Talent, Immigration,and U.S. Economic
CompetitivenessG o r d o n H . H a n s o n & M a t t h e w J . S l a u gh t e r|

M ay 2 0 1 3

Table of Contents

About The Authors  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 1Executive Summary  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 2Section 1

The Contribution of Talent to American Innovation
and Overall Competitiveness  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4Section 2

Immigration’s Contribution to U.S. Talent:
Strong Past and Growing Importance Today  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 13
Section 3

Supply and Demand of STEM Talent in America:
Immigrants Continue to Help Meet Growing Demand  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 23
Section 4

Conclusions  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 36
References  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 37

About the Authors

Gordon H. Hanson is the Pacific Economic Cooperation Chair
in International Economic Relations at UC San Diego (UCSD),
where he is director of the Center on Emerging and Pacific
Economies and founding co-director of the Policy Design and
Evaluation Lab. At UCSD, he has faculty positions in the Schoolof International Relations and Pacific Studies and the Department of Economics. Professor Hanson is also a Research
Associate at the National Bureau of Economic Research.
Matthew J. Slaughter is Associate Dean for Faculty and Signal
Companies’ Professor of Management at the Tuck School ofBusiness at Dartmouth. He is also a Research Associate at
the National Bureau of Economic Research, an adjunct Senior
Fellow at the Council on Foreign Relations, and a member of
the Congressional Budget Office’s Panel of Economic Advisers.
From 2005 to 2007, he served as a Member of the President’s
Council of Economic Advisers.

This report was sponsored and published byCompete America Coalition. The views expressedin this report are those of the authors.
© 2013 Gordon H. Hanson and Matthew J. Slaughter

1

Executive Summary

For generations, highly skilled labor in science,technology, engineering, and mathematics (STEM)
has been a catalyst for innovation, job creation, andrising standards of living in America. These innovative STEM workers have long been not just nativeborn Americans but immigrants, as well. Immigration
has played a vital role in helping American companies meet their growing demand for skilled labor—
demand that, without immigration, would be growing
well ahead of supply, forcing companies and thecountry to endure a talent crunch.
This white paper delivers three central messages.
Message #1: Talent—especially the talent of highly

educated STEM workers—drives much of America’s
innovation and economic growth. In the increasingly global economy, America’s need for talent
has become even more acute. Despite the nation’s
historic innovation prowess, concern is rising amongleaders that our economic strength is waning.
• Of the rise in real U.S. output per person over the
20th century, over 80% was accounted for by innovation (as proxied by rising educational attainmentand research and development) and technologicalprogress. Innovation requires STEM talent.
• Workers in STEM occupations are much moreeducated than are workers in other occupations.
Compared with workers in non-STEM jobs, today
workers in STEM occupations are over 2.2 times

2

more likely to have a bachelor’s degree, 2.7 times
more likely to have a master’s degree, and5.3 times more likely to have a doctorate.
• There are more than 4.9 million STEM workers in
America: 1.5 million engineers, 1.4 million softwaredevelopers and computer programmers, and1.3 million computer and information analysts,
database administrators, and network architects.
Almost all the jobs in the latter two categories arequite new to the U.S. economy. Innovation goes
hand in hand with the creation of new demand for
STEM labor.
• The World Economic Forum’s 2012 ranking ofcountries’ “Global Competitiveness” has the UnitedStates at #7, down from #2 in 2004, and also at #7
in the “Innovation” category. For 2012, the WorldIntellectual Property Organization ranks the UnitedStates at #10 in its Global Innovation Index—down
from #1 in 2009. Absent measures to strengthen
America’s innovation capabilities, the nation’s
ranking will continue to slide.
• Among the 65 countries that participated in the
Organisation for Economic Co-operation andDevelopment’s (OECD) most recent examinations of 15 year-olds, U.S. students ranked 15th inreading, 23rd in science, and 31st in mathematics.
While there are long-run plans to improve America’s STEM education and training, in the near term,
U.S.-born students cannot meet the nation’s needfor STEM skills.

