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Nations compete across many dimensions, but in the coming years perhaps no competition will be as fierce or as important as the one for talent. My guest on this episode, Harvard Business School Professor William Kerr, explains why global talent has been so important and how the US might continue to compete for these talented few in his new book, “The Gift of Global Talent: How Migration Shapes Business, Economy, & Society.”
William Kerr is Professor at Harvard Business School and Co-Director of the school’s Managing the Future of Work initiative. He’s also a recipient of the Ewing Marion Kauffman Prize Medal for Distinguished Research in Entrepreneurship. What follows is a lightly-edited transcript of our conversation. You can download the episode by clicking the link below, and don’t forget to subscribe to my podcast on iTunes or Stitcher. Tell your friends, leave a review.
I would think that a book about the value of bringing very talented people to your country would not be controversial. I would think it’d be like writing a book about baseball called, “The Gift of Bringing Really Good Free Agents to Your Baseball Team.” But yet I think this book, at least in some sectors, is somewhat controversial: that some people don’t think global talent is necessarily a gift. But before we get to that let’s clarify what we are talking about. When you talk about global talent, what do you specifically mean?
Global talent is the movement of highly-skilled individuals around the world to places where they can have their talents best put to use. That can be in the form of early education. It can be the first jobs people are taking where they’re starting their companies or the inventions that migrants have brought to the United States and other countries. So it’s not a particular educational definition because a lot of times contributions can come from people that have bachelor’s degrees versus PhDs. So the book is about thinking more about how the movement of talented people around the world has most influenced our economy and then also the world at large.
So we’re talking for sure about Nobel prize-winning physicists, but what are some of the other categories of talent that you’re looking at?
One of the unfortunate positions we find ourselves in from a data perspective is that while we live in a knowledge economy our understanding of the movement of knowledge workers in planes around the world is far less than our understanding of the movement of physical goods that are observed in cargo boats. So we would love to be able to look at this in a truly comprehensive framework.But instead what we often have to do is piece together glimpses of it from different angles. At the highest level, prestigious awards are often an easy place to pick out that superstar dimension. You can come down to the level of inventors; entrepreneurs are often a place where we can assemble some data that are about the origin of people and these particular contributions that they’re making to the economy. And those data are digitized and very well collected.
Then you get into more broad things that the census would measure. This can be for example the college-educated workforce in the country. And then you can look at student records and so on. So you’re trying to come at this from several angles and the fortunate outcome of this is that even though each of these is taking a different slice of the whole, all the directions point in the same way. So when we talk about how the United States has held a very special position for receiving global talent, that’s true from the Nobel Prize winners to the students that are in the classrooms.
Let’s describe the gift. Why is it a gift to the United States, and how has it been a gift in the past?
Well, the first is why is it a gift to the world? And I would argue the ability to match people to the places where their talents can be best utilized, where their passions can have the greatest influence, is something that can benefit all of us. The development of skilled work and its applications is not a zero-sum game for the world. We can all be better off if people are matched with the best places to utilize their talents.
There’s a second level of this which is the particular gift to the United States, and this comes from the enormous degree to which our country has received foreign talent. A third of our Nobel Prize winners have come from abroad. When you look at science and engineering, about a quarter of the talent coming to our country is foreign-born. If you think, is this different from the rest of the world, the answer is yes, absolutely. About 57 percent of migrating inventors have come to the United States. So it’s been a particular gift for the United States but it’s also something that benefits the world as a whole.
Since you mentioned the idea that it benefits the world as a whole, one criticism of thinking like this is that by trying to attract the smartest and most capable people to come to America we are taking something away, we are in fact stealing the best and brightest from these other countries. Some people argue that is immoral. We are retarding the progress of those countries. Why do you see that argument as being wrongheaded?
This framing has been classically called The Brain Drain argument. The idea is that once somebody has migrated from India or from Mexico or from Germany to the United States that somehow is depriving that country of the benefits that that talent would have would have accrued.
I want to begin by saying that there are certainly cases where the brain drain argument holds. In smaller and more isolated countries or environments, you can have when somebody goes abroad less talent than was at home. But there are pieces that we need to add into that before we start to have a full view. First is that migration itself can often unlock talents that would not have otherwise been unlocked due to stronger educational systems or due to better opportunities to make an impact to one’s career. They’re often the cases of matching people with the best places that can generate some extra surplus for all of us. A lot of times when we think about how technology diffuses around the world or how new ideas spread or how business relationships get formed, they sit on top of networks. An overseas community or what’s sometimes called a diaspora of a country can really help unlock its access to the business and scientific frontier in cases where the country is of a size and is of interest enough to make that connection worthwhile.
