A fresh look at STEM workers and immigration

A more realistic assessment of STEM workers would show that about one fifth of them are immigrants; immigrants account for close to half of doctoral level STEM workers; that STEM workers are concentrated in family-creation age cohorts, that they earn much more than most workers.

I have posted on STEM workers and immigrants most recently here and here. In this posting I rely in part on a 2021 study which defines STEM workers broadly, to recognize the “skilled technical workforce.” It says that “this major shift in the broad understanding of the STEM workforce more than doubles the number of workers classified as part of the STEM workforce by including 16 million workers with at least a bachelor’s degree and 20 million without a bachelor’s degree.” The study elsewhere says that the broader definition includes 34 million workers of 23% of the total workforce. Foreign-born workers are 21% of the broader definition, up from 17% of the entire workforce which is foreign-born and 14% of the entire population.

Foreign-born penetration in the STEM workforce

The study, using the broader definition, reports that “…foreign-born workers accounted for 21% of workers in S&E occupations at the bachelor’s degree level, 38% at the master’s degree level, and 45% at the doctoral degree level. Foreign-born workers accounted for 25% of computer and mathematical scientists at the bachelor’s degree level and 60% of computer and mathematical scientists with doctorates. Similarly, approximately one-half of engineers and life scientists at the doctoral degree level, and about one-third of these workers at the master’s degree level were foreign born.”

Age of STEM workers

There are relatively fewer less than 25 years old because most STEM workers need to have a college degree. There are relatively fewer over than 44 because STEM work has surged during a time when people were entering the job market. Total STEM workforce — 43.8% are between 25 and 44; immigrant STEM workers 52.6%.

STEM Wages

The expanded definition of STEM workers includes about 34 million workers, or 23% of the total workforce. A traditional definition includes about 10 million. These 10 million earn on average about $90,000, compared to $40,000 for the workforce as whole.

The traditional definition is: Science, technology, engineering, and math (STEM) occupations include computer and mathematical, architecture and engineering, and life and physical science occupations, as well as managerial and postsecondary teaching occupations related to these functional areas and sales occupations requiring scientific or technical knowledge at the postsecondary level.

How Indians came to dominate the independent hotel business

When I come across an Indian at the reception desk of a modestly priced hotel, I routinely ask if she or he comes from Gujarat State.

Indians, primarly from Gujarat, are estimated to own between 80 and 90 percent of the motels in small towns. According to the Asian American Hotel Owners Association. 34,000 hotel are run by Indians (from all states in India), out of about 50,000 hotels in total in the U.S. For instance, 89% of all hotels in Texas are owned by Indians.(Go here.)

Indians began to buy hotels in the 1940s, mainly in California, But the surge started in 1976 when Chandrakant Patel, working for Braniff airlines in Dallas, and with masters degrees from Stanford and Johns Hopkins, bought a hotel he named the Alamo Plaza Hotel Courts Dallas, part of a chain of Alamo hotels which eventually went out of business.  (This from a 1999 New York Times article. Also go here.)

He manned the front desk, his  wife did the laundry. The family, with four children had a 2,000 square-feet house to live in rooms behind the motel’s front desk.

“It was a tough life managing both my airline job and the motel at the same time. I had to sacrifice a lot, especially in terms of my family life but I realized soon that I was saving a lot of money in terms of rent, utilities and phone bills because I was staying on my own property and using the motel’s phone and power connections.”

Eventually Indians, especially those from Gujarat, bought and operated many thousands of motels in rural America, often the only Indian family in town.

A formula for purchase, management and further investment evolved. Financing came from family and friends, for a down payment, from an independent American owner who wanted to leave the hotel business – Indian vastly expanded their ownership while the demand for hotel rooms grew and existing owners decided to sell. (Go here for a recent history of hotels in the U.S.)  One did not need fluent English, and the owners lived in the hotel. Extended family members came to live in the hotels. Profits were often used to buy other hotels.

