As an immigrant from the former Soviet Union and a researcher with the Mercatus Center at George Mason University, Liya Palagashvili deeply understands the accomplishments and contributions of foreign-born Americans. She shares how her research reveals the importance of attracting and retaining international students to the United States. Tune in to discover how she believes the loss of foreign-born talent may impact national security.
Transcript
Denzil Mohammed: I’m Denzil Mohammed. Welcome to JobMakers.
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Denzil Mohammed: You may have heard about the H-1B skilled worker visa that permits foreign-born talent to work at U.S. companies. But have you heard about the OPT or Optional Practical Training program that comes in between studying in the U.S. as an international student and working on a work visa? It’s existed since the post world-war years, allows us to retain this [inaudible]. And it’s often the time when immigrants come up with ideas and start businesses. It helps the U.S. Yet recent proposed legislation seeks to end the program completely under the guise of sticking it to Big Tech. For Dr. Liya Palagashvili – immigrant from the former Soviet Union, senior research fellow at the Mercatus Center at George Mason University and affiliated research fellow at NYU Law – wiping out this program is not only counterproductive, it’s also a national security threat. In a policy brief co-authored with Jack Salmon, also at the Mercatus Center, she argues that reforming and making it easier to access Optional Practical Training would build this country’s edge in the global search for talent. The brief, titled “Reforming Optional Practical Training to Enhance Technological Progress and Innovation,” demonstrates how we all benefit from having foreign-born talent working and innovating alongside U.S.-born talent. Yet lately, that talent has been moving to Canada, the U.K., other countries, and this undermines our ability to keep up and be safe, as you’ll learn in this week’s JobMakers.
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Denzil Mohammed: Liya Palagashvili, senior research fellow at the Mercatus Center at George Mason University and affiliated research fellow at NYU Law, welcome to the JobMakers podcast. How are you?
Liya Palagashvili: Thank you so much for having me on.
Denzil Mohammed: So you’re here because you wrote a policy brief on what’s called the OPT or Optional Practical Training program that is afforded to foreign-born university students in the U.S. So maybe just more broadly tell us about the impact of international students on U.S. college campuses and the wider economy.
Liya Palagashvili: So international students make up a large share of programs at universities and especially in graduate programs. If we just look at some examples in the U.S., University of Southern California and New York University, international students make up at least a third of the student body. At Columbia international students make up over half of the entire student body. And actually what should really be celebrated is that they play a huge role as contributors to STEM programs in particular. So STEM programs are those that are science, technology, engineering and mathematics degrees. And about half of all international students in the United States are enrolled in STEM programs. And also if we look at some specific programs, some specific STEM programs across U.S. colleges, we see that international students are making up even a larger share of those programs. So, for example, if we look at petroleum engineering, international students account for 82 percent of graduate students at petroleum engineering, 74 percent and in something like electrical engineering, 71 percent in computer information sciences. So they really are driving STEM programs at universities. And I think it’s pretty important to point out because sometimes there’s a concern about whether international students are quote-unquote crowding out American students, whether their presence in these programs means some American student is unable to attend that particular college. And that’s just simply not the case. So in many research studies we actually find that international students have a positive effect on enrollment of American students because international students are paying such a high tuition that it actually helps subsidize the cost of enrolling additional domestic students. I don’t know if you’ve ever looked at tuition-rate differences between international and domestic students, but you’ll see that international students are often paying four or five times the tuition rate of American students.
Denzil Mohammed: I am very well aware of that because I was one of those international students. [Laugh] And, yes, we paid a lot. And we talked about universities in California and New York but it’s all across the country. I mean, University of Alabama, UT Austin, immigrants are making up a large portion of STEM programs everywhere, and they’re helping to maintain these STEM programs as we’ll talk about a little bit more. So the American Tech Workforce Act of 2021 calls for the end of Optional Practical Training as it quote “mostly benefits Big Tech companies by providing tax breaks and allowing them to hire workers at a lower cost,” so they say. The bill is introduced by Republican Rep. Jim Banks, as part of a Republican study committee initiative to quote “hold Big Tech accountable.” This is something we hear about all the time. So you and your colleague, Jack Salmon, argue in your policy brief that, quote, “bolstering the OPT or Optional Practical Training program rather than undermining the United States’ edge in the global race for talent is what needs to be done.” And you recommend a series of reforms. So let’s back up a little bit. What is the Optional Practical Training program and why has it been singled out?