Executive Summary – Talent, Immigration, and U.S. Economic CompetitivenessMessage #2: Immigration plays a critical role inhelping America meet its steadily growing demand
for talent—especially for highly skilled STEM workers. Immigrants have long made substantial contributions to American innovation, both at the highest
levels and throughout the economy at all stages of
discovering and developing new ideas. Over time,
America’s reliance on talented immigrants has been
rising, not falling. America attracts immigrants whoachieve very high levels of education and who arestrongly inclined toward training in STEM disciplines.
• While immigrants comprise 12% of all U.S. residents, they comprise 27% of recent U.S.-resident
Nobel Prize winners in chemistry, medicine, andphysics and 25% of recent MacArthur “Genius”
Fellows. U.S. immigrants constitute over one-thirdof current National Academy of Science members
in mathematics and engineering, and one-third to
one-half of university faculty in top-ranked engineering and computer science programs.
• One quarter of U.S. high-technology firms
established since 1995 have had at least one
foreign-born founder. These new companies
employ 450,000 people and generate more than
$50 billion in sales. Immigrants or their children
founded 40% of Fortune 500 companies, including
firms behind seven of the 10 most valuable global
brands.
• Today, foreign-born individuals make up 20%
of STEM workers with bachelor’s degrees and
40% of those with advanced degrees. Among all
U.S. workers both with a STEM doctorate and in
a STEM occupation, 60% are immigrants. In the
key STEM fields of computer science, computer
programming, and software development, over
50% of U.S. workers with a master’s degree are
immigrants.

Message #3: Even after the Great Recession,
America’s need for more talent persists. America’s
demand for skilled STEM workers continues togrow—and immigrants continue to help meet thisdemand, both directly and more broadly throughtheir expansive contributions to America’s innovation
potential. Post-recession, unemployment in STEM
occupations has been falling sharply as the STEM
labor market rapidly tightens.

• Relative to non-STEM workers of the same age andeducational attainment, STEM workers in America
today earn a compensation premium of about 25%– a differential that has changed little over the past
30 years despite the substantial increase in therelative size of America’s STEM labor force. This
STEM wage premium has not disappeared because
America’s demand for STEM talent has continued
to expand.
• Over the past decade, the earnings of STEM workers have risen relative to all other U.S. occupations
by 3% to 6%. Since 2000, real wages of main
STEM occupations have grown while real wages fornearly all other U.S. occupations have fallen.
• Looking among U.S. STEM workers, there is noevidence that immigrants are paid less than U.S.born citizens. Using the most comprehensive data
available and a number of alternative approaches
to controlling for the differences in earnings acrossworkers (such as age, gender, education, industryof employment, and specialized occupation), there
is no consistent statistical difference between theearnings of U.S.-born STEM workers and immigrant STEM workers.
• The market for STEM labor is tightening. The
unemployment rate for prime-age STEM workers
with at least a college degree fell from 4.5% in2009 to 2.5% in 2012, barely above its 20-year
average of 2.45%. In computer occupations(programmers, software developers, computerscientists, computer systems analysts), the unemployment rate has declined even more dramatically—from 5.4% in 2009 to 2.5% in 2012—and is
now below its 20-year average of 2.8%.

Talent, Immigration, and U.S. Economic Competitiveness – Executive Summary3Section 1

The Contribution of Talent to American
Innovation and Overall CompetitivenessInnovation has long played a central role in driving
growth in U.S. output, jobs, and income—and thisrole may be even more important in the years ahead.
Discovering new products and processes boosts
output in existing companies and creates entirely
new industries. This innovation creates new jobs andhigher standards of living for all American workers
and their families. Indeed, for many generations,the overwhelming majority of growth in U.S. output,
incomes, and overall standards of living has been
driven by discovering new ideas that fostered new
products and processes of production.

Innovation, the process through which new ideas
are generated and put into commercial practice, is a
key force behind U.S. economic growth and national
competitiveness…Innovation protected by IP rights is
key to creating new jobs and new exports. Innovation
has a positive pervasive effect on the entire economy,
and its benefits flow both upstream and downstream
to every sector of the U.S. economy. Intellectual
property is not just the final product of workers
and companies—every job in some way, produces,supplies, consumes, or relies on innovation, creativity,and commercial distinctiveness.1

Perhaps most vital to America’s innovation successhas been the essential factor of talent: the highly
skilled knowledge workers who discover and develop
the new ideas at the heart of innovation. And among
these talented workers, most critical for many
innovations are workers in STEM.

Innovation has been the foundation of America’s economic strength. Over the arc of American economic
history, many innovations have been incremental:
slight refinements of products and processes that
better serve companies’ customers. Other innovations are truly disruptive and transformational, creating new industries and bursts of job growth while
often simultaneously displacing existing companies,
workers, and ways of doing business.

