The Future of the US Workforce
by Jacob Funk Kirkegaard, Peterson Institute for International Economics
Op-ed in the Globalist
April 14, 2008
Note: This is Part I of a two-part series from Jacob Kirkegaard's book, The Accelerating Decline in America's High-Skilled Workforce: Implications for Immigration Policy. See also Part II of this series, "White-Collar Outsourcing: Myth Vs. Reality."
1. The Era of Rising Skill Levels in America's Labor Force Is Drawing to a Close.
Overall skill levels in the US workforce have stagnated in the last 30 years. Measured by educational attainment, new cohorts of workforce entrants aged 25–29 and 30–34 do not possess higher skills than soon-to retire baby boomers aged 55–59.
This indicates that the qualitative, compositional improvement of the skill level in the US labor force associated with the retirement of workers less skilled than those entering will stop for the first time in US history. Retiring baby boomers will take as many skills with them into retirement as their children simultaneously entering the workforce possess.
2. The Number of High-Skilled Workers in Other Countries Is Rising Faster than in America.
American baby boomers aged 55–64 led the global economy in tertiary education when they entered the workforce in the 1970s. Today's American workforce entrants aged 25–34 barely make the global top ten, signifying that America will soon start dropping down the list of nations with the most skilled workforces.
At least ten percentage points more of young workforce entrants in Russia, Canada, Japan, and Korea today have a tertiary degree than does the present share of youngsters in America. This indicates that present and future generations of Americans may not possess the same relative skill advantages to thrive in the global economy as did Americans aged 55 and older.
3. Science and Engineering Degrees Are Still Popular.
Measured as a share of the total number of bachelor's, master's, and doctoral degrees granted by US universities, science and engineering (S&E) degrees have held largely steady at least since the mid-1970s. Shortages of new S&E graduates are thus related more to the general educational stagnation in the United States than to any relative decline in popularity of these fields.
4. Foreign Science and Engineering Students Have Been Numerous at US Universities for a Generation.
The foreign share of US S&E students rose substantially during the 1990s and has now stabilized at more than a third after a 9/11-related decline. More than half of all engineering and computer science students at US universities in 2005 were foreign. However, as far back as the 1980s, this share was 40 percent or more.
5. OECD Countries Are Increasingly Shifting Toward Managed Immigration, Focusing More on High Skills than is America.
In 2005 the United States had the most family-oriented immigration policy of the 17 OECD countries for which data were available. Many OECD countries, including those outside the group of traditional Anglo-Saxon immigrant destination countries, are aggressively courting high-skilled immigrants and especially copying US efforts to attract foreign students and provide them with employment opportunities.
Moreover, traditional origin countries of many high-skilled emigrants to the United States, like China, have in 2007 actively begun luring their nationals back via special offers. This raises the question whether the United States can retain its large share of all foreign high-skilled immigrants and maintain its traditionally very high retention rate among its foreign student body.
6. High-Skilled Immigrants Are Increasingly Important as US High-Tech Entrepreneurs.
Up to 25 percent of all US high-tech startups since the early 1990s have had at least one foreign-born cofounder. This share is an increase from less than 10 percent in the 1970s.
7. Green Cards Keep High-Skilled Foreigners in the United States, but Don't Grant Them Entrance.
More than 90 percent of the green cards (i.e., the granting of legal permanent residence [LPR] status) to high skilled immigrants are issued via adjustments in visa status requested for high-skilled foreigners already residing and (most likely) employed in the United States. Green cards are thus important predominantly as a tool to maintain the existing high-skilled workforce in the United States, rather than expanding it.
This indicates that temporary visas perform a "gatekeeping" function for most high-skilled permanent immigrants to the United States and that overwhelmingly it is temporary work visas, rather than green cards, that attract "the best and the brightest" to the United States in the first place.
8. The Present Green Card System May Force Many Employed High-Skilled Workers to Leave the United States.
Due to the limited number of green cards that can be issued to any single country's nationals, most high-skilled immigrants from China, India, and the Philippines have had to wait several years to be able to acquire permanent residency in the United States. Such national bottlenecks in the green card system may force many of them to abandon high-skilled US employment and leave the US workforce.
9. The Current Cap on Annual H-1B Issuance Is Pure Political Rhetoric.
More than 275,000 H-1B visas were issued in 2004 and 2005, despite the cap being nominally set at 65,000. This is a direct and intentional result of congressionally mandated legal exceptions and is unrelated to large scale visa fraud.
10. A Dual Trend Dominates Temporary High-Skilled Visa Issuance in the L-1 and H-1B Programs, and Indians Now Dominate Both.
The issuance of H-1B and L-1 visas to Indian nationals has rapidly increased in recent years, so that Indians now account for 30–50 percent of all temporary high-skilled visas issued, depending on the subcategory. Visa issuance to nationals from the rest of the world has been largely stagnant since 2000.
More detailed occupational data for H-1B recipients show that the gross number of Indian recipients, recipients in computer-related occupations, and recipients in the IT services sectors fluctuates wildly and broadly as would be directionally predicted by the business cycle. Gross H-1B visa issuance to other recipient categories is generally stable. Foreign high-skilled workers in computer-related occupations in all probability increasingly dominate both programs.
11. New Firm-Level Data on L-1 and H-1B Usage for 2006 and 2007 Show a Limited Number of Indian IT Companies at the Very Top.
Recent data released by Senators Richard Durbin and Charles Grassley on employers that request L-1 and H-1B visas show that up to a dozen Indian IT services/software companies were the top petitioners of L-1 and H-1B visas in 2006 and 2007. Several major US IT companies are also heavy users of the two programs. However, Indian IT services/software companies do hardly feature beyond the top 10.
Instead, a very broad range of US and multinational companies, as well as US educational and public institutions from different sectors of the US economy, account for the remaining demand for foreign high-skilled workers. Firm-level data thus confirm the importance of both the L-1 and H-1B visas to the IT services/software industries and a handful of Indian companies in particular, while simultaneously indicating a broad-based demand for foreign high-skilled workers throughout the US economy.