Assume a small budget hotel with 40 rooms, an 60% occupancy rate with average nightly charge of $75. By providing most of the labor, the owner family can removed some 50% of operating costs. If the profit margin is 30%, income after expenses will be around $200,000.

Patel himself went on purchase 13 hotels by 1987, eventually large big city hotels as well. He founded the State Bank of Texas. His well-educated sons are part of the management team. (This hotel Patel family is different from Mafat Patel, who immigrated to Chicago and built a chain of grocery stores.)

Here is a short Youtube Video of a case study about Indian run hotels.

The EB-5 program

The EB-5 program was created by the Immigration Act of 1990 and most recently revised by Congress in March 2022.  The act provides for the issuance of Green Cards in exchange for investment and hiring – simply stated, for a one-million dollar investment and hiring of 10 American citizens. The program’s rules incent persons to invest in geographic areas with under-investment.

Wikipedia has a long entry on the program with much history. Here is description of the legislative changes in March 2022.

The funds have normally been applied to real estate projects such as hotels, hospitals and senior living centers. The 2022 revisions might spur investments in retail buildings.  As a rough rule of thumb, the 10,000 visas supposed to be issued annually could bring in $10 billion a year into real estate. The National Association of Realtors estimated that in 2020 $235 billion was poured into commercial real estate investment. Thus, EB-5 is a niche business. It is next to impossible to find how EB-5 really makes a difference.

The great majority of EB-5 applicants and awardees come from Asian countries.  One sociological study of recent awardees suggested that EB-5 applicants are primarily wealthy households who want a foothold in the United States as part of strategy to gain some independence from their own country’s regimes. Notwithstanding applicant motivation, the EB-5 program is in large measure a dense thicket of real estate developers, consultants, and politicians operating out of public view.  One person who has a deep understanding of the program in Suzanne Lasicki, who manages a blog on the subject almost like a public service,

The EB-5 visa falls within the broad category of employment-based green cards, of which there is a cap of 140,000 a year. The EB-5 program is allocated about 10,000 visa slots annually.  The actual number of filings for these visas within a single has ranged in the past ten years from about 16,000 to 4,000, suggesting that politics and bureaucracy, plus the Trump Administration’s attempt to suppress immigration, played a large role. This is not a program with a steady, transparent and abuse free character. The number of visas actually issued before FT 2020 was about 10,000, with half or more going to Chinese. There is a relatively small Indian involvement. The total number of outstanding applications is around 40,000. (Go here).

The number of visas issued collapsed during the pandemic years.  Here is Suzanne’s breakdown by country for FY 2021. A relatively recent development is that the Chinese government has reportedly shut down marketing of the program within the country,

 

 

One third of innovation is by immigrants

I have previously posted on the synergistic effect of many Indian IT workers coming to the U.S. with a temporary work visa such as H-1B, then using their American experience to foster the IT industry in India. Now we have a study of total innovation in the United States which finds that global collaboration by immigrant inventors, which causes diffusion of innovative advances, result in 36% of total innovation in the United States by immigrants. Both this and the Indian IT case share the same global foundation for expertise and innovation.

Abstract:  We find the immigrants account for 16% of all US and inventors (patent winners) from 1990 through 2016. Immigrants, however, produce about 23% of total innovation, as we find the average immigrant is substantially more productive than the average US born inventor. Immigrant inventors are more likely to rely on foreign technologies, to collaborate with foreign inventors, and to be cited in foreign markets, thus contributing to the importation and diffusion of ideas across borders. Taking innovation as a whole, 36% can be attributed to immigrants mostly due to their higher degree of global collaboration and diffusion.

 

—- The contribution of high skilled immigrants to innovation in the United States. Shai Bernstein et al, NBER Working Paper Dec 2022

Effect of immigration on wages: an overview of research

I return to the question of whether immigration affects the wages of U.S. born workers.  The short answer is that academic studies for the U.S. and other countries tend to report little impact. And, some careful mental speculation would come to the same conclusion.

