy is to combine the idea of a startup visa with the various proposals on the right and left that would have created a new pathway to citizenship for the millions of illegal immigrants already living in the United States. Data are difficult to come by for this population, but it is reasonable to believe that many illegal immigrants have started their own businesses or are working for other immigrants who have started companies.
Create a “startup visa” for existing illegal immigrants in the United States who either are already running businesses or would do so within the boundaries of the law. Strict criteria would need to attend this, to deter abuse and make sure that actual businesses were benefiting or being created. But this startup visa would come with a pathway to citizenship, marked both by business milestones and by some of the details of proposals already out there to allow illegal immigrants to “get in line” for residency. Importantly, this startup visa should not be narrowed to only technology companies—many immigrant entrepreneurs start successful companies that are not high-tech but that grow and create jobs.6 We are interested in businesses that create jobs no matter what kind they are. Like the student startup visa described above, this one would be a way to test different pathways to citizenship without committing the country to one defined way.
These variations on the more conventional startup visa would boost entrepreneurship, create jobs, help start to solve thorny immigration issues, and solidify America’s status as the immigrant (entrepreneur) nation.
Teacher Licensing and Preparation
Education is a perennial area of concern, a perennial target of reform ideas, and, more recently, a hotspot of entrepreneurial activity. Any discussion of long-term economic growth must include some consideration of how to not just improve K-12 education, but build higher levels of human capital more generally. There are supply- and demand-side components component to this.
On the one hand, employers and others perpetually complain of a “skills gap” and there is evidence that the increasing cognitive demands of the U.S. economy are exacerbating socioeconomic divides.7 On the other hand, recent research indicates that the U.S. economy may be in the midst of “deskilling” and unable to produce enough cognitively demanding jobs for all the students it is educating.8 To sustain long-term economic growth, the United States needs an educational system that generates both educated individuals and individuals who will create new high-quality jobs. Because teachers are perhaps the most important factor in educational quality, overhauling the way we prepare and license teachers will, in the long run, boost economic growth.
The issue of teacher licensing and preparation is beginning to get more attention as school districts and states cast around for ways to improve the quality of their teaching workforce. Schools of education at universities have, by and large, responded with a shrug, preferring to point to the number of teachers they produce rather than consider their quality. As a result, the entire industry of teacher preparation has come in for stinging criticism from organizations like the National Council on Teacher Quality (NCTQ).9 Most schools of education around the country perform poorly in NCTQ’s assessment, and the organization has a raft of sensible recommendations for teachers, districts, state policymakers, and schools of education.
Besides overhauling the way that schools of education are organized or instigating a war between school districts and universities, one option is to create a new pathway for experienced professionals to become quickly but rigorously certified as teachers. NCTQ does make some recommendations in this direction, and their criteria for such alternative certifications make sense. A new pathway might be able to be created faster than reforms to existing schools of education—which should still occur in any case.
If, for example, a retired engineer wanted to teach high school math, or a mid-career internist wanted to teach anatomy, why turn them away or subject them to the inanities of many teacher preparation programs? No one is claiming that these individuals would automatically make better teachers than the ones being turned out by education schools, but few can claim they would be any worse, either. Allowing alternative certification of subject matter knowledge as well as a de minimis apprenticeship in teaching would create a new pipeline of quality teachers.10
Ideally, such an alternative pathway would begin to create competitive pressure on schools of education and help force some necessary reforms, while also creating a new set of teachers. One objection to this idea is that it would do nothing to overcome barriers, often union-backed, to getting rid of poor teachers. What good would creating more teachers do if we still can’t fire bad teachers, and if we can’t remove some of the alternatively certified teachers who turn out to be terrible?
Permit, and even encourage, the new teachers to join unions in exchange for reform of teacher tenure and greater ability to fire bad teachers. Enhanced union membership and better teachers – everybody wins.
Improving the quality of K-12 teachers – by widening the funnel of people who are admitted to the profession – will go farther than most other education reforms to boost attainment and raise long-term growth.
1 See an interactive chart of the Kauffman Index of Entrepreneurial Activity, derived from Current Population Survey data.
2 These shares, however, have declined since the 1990s and mid-2000s. See Vivek Wadhwa, AnnaLee Saxenian, and F. Daniel Siciliano, “Then and Now: America’s New Immigrant Entrepreneurs, Part VII,” Kauffman Foundation, October 2012.
3 Sarada, “The Historical Evolution of Entrepreneurship,” University of Wisconsin-Madison Business School, Working Paper, forthcoming.
4 Anthony Luppino, John Norton, and Malika Simmons, “Reforming Immigration Law to Allow More Foreign Student Entrepreneurs to Launch Job-Creating Ventures in the United States,” Kauffman Foundation, August 2012.
5 One related idea that has been raised is to use the university exemption from the H-1B cap to sponsor immigrant entrepreneurs.
6 Jonathan Bowles, A World of Opportunity, Center for an Urban Future, February 2007.
7 See Brink Lindsey, Human Capitalism: How Economic Growth Has Made Us Smarter—and More Unequal (Princeton, 2013).
8 Peter Cappelli, “Skill Gaps, Skill Shortages, and Skill Mismatches: Evidence for the U.S.,” NBER Working Paper 20382, August 2014, Paul Beaudry, David A. Green, and Benjamin M. Sand, “The Great Reversal in the Demand for Skill and Cognitive Tasks,” NBER Working Paper 18901, March 2013.
9 National Council on Teacher Quality, 2014 Teacher Prep Review, June 2014. Note: the Kauffman Foundation is a funder of NCTQ’s work.
10 See Chapter V, Recommendations, of the NCTQ report, for similar recommendations.
The opinions expressed here are solely those of the author and do not necessarily reflect the views of the Cato Institute. This essay was prepared as part of a special Cato online forum on reviving economic growth.