Global higher education quality, migration and innovation

I have posted on global talent pool, and the role of the U.S. as a – the -premier concentration of higher education in the world, notwithstanding the rise in higher education in the developing nations, and the high production of STEM graduates in China. My postings include here, here and here. I refer to Australia’s higher education network as an export industry. Here is a projection of the number of college graduates in the world through 2050.

Now there is a comprehensive analysis of highed ed quality in the world.

Researchers here measured college graduate quality—the average human capital of a college’s graduates—for graduates from 2,800 colleges in 48 countries. The study reveals significant global disparities in college graduate quality, correlating higher quality with the wealth of nations. Richer countries boast higher quality college graduates, with a comparison between the U.S. and India indicating that top universities in wealthier nations produce graduates of 52% higher quality. Both relative and absolute rankings confirm this trend, highlighting the advantage of larger nations with more institutions. The implications of these findings are profound for understanding development dynamics, as the quality of college graduates plays a critical role in a nation’s human capital, affecting productivity, innovation, and economic growth.

Developed countries not only have higher average human capital among college graduates but also benefit from selective migration, amplifying disparities. The study underscores the importance of college graduate quality in accounting for cross-country income differences, suggesting that human capital variations significantly contribute to these discrepancies. Furthermore, higher quality graduates are more likely to engage in entrepreneurship, innovation, and executive roles, factors crucial for development.

 

EB-5 abuses, including Jay Peak

Sheelah Kolhatkar writes an article in the New Yorker about abuses in the EB-5 program.  She focuses on the Jay Peak project, near the Vermont border with Canada. The following is a condensed summary of the article:

The article examines the fraud scandal involving Bill Stenger’s ambitious expansion of Vermont’s Jay Peak ski resort, which was funded primarily through the EB-5 visa program.

Under this program, foreign investors and their families obtain green cards by investing $500,000+ in projects that create American jobs. Stenger and his partner Ariel Quiros raised $350 million from EB-5 investors but misused over half the money. Quiros funneled funds to himself while Stenger allegedly promoted false jobs numbers and ignored the fraud.

While the Vermont project failed, the article notes that EB-5 funding has benefited other developments when used properly. For example, it helped complete construction at Sugarbush ski resort when it ran out of conventional financing after the 2008 recession, saving 860 jobs. However, people also creatively exploited aspects of the program.

In Manhattan, Hudson Yards raised over $1.2 billion in EB-5 money for what became the most expensive real estate project ever. It qualified for cheap EB-5 financing meant for high unemployment areas through gerrymandered census tracts awkwardly connecting wealthy and poor neighborhoods. Similarly, developers completed a $150 million Waldorf-Astoria in Beverly Hills using a dubious redrawn map. In Las Vegas, nearly $1 billion in EB-5 funds built the Chinese-themed Resorts World hotel and casino complex. The article also mentions EB-5 projects involving Kushner family luxury apartment towers in New Jersey and China.

So while some worthy projects used EB-5 properly, the program’s lack of oversight and desperation of foreign investors for green cards lent itself greatly to abuse. Large fees gave middlemen incentive to downplay risks and encourage questionable deals. The Vermont officials’ failed monitoring of Jay Peak exemplified the widespread lack of governmental scrutiny. Other EB-5 fraud cases like the Chicago hotel scheme that cost Chinese investors $156 million further showed vulnerabilities.

Ultimately the article examines the difficulty of revitalizing struggling rural economies, the tendency for EB-5 projects to cluster in big cities, and questions around Stenger’s motivations. Despite raising huge sums, the Jay Peak scheme failed to deliver the promised transformation or expected returns. The resort sold for far less than what went into its expansion. While parts operate normally, its future remains financially dubious. The hole still undeveloped in downtown Newport where buildings were to arise serves as a daily visual reminder of the jobs and revival that never materialized.

Does American industry stereotype East Asians as less creative?