So the book tries to go through and think about settings where the brain drain story holds and then also settings where other forms sometimes called “brain gain” or “brain circulation” where those opportunities are instead taking root.
I would also add that it’s not the case that if, in the case of an entrepreneur, he creates some sort of amazing business, that he and his new country are the only beneficiaries. Sergey Brin was born in Russia and came to this country and co-founded Google, and most of the gains from Google have not been captured by Sergey Brin. Most of those gains have been captured by everybody in the rest of the world who’s benefited from that technology.
Absolutely, and the more that we have the 7 plus billion people around the world helping to make our world a better place, that is going to benefit all of us, whether it’s in the form of creating a better search engine or finding the next cure for cancer or the many other applications that we observe.
And unfortunately, the opportunity to do that type of work is not evenly distributed around the world and that’s why global talent flows and the particular way that they can interact with what environments offer can make us better off. And then you get into the question, the world can be better off but is the sending country itself better off? That’s where you need to have this extra kind of kicker on top and say that it will make the difference for Korea if one of their talented young people comes to the United States, if they are able make extra connections for Korea as a consequence of this. So the world gets better off and then Korea itself also would have the incentive for this tie.
Shifting to the United States, certainly one way of describing American exceptionalism is to say we’ve been an exceptional destination for global talent. We’ve had a huge advantage: People want to come here, and very smart people have come here. But that advantage seems like it is going to wane. It’s a more competitive world. Is that what you see in the research?
It’s definitely the case that the mid-20th century and even up until perhaps like 15 20 years ago, the United States was in a truly unrivaled place in terms of attracting global talent. There have been a number of factors over the last couple of decades that have started to erode that advantage. Some countries have become much more economically developed during this period and that makes it more interesting for a migrant to possibly return home after they’ve done their studies. A number of economies are growing very rapidly and have very large markets and that makes it interesting for entrepreneurs to go back and start their businesses. Foreign universities have started to take root. And also some countries have been very aggressive in trying to provide a package or some incentives to bring talented people home.
So the United States still to this day remains the undisputed leader, I think, in attracting global talent, and the surveys and some of the Gallup polls that have been conducted often find a majority of people would migrate to the United States if given the opportunity to do so, among those that want to migrate. But we are starting to see much more competition for that talent.
So America’s national advantages are being eroded as the rest of the world thankfully develops, though we still remain a very popular destination. But to what extent should we be concerned as Americans that our edge will erode significantly and have an economic impact on the United States?
I think I want to begin with the first part you said. The development of other countries around the world is something that we should celebrate. The more we have people that are able to build on our knowledge base and help our world grow, that’s fantastic.
The United States does have something special though, and I worry about the erosion or the loss of that special position. Take something like invention. In 1975 about one out of every twelve inventors in America was foreign-born, and today that number is about one of every three and a half. And this has been across many technology fields, but especially prominent in advanced technologies. That’s been something that has unlocked new forms of work, helped make companies more competitive in global markets, and helped enrich our lives. So I would deeply fear the loss of that special position and how it’s helped keep us on the dynamic innovative frontier.
Let me ask this question a different way. So if we assume that all the gains from innovation don’t go to the innovator and they spread to other countries, does it really matter if the innovation takes place in Silicon Valley or in China or Germany if eventually our businesses and consumers will benefit from those innovations? Do we need to focus on making sure it happens in the United States?
I think yes for several reasons. First, you have already highlighted the diffusion aspect — it will get to other places around the world. Of course we can now say the light bulb is widely used all around the world and we don’t quite have to place where exactly it emerged from. But in the span of business cycles, being the place where the first ideas are emerging — let’s think about electric vehicles or autonomous driving — being the first place where you’re able to catalyze that new discovery and how it’s going to be applied into industries and for consumers creates some of the very best opportunities for companies to really establish themselves and be able to offer great jobs to people.
Second, the future of work has a lot of questions for it. We don’t know what kind of jobs are going to be there, what new jobs will emerge. I think that where those new jobs are most likely to be emerging are around the places where you’re conducting this innovation and where you’re creating the cluster that people really want to be a part of and that’s pushing that frontier forward.
What is clustering and why is that so important?