The Past: The Massive Contribution of
Innovation to America’s Economy
Since the founding of the American republic, innovation has been a primary driver of growth in U.S.
output, jobs, and income. This basic economic factof knowledge discovery has been well established byacademic and policy research in recent decades, and
it is widely recognized by leaders in business and ingovernment. For example, here is a statement on therole of innovation in America’s economic growth andoverall success, from a landmark new study by the
U.S. Department of Commerce.

4

The cumulative economic benefit of innovation—indeed, the cumulative impact on the average
standard of living of a country’s citizens—is best
expressed in terms of productivity: the averagevalue of output of goods and services that a country
produces per worker.
The economics of this “essential arithmetic” for why
productivity matters is simple. Broadly defined, acountry’s standard of living rises with the quantityand quality of goods and services its citizens canconsume: people achieve economic well-beingby consuming goods and services such as food,

Section 1 – Talent, Immigration, and U.S. Economic Competitivenessclothing, and medical care. Purchasing these items,
however, requires some means to pay for them. For
almost all people, their income is the primary—often
the only—means they have to provide for consumption. In turn, people’s income derives from producing
goods and services, usually by working with others
in firms, be they large or small, public or private.
Thus, the more and better quality goods and services
people produce—that is, the more productive they
are—the more income they receive and the morethey can consume. Higher productivity means ahigher standard of living.
How can a nation raise its productivity? There are
two basic means. One is to save and invest to accumulate the other inputs people work with to produce
things. The most important other input people needis capital, broadly defined as goods and services that
help people make other goods and services—e.g.,buildings, machinery, and software.
The second way to raise productivity is to improve
the technological know-how for transforming inputs
into outputs thanks to innovation. New products
and processes allow workers to make new and/or
more goods and services. What makes innovation so
powerful for productivity is that many ideas are ultimately non-rivalrous—i.e., their use by one company
does not preclude their use by another (unlike capitaland nearly all other goods and services, which arerivalrous). Thus, the more ideas a country has today,
the easier it is to produce additional ideas tomorrow.
So, what does the data say has driven America’s
rising productivity—and thus average standardsof living—over the generations? A large body ofacademic and policy research has found that theoverwhelming majority of America’s growth inproductivity over the 20th century was driven by
innovation and the resulting technological advances.
Robert Solow, in his seminal work that helped leadto his Nobel Prize in economics, calculated that thelarge majority of U.S. growth during the first halfof the 20th century was driven by innovation andtechnological progress.
• Of the rise in real U.S. GDP per person-hour
between 1909 and 1949, “about one-eighth of thetotal increase is traceable to increased capital perman hour, and the remaining seven-eighths totechnical change.”2• Looking at the second half of the 20th century,
one study found that for growth in U.S. per capita
GDP from 1950 to 1993, 80% was accounted forby discovery of innovative ideas fostered by the
combination of—to be discussed below—rising
educational attainment and R&D effort.3
And looking at the recent period of strong U.S. productivity growth that ran for about a decade starting
around 1995, the majority of that growth was driven
by faster technological innovation in information-technology (IT)—a highly innovation-intensive industry.4• From 1995 to 2005, U.S. labor productivity grewat an average annual rate of 2.9%, up from a
1.5% annual rate in the preceding 10 years (thoughfalling to 1.6% after 2006).
• Post-1995, technical change has accounted forover half of U.S. per capita GDP growth.
Substantial research has found that innovation
matters because the social benefits of knowledge
often exceed its private benefits; in the jargon of
economics, discovery of ideas generates “positive
externalities” through several channels (such as
worker mobility, and the more general property thatideas, different from other goods and services, areeasily shared). A number of studies have found thatthe social return to R&D exceeds the private returnby at least double.5
The historical contribution to the U.S. economy ofinnovation-intensive industries looks strong not juston its own, but in relation to other countries as well.
On many measures, today the United States remains
the world’s largest producer of idea-intensive goods
and services.6
The Present: The Contribution of STEM
Talent to American Innovation
What factors account for America’s long-standing
innovation strength? Many scholars and leaders haveidentified a constellation of factors working together
across a number of areas including laws and regulations, capital markets, and labor markets.7
Perhaps most fundamental for innovation success,however, is the supply of talent: the highly skilledknowledge workers who discover and develop the
new ideas at the heart of innovation. And among
these talented workers, most critical for many innovations are workers in science, STEM. One reason for