From MIT Sloan School:

Hardworking, geeky, adept at math — these are some of the stereotypes that American culture attaches to East Asians, such as ethnic Chinese, Japanese, Koreans. But East Asians aren’t often portrayed as wells of creativity, a trait highly valued in U.S. culture. The opposite is more often true, with adjectives like “robotic” applied to East Asians’ achievements: When Chinese American figure skater Nathan Chen won a gold medal at the 2022 Winter Olympics, for instance, a Washington Post article credited his win to an “almost robotic zeal” rather than any creative flair.

New research by MIT Sloan associate professor Jackson Lu reveals how this creativity stereotype contributes to a phenomenon known as the “bamboo ceiling”: Despite the educational and economic success of East Asians in the United States, they remain underrepresented in leadership roles.

……

I’m drawn having read this article to consider what kind of creativity is being asked for. Here is a passage in George Castaneda’s book, America through Foreign Eyes (2022) about a crucial economic advantage of the U.S, as seen by a Chinese visitor. (Pg 140):

“The United States was the first and only modern economy and society to nail the two processes together, technological innovation and business, inventions and profits, engineering and economics, management through people like Frederick Taylor and creative imagination. As a Chinese traveler in 1918 “no matter what the branch of science, once it is transmitted to the United States, Americans use their talents to imitate it, put it in the practical use, and develop it.”

 

Immigration and conservative response: evidence at the local level

There is some research that has explored a potential link between an increase in foreign-born population in American local communities and a shift toward political conservatism, though the findings are complex and mixed.

One of America’s most respected social scientists, Robert Putnam, at Harvard’s Kennedy School of Government, has studied the social impact of ethnic diversity. The results shocked him so much that he withheld reporting them for years.  Fighting his personal pro-immigrant leanings, he concluded, “immigration and ethnic diversity challenge social solidarity and inhibit social capital.”

He describes social capital as a collective capacity to spark civic participation and trust, keys to building democracy. In his 2006 lecture, “E Pluribus Unum,” Putnam warned  “The more ethnically diverse a residential context is, the less we trust…” The more racially diverse a community, the less trust exists between neighbors. Even trust within groups is lower in more diverse settings.

Here is a fresh study which looked the local responses which the authors associate with the rise in the number of unauthorized immigrants.

“In response to newcomer unauthorized migrants, county vote share for the Republican party increased in  House and presidential elections. Local government agencies reduced total expenditure, divested in education, and increased relative spending in policing and the administration of justice. Migration creates formal job loss in the construction and hospitality and leisure sectors as jobs moved to the informal sector.  The arrival of newcomers caused an increase in the number of poor people. Established residents, display more outgroup bias. Newcomers generate population loss, especially among white residents.”

Here is the article, published November 2023

Temporary decline in immigration had limited impact job market

The researchers wrote: “At the start of the pandemic in February 2020, there were 13.6 million non-US citizen (immigrant) workers. By April 2020, that number had fallen to 12.2 million: Roughly 1.4 million fewer immigrant workers were in the labor force.

After the pandemic, however, the economic recovery was unprecedently sharp, with the unemployment rate returning to pre-pandemic levels by July 2022.2 Additionally, the vacancy-to-unemployment ratio, a measure of labor market tightness, was unusually high, peaking at 2.63 in April 2022.”

PFR:  the count of foreign born has fluctuated much since the late 2010s and this is one example, so it needs to be taken with a grain of salt. That said, the workforce in early 2020 was about 165 million. The research essentially shows that a reduction by 1.4 million in the workforce was not enough to have any material impact on scarcity of workers except where the share of workers who are non-citizen immigrants is high – which is in the food services industry.

Very roughly 30% of cooks in the U.S. are foreign born and 25% of all other food services workers are foreign born.  This is a highly mobile, high turn over workforce, willing to switch jobs for better conditions, probably much faster than in other lines of work which employ a lot of foreign born workers such as farming and IT. 18% of all workers are foreign born (including naturalized and non-naturalized).