If you ask a young finance graduate where they want to go, they’re going to give you a handful of cities like New York or London or elsewhere. If you ask an aspiring actress where she wants to go, it is a short list. What you find is a city and the regions surrounding it have become very specialized in the production of a good or a product, be it a financial product or a Hollywood movie. And we’re seeing this has a particular strength in today’s economy in part because we’ve got greater integration of some of the markets, and so my ability to sell around the world the product of a Hollywood movie or a financial product heightens the returns for the innovation.
And second we increasingly see from our organization of work, whether it is making movies or developing the startup company in Silicon Valley, what matters is talented people coming together. Once somewhere takes root as being the leading cluster of a space or among the two or three leading clusters of a space, it becomes very attractive for the people that want to do that in the future to also go there.
So as a patriotic American, I should want that cluster and that new technology to be in the United States.
Absolutely, and I think we have to recognize that we will always have some clusters that will exist outside the United States, whether it is the other financial centers in the world or whether it is the startup communities that are emerging in Shanghai and in Berlin. But what’s important is that we need to make sure that we have strong clusters ourselves because the more we’re at that leadership edge, the more we will also participate and be first to observe and to bring in some of the stuff that’s happening outside of the country as well. It’s about what we’re able to create. It’s also our ability to hear, absorb, learn, and bring in the things that are happening elsewhere.
What is your rough definition of talent and how many “talented” people are coming to the United States every year?
That’s a great question. It’s a difficult one because of course you have temporary migration coming in as well as more permanent migration that is developing. It is probably easier for me to break it down into some of the categories. We have a roughly a million foreign students that are coming to the country every year; about a quarter of our science and engineering workforce is foreign-born (that number depending upon the exact zone or definition that you want to create could go from say 3 million up to 8 million people).
Is there a large pool out there that we are not already, attracting, that with better policy we could get?
This goes back to our earlier conversation that in part talented migration also includes the education aspect. When you think about what exists abroad, there’s both people that have been trained and are ready to get to work, and there’s also going to be the people that would like to be a part of a leading university, become educated, and then launch their work. On both dimensions there is certainly supply that exists out in the world. If we wanted to open up to greater skilled migration there is room on this front. Some of that would almost certainly come from the reallocation of people that are currently going elsewhere toward the United States, but there would also be some opportunity for going further in depth into new groups that would want to become incorporated.
That potential supply seems to be increasing beyond mere population growth, I imagine, thanks to things like Chinese universities graduating lots of students.
Yes. One of the biggest things that’s happened over the last two decades has been very large countries like China and India and also other large countries like Brazil and Turkey hitting stages where their economic development has brought forth a lot of young talent. They’ve also reached points where the families are wealthy enough that they’re willing to send their kids abroad for study or for work. And they’ve also hit a point where multinational companies and entrepreneurs around the world are saying that’s a market that I want to be a part of. So I think all those things are helping to push forward this talent that’s coming up.
It certainly seems to me that an obvious thing policymakers should try to do is keep that flow of international talent coming, but you don’t have to do too much Google searching to find a lot of folks don’t think that. There are arguments that this is not the way to go, that this is just about bringing in replacements for US workers, that we generate plenty of talent here domestically. We generate more computer science majors than we can use and we don’t see the rising wages that you would expect to see if there was a shortage. In short they argue this is really about companies just not wanting to pay workers.
I’m sure you’ve run across some of these arguments. So how do you respond? Does the US economy need this sort of immigration to move forward, or can we throw up the wall and use our domestic talent better?
I think you’ve hit in a variety of different ways several important topics. I want to save the beginning until the end and start with, does the US want more talent? My answer to that is yes. This is one of the things that really helped make our nation what it is. It has been vitally important for our science and engineering development, for our business success, for the universities that we’ve created and now can provide to the world. And it would be a shame to lose that edge and that opportunity.
Now that doesn’t mean that there are not challenges. And that’s what your Google searches were highlighting, that there are some workers that can get hurt and the book spends a lot of time trying to understand why older tech workers in particular can feel strains that come from global talent flows. Likewise there is the increasing issue of inequality in the country and also inequality within the town clusters themselves, and that is bubbling over in very important ways: both differences across states as well as local differences across neighborhoods. And one of the places I want to then go is to say, alright, even for the admissions that we’re making we don’t have the best system; it’s going to be controversial. Even for high-skilled, employment-based migration it’s always going to be controversial to say we should increase the admissions. What I would hope we could at least come to some agreement on is that for the level of admissions that we’re making, America currently has a very crude policy structure. The H-1B system and the lottery features that it uses mean we are really not selecting the very best talent to admit. So why don’t we start by making that better?
