Does immigration process hinder US innovation?

Does the current H1-B visa immigration system hinder US innovation, dissuade domestic research and development, and create more of a job gap by increasing the demand for off-shoring and outsourcing? This is the question that Congress has been pondering over the past few weeks. On March 7, 2007 Bill Gates (Chairman of Microsoft and Co-Chair of the Bill and Melinda Gates Foundation), spoke on this topic as well as education policies during an open hearing to the US Senate committee on Education and Labor.

I want to post some excerpts of Mr. Gates speech on immigration reform. The entire testimony can be found here. Mr. Gates addresses the need to not only increase the number of foreign engineers and developers that may come to the US, but also to retain the engineers that are being trained in our own universities. Mr. Gates speaks eloquently and succinctly on the pitfalls of the current practice and the “backwards” logic of our current regulations.

From Mr. Gates Testimony on 3/7/2007:
“Unfortunately, America’s immigration policies are driving away the world’s best and brightest precisely when we need them most. I appreciate the vital national security goals that motivate many of these policies. I am convinced, however, that we can protect our national security in ways that do less damage to our competitiveness and prosperity. Moreover, the terrible shortfall in our visa supply for the highly skilled stems not from security concerns, but from visa policies that have not been updated in over a decade and a half. We live in a different economy now. Simply put: It makes no sense to tell well trained, highly skilled individuals – many of whom are educated at our top colleges and universities – that the United States does not welcome or value them. For too many foreign students and professionals, however, our immigration policies send precisely this message.

This should be deeply troubling to us, both in human terms and in terms of our own economic self-interest. America will find it infinitely more difficult to maintain its technological leadership if it shuts out the very people who are most able to help us compete. Other nations are recognizing and benefiting from this situation. They are crafting their immigration policies to attract highly talented students and professionals who would otherwise study, live, and work here. Our lost opportunities are their gains. I personally witness the ill effects of these policies on an almost daily basis at Microsoft. Under the current system, the number of H1-B visas available runs out faster and faster each year. The current base cap of 65,000 is arbitrarily set and bears no relation to U.S. industry’s demand for skilled professionals. For Fiscal Year 2007, the supply did not last even eight weeks into the filing period, and ran out more than four months before that fiscal year even began.

For Fiscal Year 2008, H-1Bs are expected to run out next month, the first month that it is possible to apply for them. This means that no new H-1B visas – often the only visa category available to recruit critically needed professional workers – will be available for a nearly 18-month period. Moreover, this year, for the first time in the history of the program, the supply will run out before the year’s graduating students get their degrees. This means that U.S. employers will not be able to get H-1B visas for an entire crop of U.S. graduates. We are essentially asking top talent to leave the U.S. As with H-1B visas, the demand for green cards far exceeds the supply. Today, only 140,000 permanent employment-based visas are available each year, which must cover both key employees and their family members. There is a massive backlog in many of the employment-based green card categories, and wait times routinely reach five years. Ironically, waiting periods are even longer for nationals of India and China – the very countries that are key recruiting grounds for the professionals desperately needed in many innovative fields.

In the past, we have succeeded in attracting the world’s best and brightest to study and work in the United States, and we can and must do it again. We must move beyond the debate about numbers, quotas, and caps. Rather, I urge Congress to ask, “How do we create a system that supports and sustains the innovation that drives American growth, economic opportunity and prosperity?” Congress can answer that question by acting immediately in two significant ways.

First, we need to encourage the best students from abroad to enroll in our colleges and universities, and to remain in the United States when their studies are completed. Today,
we take exactly the opposite approach. Foreign students who apply for a student visa to the United States today must prove that they do not intend to remain here once they receive their degrees. This makes no sense. If we are going to invest in educating foreign students – which we should and must continue to do – why drive them away just when this investment starts to pay off for the American economy?

Barring high-skilled immigrants from entry to the U.S., and forcing the ones that are here to leave because they cannot obtain a visa, ultimately forces U.S. employers to shift development work and other critical projects offshore. This can also force U.S. companies to fill related management, design, and business positions with foreign workers, thereby causing further lost U.S. job opportunities even in areas where America is strong, allowing other countries to bootstrap” themselves into these areas, and further weakening our global competitive strength. If we can retain these research projects in the United States, by contrast, we can stimulate domestic job and economic growth. In short, where innovation and innovators go, jobs are soon to follow.

Second, Congress should expedite the path to Permanent Resident status for highly skilled workers. The reality for Microsoft and many other U.S. employers is that the H1-B visa program is temporary only in the sense that it is the visa we use while working assiduously to make our H1-B hires – whether educated in the U.S. or abroad – permanent U.S. residents. Rather than pretend that we want these highly skilled, well trained innovators to remain for only a temporary period, we should accept and indeed embrace the fact that we want them to become permanent U.S. residents so that they can drive innovation and economic growth alongside America’s native born talent. These reforms do not pit U.S. workers against those foreign born. They do not seek to make or perpetuate distinctions among the best and brightest on the basis of national origin. They simply recognize the fact that America’s need for highly skilled workers has never been greater, and that broad-based prosperity in America depends on having enough such workers to satisfy our demand. Far from displacing U.S. workers, highly skilled foreign-born workers will continue to function as they always have: as net job
creators.”

Ciscex-Webisco?

$3.2 billion was the price tag announced last Thursday when corporate tech giant (soon to be conglomerate) Cisco purchased web-conferencing magnate WebEx. I cannot say that I am shocked. Cisco has been expanding its core business for some time now, ever since a scare by Bay Networks in 1999, Cisco has been making a run beyond networks. In 2005 Cisco jumped into the physical security space with an IP camera offering, but this foray continues to show the movement of our tech giants from vertical segmentation to complete encapsulation of the business process.

What does surprise me is the price tag, which includes a buyout of remaining shares at $57/share. The market price at the time of the deal was $46 and change, and honestly I thought WebEx was beginning to lose its cachet a bit. Service offerings from GoToMyPC and Live Office (Microsoft) have definitely made a dent in Web-Ex’s market appeal. Although as a former user, I do enjoy the advanced functionality but could have lived without the advanced price-tag.

In the end though, I believe this deal speaks more about Cisco’s expansion than Web-Ex’s economic development. Cisco is a huge player, they always have been, but their migration from networks to services is something to write books about.