 

Who is supplying new workers to the European working age population?

In spite of relatively low population shares of migrants in Europe, the increase in the European labor supply from 2006 to 2018 was driven by migrants and by foreign-born persons in particular.

In the EU as a whole, the total labor force increased by 4.2 percent between 2006 and 2018 (i.e, an average annual increase of 0.33%). Given that natives’ contribution to this variation was almost zero, the entire increase in the total labor force is attributable to migrants. At the same time, the aggregate labor force participation rate rose by 5.2 percent in comparison to the 2006 level as a result of native-born persons’ limited contribution (by 0.9 percent) and foreign-born persons’ large contribution (4.3 percent). In other words, the growth in EU labor supply from 2006 to 2018, in terms of either the total labor force or the aggregate labor force participation rates, was driven by migrants.

The shifting contribution of foreign-born labor was influenced by a number of factors, including a demographic shift towards an older overall population, changes in work participation by older native born workers, the size of the foreign-born population, and the work participation rate of the foreign born. Generally, the increase in older person participation did not make up for a decline in total younger workers.

Among native born workers, there occurred an increase in the numbers of persons on the relatively old side of the working age population (in their 50s and 60s) and a higher work participation rate for them. Thus the meager growth of the native population in the workforce was disproportionately driven by older workers.

Norway, Italy and Germany were the most affected by a decline in the labor participation rate of natives – a 10% reduction in Norway,

In Sweden, non-migrants contributed 0.7 percent to the increase in the total labor force, whereas migrants’ contribution was 11.4 percent, for a total increase of 12.1% (that is, an average annual increase of about 1% a year). In Italy, the shrinkage in the native-born labor force would have resulted in a decrease in the total labor force by −1.8 percent, but through migrants’ positive effect (7.2 percent), the total workforce increased by 5.4 percent.  Only in the Netherlands was the native born increase in the workforce greater than the foreign-born; in France, the contributions were equal.

From International Migration Review, Christos Bagavos, How Much Does Migration Affect Labor Supply in Europe? 2023

 

Working age population trends U.S., Germany, Canada and China

Between 2010 and 2020, the working age population (15-64) in Germany declined by 2% or one million, and increased in the U.S. by 0.5 % or nine million. Canada’s working age population rose by 4% or 800,000.  Canada likely had the highest rate of working age population increase among all advanced economies, thanks to its aggressive immigration policy that results in an immigration flow three times that of the U.S. on a comparable population basis.

This population increased in China by 6% or 75 million between 2010 and 2020. In China the working age population likely hit its peak in about 2015, and the 2030 figure is expected to be 880 million, a 110 million or 11% decline.

Immigration to keep up the size of the workforce, and avoid decline, is essential in most or all advanced countries.

 

Wealth in America by race / ethnicity: very recent trends

The Federal Reserve reports on the growth and distribution of wealth from 2019 through 2022, drawing from the 2022 Survey of Consumer Finances (SCF).  Note the relatively very high wealth of Asian households.  I have found no reliable analysis of why Asians are so wealthy. In the past 10 – 20 years, new Asian immigrants are far better educated that white and other groups in the U.S. which may have translated into higher incomes allowing for housing purchases and equity investments.

Two dominant drivers of wealth since the Great Recession are the stock market (Dow Jones 10/2009 was under $14,000, now over $33,000) and housing prices (median price October 2009 $214,000; October 2023, $416,000).  Any household who new ability to buy a home or invest in stocks rode these waves.  

I have posted on the economic rise of Hispanic households (here and here) and the educational powerhouse of Asians (here).