This may well have to do with how immigration works in advanced countries, with relatively little size of immigrant workforces vs the existing workforce, and the fluidity of the workforce of an advanced economy. (Thus, large numbers of Venezuelans rapidly migrating to Columbia may well affect wages).

A 2011 meta-analysis with 213 citations concluded that “the likelihood and magnitude of adverse labor market affects for natives from immigration are substantially weaker than perceived. Most studies find only minor displacement afterwards, even after very large immigration flows.”

The question of wage effect may be the wrong question to ask in an advanced economy. A better question may be, does immigration increase or decrease the number of Americans employed, leaving aside wage impact. In an environment of labor shortage and a dynamic economy, immigrants may both increase employment and wages. But the effects will almost certainly by very local.

This entry reviewed in 2006 the wage issue, citing two case studies. Here is another posting. The World Bank addressed the issue of wage impact and ppolicy responses to it in 2018.

Jobs for persons with a lot of formal education.  Some studied (and your own speculation) suggest that medical doctors, computer scientists and other education immigrants may in fact increase the numbers of U.S. born persons employed (their wages may not go up). Consider the immigrant who provides a critically needed expertise to a team.

Jobs for persons with low formal education.  Consider persons without a high school degree.  26% of all immigrants have less than a high school degree education compared to 8% of U.S. born persons. (This high rate for immigrants has almost certainly gone down among recent immigrants.)

Divide the jobs between those requiring or favoring English proficiency and American cultural literary (Type A) and those not (Type B). Type A:  restaurant server, barista, sales staff in retail. Note that these jobs involve a high level of social interaction and opportunities for self-expression.  Type B: landscape worker, warehouse worker, farm worker, waste management, semi-skilled factory work. Note that these jobs effectively preclude the worker from expanding her use of English and interacting with the public.  Consider that many of the Type B jobs are relatively very hard, such as meat processing workers. We can infer that in a dynamic large economy poorly educated immigrants do not necessarily compete with their peers in education.

Also go here.

Who wants more skilled immigrants?

From a survey by the Economics Innovation Group:

The survey display found strong bipartisan backing for expanding pathways for skilled immigration. Specifically, 71 percent of voters are supportive of more skilled immigrants coming to the United States (defined as those with a high level of educational achievement or specialized professional skills), including 60 percent of Republicans, 83 percent of Democrats, and 72 percent of Independents.

When asked if voters would support increasing the number of skilled immigrants so that they can “start companies in the United States that will promote economic growth and create new jobs for American workers” support increased across the board, including by 20 percentage points among Republicans (to 75 percent overall, 84 percent among Democrats, 66 percent among Republicans, and 73 percent among Independents).

The Biden administration has signaled its desire to increase employment-based immigration. (Go here and here.)

Economic disparities among Hispanics in the U.S.

The Census reports on economic hardship and household wealth among Hispanics by country of origin. 35% of  Hispanic and 24% of non-Hispanic people in the United States lived in a household that experienced material hardship in 2020. About half of Dominicans and Salvadorans experienced material hardship.  But only 23% of Columbians experienced hardship. (Columbian household economic conditions are better than those of Cubans in the U.S.)

Average household wealth of Hispanics ($52K) is much less than that of non-Hispanics ($195K). the table below shows the average wealth of five nationalities of Hispanics.

 

Should we increase the H-1B program?

The Wall Street Journal ran an article, “Should the U.S. Expand the H-1B Visa Program? Three experts offer a vigorous debate on whether the program helps or hurts the U.S., and whether it exploits foreign workers.”

WSJ: Overall, is the H-1B program good, bad or neutral for the U.S. economy?

Ron Hira, associate professor of political science at Howard University and a research associate at the Economic Policy Institute: It does more harm than good. The shame of it is that it could be reformed to do a lot more good than harm. The Biden administration has the power and legal authority to reform it. Raise the H-1B minimum wages, close the outsourcing loophole, enforce the rules, audit major users of the H-1B program to ensure compliance, join in whistleblower lawsuits.