From there I think we can actually go and find something that Republicans and Democrats and people of rich and poor backgrounds can start to have that unanimous agreement. But I think one of things we have to first do is make sure our policy structure is providing that high fidelity talent and then it becomes much more of a no-brainer for the country.
So the crucial mechanism to get that talent here is that visa system, so tell me what needs to change.
Well, I want to actually say that I think there are two crucial things. There’s the mechanism, but also increasingly one of the bigger issues is just the rhetoric around immigration in the United States. That’s not tied to a specific policy mechanism, but people all around the world are kind of looking at the United States and saying, “I’m not so certain I want to make my bets there. I’m not so certain I want to make those investments. So that has also become a bigger challenge for us.
Let me briefly interrupt you. Do you think that’s a real thing? Do you think that someone who wants to come to United States and sees all the opportunities and universities is being dissuaded in a meaningful way from coming here because of the perception that the US has become less welcoming to immigrants?
Yes, and the decision I think for high-skilled talent was always about investment. So if you are trying to decide where to go to school, often times what you think about is after I graduate from this school I will have this type of job opportunity; or if you’re trying to decide where should I start my business, you’re asking yourself, how can I grow and develop it? It’s much like an investment decision that a company would make in terms of building a new plant. And the one thing we know is most detrimental to investment is uncertainty. If you’re trying to think about long-term horizons, if it’s a very volatile and uncertain place, we all pull back. Whether that’s our choice to buy a house or whether it’s the choice to open the chemical plant or whether it’s the choice to choose this particular undergraduate program versus one that would be elsewhere.
That investment under uncertainty is the most direct channel through which the rhetoric and the worries about this being a place you want to make your bets develop through. Now, do we have evidence around that? We have some examples. Business schools are one place that this has become visible. Applications from foreign students are down about 11 percent this last year and that compares to about 2 percent from domestic students. In the surveys of the foreign students that ask why they chose or did not choose to apply to US schools, the immigration rhetoric and environment is something that comes out. So we’re picking up some of the signals that this does affect the choices people are making because they look ahead and say, “I’m worried about this future environment.”
I think you’re probably right. So what about policy?
On the policy side, let me just isolate one feature. The H-1B system is the largest of the employment-based migration systems. It’s used for people that have a bachelor’s degree or above doing a skilled or specialty occupation. A lot of this goes to computer scientists and similar occupations. Every April 1st is the start of the H-1B visa season and combining two categories together we have about 85,000 slots that we fill every year. And every year with the exception of a couple that happened during the Great Recession we have gotten well in excess of the 85,000 almost immediately, and the policy of the government is to hold open the application process for about five days in April and then see how many we get. Last year, we got a little over 190,000 applications for the 85,000 slots during those 5 days. And then what we do is we use a lottery to pick among those applications, and one of the challenges of the lottery is that it is a very crude way of selecting.
You have some people in these applications that are doing artificial intelligence research and you’re giving them the same shot as someone that is doing code testing for an outsourcing company; we don’t differentiate across those. Another example: Imagine if you are Microsoft, you’re usually putting several thousand applications in so the law of large numbers is going to mean that you’re basically going to get about a third of your applications approved, but you don’t even get to pick which third of your candidates you most want to employ. It is done at the individual level. So this is just a very inefficient system and then people have to go back and students or people that have come out on what’s called an OPT program may try the lottery two or three times and be getting to a desperate spot trying to get a position or an employment visa into the country.
So I propose in the book one way of trying to bring greater structure or prioritization using wage ranking. So we would start with the applicant that receives the highest wage that they’ll be paid and then work our way down the list, so we’re using signals from the labor market to say this is a more valuable use of the visa versus others. There’s a lot of fine print that has to be brought in to ensure the expensive coastal cities or the finance industry don’t gobble up all the pieces right there, but just putting those things aside, I am not saying a simplistic idea like “let’s triple the number of visas.”
But would you like to triple the number of visas even though that’s not what you’re explicitly calling for?