Talent, Immigration, and U.S. Economic Competitiveness – Section 1

5Section 1

this is that STEM workers conduct the basic researchthat inspires applied product and process innovations. In many parts of the U.S. economy, innovationthat ultimately ends up on the product shelf begins
in the STEM research laboratory. Research on innovation consistently shows this integral role for STEM.
Relative to college graduates in other fields, STEM
graduates are twice as likely to produce a patent andmore likely still to have produced a patent that islicensed or commercialized. They are also more likely
to launch startup enterprises in technology fields.8

companies, are responsible for much of America’s
innovation. Indeed, higher education of any kind—
STEM or not—is required for many STEM jobs in the
U.S. economy. Workers in STEM occupations aremuch more educated than workers in other occupations. Based on data for 2009-2011, Figure 1.1 shows
this fact clearly.10 Compared with workers in nonSTEM occupations, workers in STEM jobs are
2.2 times more likely to have a bachelor’s degree,
2.7 times more likely to have a master’s degree, and5.3 times more likely to have a doctorate.11

How does the U.S. economy create talent? It does so
in part through education. A principal foundation ofAmerica’s economic success over the 20th century
was the dramatic skill upgrading of the American
labor force through secondary and tertiary education provided by an open, extensive, competitive
system of public and private schools. The result was
the world’s premier education sector and dramatic
growth in talent that is the foundation of innovation.

Not only do STEM occupations require high levels of
education, they also, not surprisingly, tend to require
high levels of education in STEM fields, rather than inother non-STEM disciplines.

Today’s global preeminence of American higher
education is well documented.

• STEM education is critical for the large majority ofworkers in STEM fields. To land a STEM job, workers need the rigorous training that engineering,
math, and science afford.

• The United States is home to eight of the top 10,
37 of the top 50, and 67 of the top 100 universities
in the world.
U.S. educational preeminence in STEM fields is
especially pronounced.
• In engineering all of the world’s top 10 universities are American, as are nine of the top 10 in life
sciences and seven of the top 10 in both naturalsciences and mathematics.9
The scientists and engineers who graduate from U.S.
universities, many of whom go on to work for U.S.

• From 2009-2011, in STEM occupations the fractionof workers with a degree in STEM fields is very
high: 72% for workers with a bachelor’s degree,
78% for workers with a master’s degree, and 87%
for workers with a doctorate.

Which industries employ STEM labor? STEM workers
are utilized extensively across the U.S. economy. For
each of 14 major U.S. industries between 2009–2011,
Figure 1.2 reports the share of jobs in each sector
that were tied to STEM occupations.
Clear in Figure 1.2 is the high employment of STEM
workers in innovation-intensive industries: professional services and management (22%), information(10%), and manufacturing (9%).

Figure 1.1
Share of Workers by Education Level for STEM, non-STEM, All occupations (%)

Occupation

Less thanhigh school

High school
grad

Some
collegeBA
degreeMAdegreeProf
DegreePhD

Non-STEM

8.9%

25.2%

32.0%

21.7%

8.4%

2.5%

1.2%

STEM

0.3%

3.4%

17.8%

47.9%

23.0%

1.3%

6.4%

All

8.5%

24.2%

31.4%

23.0%

9.1%

2.5%

1.4%

Source: American Community Surveys (ACS), 2009, 2010, 2011

6

Section 1 – Talent, Immigration, and U.S. Economic Competitiveness• The salient message of Figure 1.2 is that every
one of the 14 major U.S. sectors employs STEM
workers.
This breadth of STEM employment throughout the
U.S. economy reflects, in part, that the drive forinnovation is universal—a drive that, as discussed

earlier, has been the foundation of rising U.S.
prosperity for generations.
A complementary view on the importance of STEM
workers in America is shown in Figure 1.3, which
reports the number and major occupations ofAmerica’s STEM workers in 2012.12

Figure 1.2:
Employment in STEM occupations
Agriculture
Construction
Education
Entertainment, food, lodging
Finance, insurance, real estate
Health care
Information
Manufacturing
MiningOther Services
Prof Services, management
Public administration
Transportation, utilities
Wholesale, retail trade
0

5

10

15

STEM SHARE OF INDUSTRY EMPLOYMENT (%)

20

25(Source: ACS 2009, 2010, 2011.)