Liya Palagashvili: The OPT program, the Optional Practical Training program, it’s designed to allow foreign students to work for at least one year upon graduation from a U.S. college or university. And recently they’ve allowed a maximum up to three years if you graduate from a STEM field. So, again, the STEM extension is relatively new. Basically the OPT program acts as a primary on-ramp for highly educated foreign students who graduate from U.S. universities and colleges to enter the U.S. labor force. And over the years, it has grown significantly. And that’s part of the reason it has been singled out as well, because they’re like, “Look at all these international students coming in on the OPT program who are taking quote-unquote American jobs.” So over the past 20 years, the number of foreign students participating in OPT has grown almost tenfold. There were under 25,000 participants from 1999 to 2000 so in that academic year. And then in the last few years, we’ve had upwards of over 200,000 OPT participants. And some of these OPT participants will seek H-1B employment sponsorship through their respective employers after.
Denzil Mohammed: And this, the rationale behind this, is not an act of good will to international students. Obviously there’s some benefit or great benefit to the U.S. by retaining this talent, right?
Liya Palagashvili: Yes, absolutely. So they’re retaining the talent. And that’s another thing that we can have a little bit of more of a deep dive on, but international students and particularly they’ve played a significant role in our economy as inventors and also patenting new ideas especially in science and technology, in technology fields, which is great for U.S. economy because that helps boost innovation and productivity if we look at something like patent rates. So we know that. We have studies that show that immigrant graduates with science and engineering degrees have historically had a patent rate double the average American rate. And there are several studies that try to parse this out further. So there’s one influential study that found that since 1940, a one percent increase in immigrant college graduates, as a share of the population, increases the number of patents per capita by about nine to 18 percent. This is broadly the case for all immigrants, not only international students in particular, because if we look at immigrants’ share of U.S. patents that has also risen significantly over the years. So, again, not only international students, but immigrants as well. In one study, we know that in 1975 immigrants’ share of patents was only nine percent, but by 2015 immigrant patents represented 28 percent of all patents in the U.S.
Denzil Mohammed: There’s a wealth of data and examples all over the U.S. history and across the media today that points to exactly what you’re talking about and shows us who this talent is and what they do that benefits, not just them, but the country as a whole. So you just said overall immigrants, international students are more likely to raise the rate of patents. You also state in your policy brief that they’re more likely to start a successful company when compared to U.S. born students. I like to say that the act of migrating is itself an entrepreneurial act. So it sort of comes naturally to many of these students. What are some of the other data points you find in your research that sort of speaks to this?
Liya Palagashvili: Yes, that’s exactly right. It is important to point out that these international students contribute not only through employment and patents, but they later end up as entrepreneurs and innovators in the technology industry. Actually, if we look at all of the billion dollar startups in the United States, 22 percent of them, so think about companies like Zoom, Tesla, SpaceX, Instagram, right? They had at least one immigrant founder who came to the country as an international student. And then one that even found that international students are more likely to start a successful company when compared to domestic students. And, by the way, we just want to emphasize this again, it’s not only international students, but we’re seeing this among immigrants in general. This is the case for immigrants in general, too. So we know that immigrants show an 80 percent higher rate of entrepreneurship than native-born individuals. And they start companies quite quickly after entering the United States.
Denzil Mohammed: Wow. That’s incredible. Immigrants are job makers, not job takers.
Liya Palagashvili: Exactly.
Denzil Mohammed: And is there something about the U.S. that brings out this entrepreneurship in people?
Liya Palagashvili: Well, we have good institutions that are pretty supportive and conducive for entrepreneurship in general. It’s relatively easy to start a business here. We actually also have a culture that is open to experimentation and failure. That’s not always the case in other countries. Sometimes in other countries if you start a business and you fail, it’s frowned upon. So society does not like that. Your social status goes down. If you start a business and fail, I think that’s important to highlight that in the U.S., as people, as individuals, society, we don’t frown upon failures. And we are open, we are a culture that is open to experimentation and just to see where it goes.