 

 

From the Fed’s report

[On real wealth—the difference between assets and liabilities in 2022]. Median wealth (the amount held by a typical family, shown in the top panel) among White families was $285,000 in 2022. By comparison, the typical Asian family—who we can split out for the first time in 2022 because of an oversample of certain non-White groups—held $536,000, nearly twice that of the typical White family. Meanwhile, the wealth of the typical Black family ($44,900) was only about 15 percent of the typical White family. The typical Hispanic family similarly held only about 20 percent of the wealth of the typical White family (about $61,600).

Between 2019 and 2022, wealth for the typical Black family rose 61 percent and for the typical Hispanic family it rose 47 percent….while the typical White family saw a 31 percent increase. However, despite faster growth in wealth for the typical Black and Hispanic family, the absolute dollar-value differences in wealth between the typical White and the typical Black and Hispanic family grew in 2022 because the typical Black and Hispanic family had less wealth in 2019. Both the White-Black and the White-Hispanic median wealth gaps increased by around $50,000 between 2019 and 2022, with each gap reaching over $220,000 in 2022.

Since the Great Recession the typical Black and Hispanic family has had between about $10 to $15 of wealth for every $100 held by the typical White family (Figure 3). This ratio has closed only modestly in the past two surveys. The typical Black family went from having about $9 in wealth for every $100 held by the typical White family in 2013 to around $16 in 2022; the typical Hispanic family went from having about $10 in wealth for every $100 held by the typical White family in 2013 to around $22 in 2022.

Most notable is the increase in net housing wealth—the market value of a family’s home minus any outstanding loans secured by the home—among all groups, but particularly for Black and Hispanic families. In part, the larger increase for Black and Hispanic families reflects the fact that these families tend to have higher leverage ratios, which amplifies the effect of rising prices on wealth, though it also reflects an increase in homeownership rates among these families.

Black and Hispanic families the gains in wealth were concentrated in housing, which is somewhat illiquid and may not be as useful as liquid wealth for covering recurring expenses. As shown in Figure 4, real average liquid wealth, which includes assets such as cash, checking, and savings accounts, did not grow much for Hispanic families and fell for Black families.

[Summary] Overall, the SCF depicts a complex account of families’ finances and disparities across race and ethnicity. Broad-based gains in wealth across race and ethnicity have narrowed wealth ratios somewhat over the past three years, but income ratios widened slightly. In particular, incomes for non-White families were propped up by temporary sources, like government support, that have ended, with real wages stagnant, on average, for Black and Hispanic families. While most families were able to meet their required payments, families, especially non-White families, have grown more pessimistic and uncertain about the current and future state of both their own finances and the economy. The recent improvements in wealth ratios across races is promising, but families’ increased financial uncertainty suggests continued improvements may not persist in the future.

The race for artificial intelligence talent

The October 30, 2023 White House “Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence” includes Section 5: a 774 word instruction for enhancing our immigration systems to provide more AI talent. I am digesting it now.

In 2021 I posted on AI talent: “The United States has a large lead over all other countries in top-tier AI research, with nearly 60% of top-tier researchers working for American universities and companies. The US lead is built on attracting international talent, with more than two-thirds of the top-tier AI researchers working in the United States having received undergraduate degrees in other countries.”

 

Foriegn born workers trends, 2010 – 2030

The growth rate of the foreign born employment has recovered from the pandemic and is about 3.5% annually vs. 0.6% annual growth for the U.S. born employment. The percentage of workers who are foreign born, based on these rates, is expected to grow from 16% in 2010 to 23% in 2030:

Why? First, the labor force participation rate of foreign born workers is higher at all levels of education:

Now, take into account not only first generation but second generation immigrants. Immigrants and their U.S. born children were responsible for 85% of the labor force growth between 2010 in 2018 at which point they comprised 28% of all workers [17% foreign born, 11% children of foreign born– PFR], up from 25% in 2010. And projection suggestions to 2035, all growth in the working age population will come from immigrant origin adults. (Go here.)

First and second generation workers are more concentrated in prime working age (25 – 54) – 70% vs. 62% for all other workers.