Figure 1.3:
Employment and Median Earnings by STEM Occupation
Share of employment (%)
STEM Occupation

Employment

STEM
occupations

All occupations

MediansalaryEngineering
Occupations

1,530,090

31.1

1.2

86,200Software Developers
and Programmers

1,397,780

28.4

1.1

87,100Computer andInformation Analysts

740,440

15

0.6

80,631

Database Administrators,
Network Architects

599,800

12.2

0.5

76,880Life Scientists,
Physical Scientists

534,640

10.9

0.4

71,898Mathematicians,
Computer Scientists

122,880

2.5

0.1

79,686

Total

4,925,630

100.0

3.9
Source: Bureau of Labor Statistics

Talent, Immigration, and U.S. Economic Competitiveness – Section 1

7Section 1

For the most recent year of data at the time of writing, 2012, there were over 4.9 million STEM workers
in America—3.9% of America’s total employment.
We disaggregated these 4.9 million into six broad
occupation categories, based on the similarity of
their endeavors. America has more than 1.5 million engineers, 1.4 million software developers andcomputer programmers, and more than 1.3 million
computer and information analysts, databaseadministrators, and network architects. What is
striking about the latter two categories is how newthese jobs are to the U.S. economy, thanks to the IT
revolution spawning new industries, companies, andactivities. Innovation has not just added to overall
STEM employment; it has changed the nature of this
employment, demanding that American workers
acquire fundamentally new skills and master new
techniques.
The Future: Signs that America’s
Innovation Strength Is Waning
Despite America’s historic strength of discovery
and of transforming innovations into new products,
companies, industries, and jobs, concern is risingamong leaders in both the private and public sectorsthat America’s innovation strength is waning. Signs
of waning strength are apparent in a number ofindicators, not just in relative terms in comparison toother countries but even in absolute terms.
Perhaps the most alarming case for America’s flagging innovation vitality has been made by the 2007
initial and 2010 follow-up Gathering Storm reports—
alarming because of the breadth of data brought
to bear in this pair of National Academies’ studies
by a distinguished committee comprised of leading
academics, university presidents, CEOs of global
firms, and Nobel laureates.13 Similar alarm bells havebeen recently rung by the White House.14
Consider assessments of America’s overall innovativeness compared to other countries. A number ofstudies using a number of methodologies continue
to reach the same concerning conclusion: America’s
innovativeness, though still high, is falling—in many
ways rapidly.15• The World Economic Forum’s 2012 ranking ofcountries’ “Global Competitiveness” has the UnitedStates at #7, down from #2 in 2004.

8• For 2012, the World Intellectual Property Organization ranks the United States at #10 in its Global
Innovation Index—down from #1 in 2009.
• In 2009, the Information Technology and Innovation Foundation ranked 44 countries and regions
on 16 core indicators of innovation capacity. The
United States ranked #4. This was down from
America’s #1 ranking based on 1999 data. Whenassessing the rates of change in innovation
capacity during 2000-2009, the United Statesranked #43—ahead of only Italy. On this rate-ofimprovement metric, China ranked #1.
Consistent with these studies of weakening U.S.
innovativeness are the data on America’s slowing
productivity growth, visible in the annual growth in
output per worker hour in the non-farm businesssector (which many regard as the best indicator of
the productivity of the U.S. private sector). From thestart of consistent U.S. data in 1947 through 2004,
this measure of U.S. productivity growth averaged
2.3% per year. Since that time, however, productivity
growth has fallen to just 1.5% per year. This post2004 average was boosted by the unusually highrates of productivity growth in 2009 and 2010 thatwere driven primarily not by innovation but rather
by dramatic worker layoffs in the wake of the GreatRecession. Excluding those two unusual years, in thesix other years U.S. productivity growth has averaged
just 1.0% per year—with just 0.6% growth in 2011 and
0.7% in 2012.
Several leading scholars on economic growth are
now forecasting that U.S. innovativeness and productivity growth may be permanently lower in the future.
Indeed, one such scholar has recently forecast that,in contrast to the average growth in U.S. GDP per
capita of the past 150 years of about 1.9%, “future
growth in consumption per capita for the bottom
99% of the income distribution could fall below
0.5% per year for an extended period of decades.”16
What explains America’s darkening innovation
outlook? Part of the cause may be America’s
faltering growth in educational attainment—thesource of much of America’s talent dedicated toknowledge discovery. Over the 20th century one ofAmerica’s greatest achievements was the dramatic
skill upgrading of the U.S. labor force. This progress,
however, has slowed in the past generation, all while
educational upgrading is quickening abroad.