Denzil Mohammed: So in a future episode we’re gonna hear from an entrepreneur from France who specifically says that that culture for entrepreneurship does not exist. They don’t even want you to start businesses. They just want you to enter the government and have a conventional life. And that failure is indeed frowned upon. So there is something special about the U.S. and that something special has always existed in the U.S. to allow for entrepreneurship from U.S.-born people and from immigrants. But you also state that this OPT, Optional Practical Training, is a national security necessity. So to the untrained eye, this seemed a little bit absurd. Explain, what have we got to lose?
Liya Palagashvili: So that was a statement from the Department of Homeland Security, actually. It was in a 2008 report. They concluded that the expansion of OPT is a national security necessity. And I’ll quote directly from the Department of Homeland Security on this. So they said, quote, with their large and growing populations of STEM, graduate scientists, high-tech industries in Russia, China and India and others in the OECD now compete much more effectively against the U.S. high technology industry, end quote. So then the DHS goes on to acknowledge that the OPT STEM extension should be justified on the grounds that American companies are harmed when they cannot recruit high skilled foreign workers. So, again, I think that’s really important to point out as well, that the DHS sees this as a national security reason. And, by the way, America has been an active recruiter in global talent. You know, we have recognized that when the best and the brightest minds blend their ideas and talents, innovation follows. And I think this type of national security reasoning is coming back in our minds. As we’re thinking about competition with China, we’re trying to be a little bit more thoughtful about our competition with China, and maybe we’re starting to remember our old methods that worked in the past, which is okay. Bring the best and the brightest minds to America and innovation will flow. And it’s also a very low cost and effective way to increase America’s edge over China; let America access the world’s most talented people.
Denzil Mohammed: That’s a very, very important point. So we don’t want to teach and educate people and then just send them elsewhere. We want to keep that talent here. You spoke earlier about companies that had at least one immigrant founder, so that foreign-born talent mixes with the U.S. born talent to found incredible companies of innovation. So not only do we benefit from them, but we collaborate with foreign-born talent in the U.S. and that helps us keep our competitive edge. And in a world that is not only much more competitive and globalized, but cybersecurity threats, as one issue, we do need to have a competitive advantage.
Liya Palagashvili: There is a University of Pennsylvania study that examined over 2,000 U.S. companies from 1994 to 2014. And they found when these U.S. multinational companies face H-1B visa restrictions, which prevented them from hiring the high-skilled foreign workers that they needed in the U.S., these companies increased employment in their overseas locations. And, ironically, the top three locations were Canada, India and China. And, by the way, we see this anecdotally, too. So Microsoft has continued to open up research and development offices, affiliate offices, in Canada. They did this in 2007, they did it again in 2018. And if you look at their announcements, just read them, and they actually say we’re doing this to attract top talent because in Canada their immigration system is much more favorable and open to high skilled workers.
Denzil Mohammed: So “America First” nationalism is not going to get you far when it comes to attracting and keeping the talent that is going to make us competitive and have an edge over other countries. We have to go wherever the talent is. So what have been the trends recently? You talked about Canada, you talk of Eastern Europe, Russia, China, India. What has been the trends recently both here in the U.S. and among our competitors when it comes to attracting high skilled foreign talent in general?
Liya Palagashvili: So we have seen declining rates of international students to the U.S. And this has been since 2015. And when we look at survey questions about why this is the case, they point to the difficulty in being able to enter the U.S. labor force, post-graduation. On the other hand, if we look at what’s happening in Canada and in the U.K., both of those countries have actually revamped their immigration policies to attract more international students and to streamline and to make it easier to have those international students get jobs. And in Canada and in the U.K., post-graduation, in fact, we’re seeing more international students in the U.K. and in Canada.
Denzil Mohammed: Interesting. So it’s declining in the U.S., and it’s increasing among our competitors, even our closest neighbor to the north. That seems like a bit of a tragedy. So what do you recommend we do about the Optional Practical Training program. Whereas Jim Banks wants to cut it entirely, you say that we need to actually foster it and increase it.