David Bier, associate director of immigration studies at the Cato Institute: The H-1B visa benefits the U.S. economy in numerous ways, creating innovation and new products that benefit U.S. consumers, reducing costs and inflation, and expanding the tax base. The H-1B visa is also the only way for most skilled workers to obtain permanent residence in the United States. As a result of these pathways, foreign workers have risen to become CEOs of dozens of major companies, including Microsoft and Google. Skilled immigrants (mostly starting their careers on H-1B visas) have also gone on to found more than half of the $1 billion startups in the U.S., creating thousands of jobs for U.S. workers.

Theresa Cardinal Brown, managing director of immigration and cross-border policy at the Bipartisan Policy Center: I think it’s better than nothing but a far cry from what would really help the U.S. economy.

Background

There are about 600,000 persons in the U.S. today holding a H-1B visa, although only 85,000 new visas are issued annually. This is how the H-1B visa system works.

On the one hand, there is Ron Hira’s relentless criticism of H-1B as exploitation of foreign workers who displace American workers. Go here for the stream of his papers. In 2016 there was a huge outroar in which Hira participated about how Southern California Edison hired many H-1B workers through an Indian IT firm.

On the other hand, Omid Bagheri of Kent State University produced a study concluding that H-1B visa holders are paid well, are not exploited, and implicitly do not drive down wages of American workers.

 

 

Here is a subdued, nuanced study of the role of H-1B workers in the financial auditing industry

 

 

Semi conductor workforce shortage

The CHIPS and Science Act was passed by bipartisan support (64-33 in the Senate) and signed into law by President Biden on August 9, 2022. As part of its goal to increase semi-conductor production in the United States, it aims to resolve the shortage of workers to staff new production facilities, each costing some $20 billion. It is hard to find this staffing without relying heavily on foreign-born workers.

Chips are critical to manufacturing. Per Deloitte, the absence of a single critical chip, often costing less than a dollar, can prevent the sale of a device worth tens of thousands of dollars.

Here is one analysis of the labor shortage: Sure enough, technology can automate most processes in a fab. But the reality is, the semiconductor industry still needs professional skilled workers to manage some roles. According to a whitepaper by Eightfold.ai, the US alone will need around 70,000 to 90,000 workers to be added by 2025 to meet the most critical workforce needs for the new fab facilities….the US for example needs to increase its current workforce by a minimum of 50% — and likely significantly more.

The American Immigration Council says that Immigrants made up almost one-fourth, or 23.1 percent, of all STEM workers in the United States in 2019, a significant increase from just 16.4 percent in 2000. While the overall number of STEM workers in the United States increased by 44.5 percent between 2000 and 2019, the number of immigrant STEM workers more than doubled over the same period. By 2019, there were almost 2.5 million immigrant STEM workers, compared to just 1.2 million in 2000.

 

Three quarters of electrical engineering students in the U.S. are foreign born.

 

Also go here.

 

Once again the labor shortage

The U.S. workforce now is three million fewer than would be the normal number based on pre-pandemic trends. (At the depths of the pandemic it was five million fewer.)  This places even greater than before dependence on the inflow of immigrants.

Today, the workforce participation rate of 25-54 year olds, which was at a near 21st Century high of 83% in 2019, is now at 82.5%, and the rate for 55 and older, which used to be at 40.3%, is now at 38.3%.

Growth of the workforce, which averaged about 1.4% per year prior to the pandemic, will be about 0.4% for the next ten years, according to federal forecasts—about 600,000 a year.  Most of this annual gain is due to immigration.

Biden’s initial immigration proposal in early 2021 was to increase immigration by about 500.000 a year, which would increase the annual inflow of workforce – type people from about 500.000 to 750,000.

Also go here.