Section 1 – Talent, Immigration, and U.S. Economic CompetitivenessFigure 1.4 shows the remarkable educational growthof the American labor force—and its more-recent
sobering slowdown.17 For every year from 1900
through 1980, it plots for all Americans born thatyear the mean years of schooling attained by thatcohort by adulthood (measured as age 25). Thus,
the 1900 value of 8.5 indicates that for all Americans
born in the country in 1900, by adulthood the average educational attainment of that cohort was
8.5 years of schooling; similarly, for those born in1940 average attainment was 12 years of schooling.

But in addition to this century-long progress, Figure
1.4 also shows a troubling fact: the rate of U.S. educational advance has sharply decelerated.

One remarkable fact of Figure 1.4 is how over the 20th
century, subsequent cohorts of Americans became
progressively more educated thanks to the spread ofboth secondary and tertiary education. Today, thosein their early twenties (and so born in the late 1970s)
average 14 years of schooling. Looking at the overall
U.S. workforce rather than year-by-year cohorts
shows the same impressive gains: from 1915 to 2012
the mean educational attainment of all U.S. workers
rose by nearly six years, from 7.6 years to 13.5 years—
a rate of increase of 0.6 years per decade.

• From 1940 to 1980 the mean educational attainment of all U.S. workers rose by 0.9 years per
decade (from 9.0 years to 12.5 years)—equivalent
to the pre-1950 performance. But from 1980 to2010 the total increase was barely one year—just
0.4 years per decade.

• For cohorts born before 1950, mean years ofschooling rose at 0.8 years per decade. For later
cohorts, this upgrading slowed, with little change ineducational attainment for cohorts born between
1951 and 1965, and much slower growth than
pre-1950 after that.
Looking at the overall U.S. workforce, rather than
individual cohorts, this slowdown is evident.

And while America’s slowdown in overall educational
attainment is concerning, at least as alarming is its
faltering ability to educate children and young adults
in STEM. America’s governors are sounding this

6

8

10

12

14

16

Figure 1.4
Average Years of Schooling for Adults, by Year of Birth

1900

1920

1940

YEAR OF BIRTH

Talent, Immigration, and U.S. Economic Competitiveness – Section 1

1960

1980

(Source: Goldin and Katz (2008).)9

Section 1

alarm based on the deficiencies they see growing
in their local and state schools. A new report by
the National Governors Association describes the
problem starkly.
The United States has fallen behind in fully realizing
the benefits of STEM education. Results…over roughly
the past 10 years show little improvement in highschool seniors’ knowledge of math and science…
[Beyond high school,] unfortunately, the growth inpost-secondary STEM degrees awarded in the UnitedStates over the past decade has been anemic.18
This slowdown in America’s educational attainment—reflecting the problems plaguing primary andsecondary education—threatens America’s innovation competitiveness. This is true viewing the U.S.
economy in isolation. The median worker in the U.S.
labor force today has a high school degree plus little
more than one year of post-high school education. A
continued near-stagnation of educational attainment
could limit the creative dynamism of innovation andentrepreneurship that drove so much of America’s
economic growth over the 20th century.
But in today’s increasingly global economy, America’s competitiveness is doubly challenged by its
slowdown in skill upgrading because the opposite
is happening in so many other countries. While U.S.
high school graduation rates have slumped since1970, mass secondary education was spreading fastaround the world.
• Among the 65 countries that participated in theOECD’s most recent Program for International
Student Assessment examinations of 15 year-olds,
U.S. students ranked 15th in reading, 23rd in science, and 31st in mathematics.
These mediocre U.S. results were not driven solely by
low scores for challenged U.S. socio-economic groups.
• In comparing scores across the top three quartilesof socio-economic position, U.S. students were
outperformed by their counterparts in 15 countries
in science and 24 in math. In comparing scores
across the third quartile of socio-economic position (i.e., the second highest group), U.S. students
were outperformed by 25 countries in science and
31 in math.19