Liya Palagashvili: Yes. So my co-author Jack Salmon and I have a set of proposals that we think will help reform the OPT program. I think first and foremost, and this will be one of the easiest things we can do, is just extend those eligible years from one year to three years, which is already what’s happening in the STEM program. So if you graduated with a STEM degree, you have three years to work on the OPT. We can make that the case for all graduates, not only STEM, so increase eligible years of work for non-STEM graduates on OPT from one year to three years. The second thing is, as I mentioned before, in the beginning we didn’t have this restriction on the OPT program that said graduate students who [are] international students have to work in industries that are related to their field. So we can change that to go back to the original part of the program, which is allow these foreign graduates to work in industries unrelated to their field of study. Another reform idea we have is eliminating the minimum working hour requirements for employment authorization, and then also removing outdated employer sponsorship requirements. So some of these other ones are just basically streamlining the process because it takes a long time, and a lot of paperwork in the U.S. to authorize employment for the OPT. And then in the policy brief, you’ll actually see we have a little table where you can see the differences; how long it takes in the same type of requirements in Canada and the U.K., and they’re much faster and much easier than it is in the U.S. So, again, to compete with our competitors, Canada and the U.K., we can just basically streamline some of these things, make it easier.
Denzil Mohammed: And many of these things do require Congress to act or the president. It’s statutory under the Department of Homeland Security, right?
Liya Palagashvili: Yes, yes, that’s correct.
Denzil Mohammed: So there are things that we can be doing right now that would be easier to implement and beneficial to us, but we’re not doing it. We’re not doing it. And clearly this is gonna be a tough sell to some Americans, even though what you outline here has been very, very compelling both in this interview with you and in your policy brief. What should skeptical Americans keep in mind by considering your proposal in this time of heightened restrictionist and nationalistic sentiments?
Liya Palagashvili: I think one framework that we as Americans could utilize that I mentioned earlier is just if we think about America first. I’m going to use that motto, America first. Well, for America first, it helps America to have the best and the brightest talent come to America and work in America and come up with inventions in America and boost productivity in America, and basically make America a global leader in technology. And so I think, again, if you’re thinking about America first, and you don’t want to, you’re not thinking about we’re helping these immigrants, then this is one of the best ways you can help America, is allow high skilled talent to come in.
Denzil Mohammed: That’s what’s going to keep America first or ahead. And as you mentioned, since 2015 that entry of foreign, of high, of best and the brightest has been declining. So we are really in danger of losing that edge. And it is something that we really do need to keep in mind, especially as we see tensions with places like Russia and China escalating. You have your own immigration story, don’t you?
Liya Palagashvili: I do.
Denzil Mohammed: Tell us a little bit about it.
Liya Palagashvili: So this is not a high skilled immigration story. This is a pure luck immigration story. So I was born in the Soviet Union as it was collapsing. And we were, my family and I, refugees from Azerbaijan to Armenia. Unfortunately, after the Soviet Union was collapsing, there were wars that broke out in all the different countries that were part of the Soviet Union. And so I’m part Georgian, part Armenian. We moved to Armenia and were living there for basically five years of war between Azerbaijan and Armenia. There were a lot of blockades, food shortages. It was a very dark period as my parents describe it. I don’t remember too much because they tried to keep it very light inside of the house, and I was young, but it was a pretty bad time. So one day we received invitation, we received a letter in the mail and basically said we had won the green card lottery to come to United States. And that was in 1995. So we moved to the United States in 1995. I was seven years old at the time and it just completely changed our lives, the trajectory of our lives. And I know by comparison, because I have cousins and family who are still there, and they’re nowhere near where we are. They don’t have the same opportunities and they’re almost still stuck in the same place where they were 30 years ago.
Denzil Mohammed: So Liya Palagashvili, senior research fellow at the Mercatus Center at George Mason University, thank you so much for joining us on the JobMakers podcast and for your research for us.
Liya Palagashvili: Thank you so much for having me on. It was great to chat with you about this.
Denzil Mohammed: JobMakers is a weekly podcast about immigrant entrepreneurship and contribution produced by Pioneer Institute, a think tank in Boston and The Immigrant Learning Center in Malden, Massachusetts, a not-for-profit that gives immigrants a voice. Thanks for joining us for this week’s special policy episode on retaining immigrant talent to benefit this country. If you know an outstanding immigrant business owner or innovator or researcher we should talk to, email Denzil, that’s d-e-n-z-i-l, @jobmakerspodcast. I’m Denzil Mohammed. See you next Thursday at noon for another JobMakers.