I think we should be thinking about increases of that magnitude, but I’d also want to tie it to doing it in a better way and kind of think of the whole setup. And when I go through some opinion polls, you can see differences where people are 3-1 usually supportive of increasing high-skilled migration to the country. But when you ask about the H-1B visa program, it’s split pretty equal between those who want to make it a little bit smaller versus a little bit bigger. So I think the respondents have a fair understanding that the H-1B program isn’t giving all of the bang for the buck or all of the best candidates that it could. So if we can make that system more skills-based and more focused on the best cases, there will be a lot of room to then say let’s expand the number of visas that are being supplied.
Right. And what do you think about a points-based system where applicants will get certain points depending on their skills? I think that’s what Canada has. What about that idea, using that as more of a measure as opposed to more a market measure where you’re looking at wages?
Well, I think there is two parts to that. One, we’ve been focused on employment-based immigration and within that sphere the United States has what’s called an employer-driven system, meaning that compared to Canada what we have is an individual company sponsoring a migrant. They say, for instance, that Bill is the person that they want to have in this role.
That’s got some very important features to it in terms of guaranteeing a person has a job when they arrive. Firms also have a lot of incentive to screen workers carefully and to think, you know what, a bachelor’s degree in data science right now is actually more important than a PhD in nuclear physics.
So, the firms are able to make those kinds of judgments and think about how creative a person is, how hard-working, and similar things. I kind of like having a firm in that particular role. But one of the reasons to think about signals like wage ranking is that we could do better about prioritizing the scarce slots, and firms help in that process. So I’d be bringing a little bit more of a points concept into that space.
There is however a broader question. We have many ways that migration to the United States happens, family-based migration is the majority of migration, and then the employment categories that we’ve talked about are a much smaller subset. When you hear conversations about points-based structures a lot of times people are also suggesting fewer family-based migrants coming into the country, and a greater allocation toward employment-based migration.
And the point that I’m trying to get to in the book is that we could double or triple the amount of employment-based migration into the country and it would still be a minority of the total immigration that is happening. So, once you get into comprehensive immigration reform that involves family and employment, you get into an enormously complex space with a lot of political issues on both sides. To go back to the employment base, make it larger, but make it more skilled in the processes.
The other sort of high-skill immigration theme politicians love to talk about is the idea of stapling a green card to every science and tech diploma that a university will hand out. What do you think about that idea?
I’m very sympathetic to the idea, and I’m sympathetic because we have many graduates that have skills we want to hold onto and the problem is there’s just not enough employment opportunities downstream and not enough visas. In the book I here’s how I describe this: Imagine we have various pipes of different sizes and the graduating student pipe has gotten bigger and bigger and bigger, but the H-1B pipe has stayed the same size, and the other pipes that are around too, and so you have all these sort of workarounds and attempts to overcome these mismatches that are occurring. That said, I suggest in the book that we not use the green-card stapling policy and my principal reason was what this would basically allow for administrators at universities all across the country to be making permanent migration decisions on behalf of the United States. I have no love of bureaucracy, but I also know the scope for unintended consequences if we made such a strict connection would be enormous. I’m a professor. I can only imagine a situation where the student is one credit short of graduating and therefore getting a green card to the country. Hopefully they would try to bribe me and not blackmail me. But either way you create a whole bunch of pressure with this suggested system.
So in the book I say I think we should adopt what some other countries have, which is a guaranteed employment period for any graduate. You can make the length a little bit different based upon time in the United States, level of degree, and other pieces you want to add on, and this would be important if you also had the wage ranking, because few students coming out would hit high enough on the wage scales that they would be picked if you had a prioritization around wages. So, I say, give them some time to launch a career and then if they’re going to stay for the long term they have to be able to work through the employment categories like the H-1B.
I know this isn’t the subject of the book but what are your thoughts about the role of low-skilled immigration to the United States? We tend to focus on high-skill immigration and it’s easy to see the benefits, but a lot of people, even if they can see the benefits of high-skill immigration, they have a problem with low-skill immigration.
I think low-skilled immigration — and let me broaden that out to family-based immigration — has been important for the United States. The academic evidence suggests this does not hurt American workers and can contribute to the public finances. I’m not someone that is prepared to go to an open borders argument. I think we have a high level of family-based migration coming into the country and I’m going to sort of say let’s keep that structure the way it is and the levels of admissions and I want to make sure that we can start doing what a number of our peer countries are doing, which is being more attractive to high-skilled migration.
We’ve received a huge benefit from global talent, but I often say that it has probably been in spite of, rather than because of, our immigration structure. I think we have ample opportunity to expand the employment work-based programs that we have.
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