The no-brainer immigrant-entrepreneur visa

By Felix Salmon
February 27, 2013

Many thanks to the Kauffman foundation for crunching the numbers on a key part of Jerry Moran’s clumsily-named Startup Act 3.0 — the new visa for immigrant entrepreneurs. I don’t have an opinion on the rest of the bill, but it does have two sections which are something of a no-brainer when it comes to immigration reform. One is the immigrant-entrepreneur visa; the second is the idea of giving green cards to up to 50,000 foreign students who graduate from an American university with an advanced degree in science, technology, engineering, or mathematics — so long as they remain in that field for five consecutive years.

The immigrant-entrepreneur visa is pretty simple. You create a pool of 75,000 such things, available to anybody who’s here already on an H1-B or F-1 visa. When those people switch from their old visa to their new one, they have to start a new company; employ at least two full-time, non-family member employees “at a rate comparable to the median income of employees in the region”, and invest or raise at least $100,000. After that, they have to continue adding employees at a rate of one per year, so that after three years, there must be at least five employees. At the end of three years, you graduate to a green card, and with it the standard path to citizenship.

The visa addresses the main problem which Ross Eisenbrey has with H1-B visas: the fact that people on such visas are “more or less indentured, tied to their job and whatever wage the employer decides to give them”. The new visa would create an employer exit strategy for H1-Bs, allowing workers to leave companies which pay too little or offer too few opportunities, and instead strike out on their own.

And of course — by definition — it would create jobs. The Kauffman foundation’s math is solid, here: they conservatively estimate job creation at somewhere between 500,000 and 1.6 million new jobs after ten years, and possibly substantially more. (Those estimates don’t include jobs created by the new firms after they’ve left the program, for instance.)

I also like the fact that the new immigrants created by this program would go overwhelmingly to the parts of America where immigration is wanted and embraced: big cities and research hubs. This plan is full of positive externalities: it improves tax revenues, from all the new employment and consumption; it improves America’s share of global innovation, and of course it helps to position America once again as the land of opportunity.

The Kauffman foundation is understandably worried that the visa would unfairly punish failure in an inherently risky world, but we’re living in a world of pivots, these days, where a gay social network can become a discount shopping site — and so long as the immigration people are OK with pivoting business plans, I think the failure problem will be manageable.

Most fundamentally, however, this visa is a great idea just because without it, the incentives are all wrong. As Stuart Anderson demonstrates, “in a practical sense, it may be easier to stay in the United States illegally and start a business than to start a business and gain legal temporary status and permanent residence (green card) as the owner of that business”. If we want to reduce illegal immigration, we obviously have to make it less attractive than legal immigration: as Jeb Bush and Clint Bolnick point out, you can only realistically ask illegal immigrants to “return to their native countries and wait in line like everyone else” insofar as there is, actually, a line to wait in. Right now, there isn’t one.

The only real question, when it comes to this visa, is how it’s going to get signed into law. The proponents of immigration reform tend to fall into one of two groups: US employers, on the one hand, who are looking to increase the size and/or quality of the pool of potential employees they’re choosing from; and illegal immigrants, on the other hand, along with their families and friends, who want to stop living in the shadows. Neither group has much incentive to support an immigrant-entrepreneur visa. But let’s hope we manage to get one somehow, anyway.

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