10

A similar pattern has emerged for college-graduation
rates, especially among younger Americans. The U.S.
rates are now just about average among all OECD
countries. And educational upgrading is happening
not just in OECD countries but in many lower-income
countries as well. It is now well documented, forexample, that the U.S. share of global science andengineering graduates is declining at all degree levels
thanks to growth in emerging markets.
• In 1975, China produced almost no PhDs in scienceand engineering; by 2008 China graduated 26,000
such PhDs, compared to just fewer than 25,000 in
the United States.20
One key reason that America’s educational edge iseroding is the globalization of knowledge itself: many
foreign universities emulate the structure of U.S.
schools—and they increasingly staff their facultywith U.S.-trained scholars.
• In 1975, the share of science and engineering PhDs
graduating from U.S. universities was 47% of thetotal among students from major Asian nations
and advanced European economies; in 2004 theshare had fallen to just 25%.21
Assessing relative supplies of educated workers
across countries is not a simple exercise in counting
graduation caps. There remain large quality differences across countries, especially for professionaland doctorate degrees. On many measures ofacademic quality, elite American universities remain
the best academic institutions in the world.
Even adjusting for these quality differences, however,
the trend is clear: America’s talent abundance relative
to the rest of the world is eroding. Perhaps mostsignificantly, these education trends may threaten
America’s national security. A 2012 Council on Foreign
Relations task force chaired by Joel Klein and Condoleezza Rice articulated this disquieting connection.
The education crisis is a national security crisis…
America’s educational failures pose five distinct
threats to national security: threats to economic
growth and competitiveness, U.S. physical safety,
intellectual property, U.S. global awareness, andU.S. unity and cohesion.22

Section 1 – Talent, Immigration, and U.S. Economic CompetitivenessWere current trends to persist, the pressures ofglobal competition and comparative advantage
would continue to reshape the U.S. economy. The
world’s innovative activities are today both morecompetitive and more mobile. Gone is the notion that
the United States has a perpetual lock on high-profit,
ever-expanding innovation.
Even if the United States can maintain its innovation dynamism—along with all the commensurate
long-run growth in jobs and incomes—it will do soamidst greater competition among companies andthus, indirectly, among their workers. This competition might eventually shift substantial innovation
activity out of America altogether—with some lossof innovation’s support to jobs, to income, and to
standards of living.
Whether America can maintain its innovation
strength in the 21st century will depend critically on
an important aspect of talent that Section 2 examines in greater detail: immigration.

The principal message of Section 1 is that innovation has long played a central role in driving growthin U.S. output, jobs, and income. Discovering new products and processes boosts output in existing companies and industries and creates new industries. This discovery has long created higher
standards of living for all American workers and their families. In turn, a critical foundation for thisinnovation strength has been talent—especially talent in STEM fields created through America’s
educational system. Maintaining innovation’s many contributions to the U.S. economy will require
smarter public policy now and in the future, given the indicators that America’s innovation strengthis waning—in part because of its faltering primary and secondary educational system.

Talent, Immigration, and U.S. Economic Competitiveness – Section 1

11Section 1

1.

U.S. Department of Commerce (2012), p. 1.

2.

Solow (1957). See also the closely related work in Solow (1956).

3.

Jones (2002).

4.

See, for example, Feenstra, Mandel, Reinsdorf, and Slaughter(2013).

5.

Jones and Williams (1998, p. 1121) estimate “the social return [toR&D] of 30% and a private rate of return of 7 to 14%: optimal
R&D spending as a share of GDP is more than two to four times
larger than actual spending.” Bloom, Schankerman, and Van
Reenen (2012) report, “We find that technology spillovers dominate, so that the gross social returns to R&D are at least twice ashigh as the private returns…We estimate that the (gross) social
return to R&D exceeds the private return, which in our baseline
specification are calculated at 55% and 21%, respectively. At
the aggregate level, this implies under-investment in R&D, withthe socially optimal level being over twice as high as the level ofobserved R&D.”

6.

See National Science Board (2012).

7.

Here is the assessment from a new report of the prestigious
National Research Council of the National Academies (2012):“The U.S. innovation system still enjoys many advantages: theworld’s largest research infrastructure, a number of the world’s
greatest universities, the deepest capital markets, and a highly
dynamic ecosystem for knowing how to turn inventions into
products and businesses…The United States still offers one of
the world’s best environments for commercializing products andlaunching companies, including strong protection of intellectual
property rights, temperate bankruptcy laws, well-developed
capital markets, and extensive worker mobility.”

12.

Figure 1.3 is based on Occupational Employment Statistics
produced by the Bureau of Labor Statistics, available at http://
www.bls.gov/oes/current/oes_nat.htm.

13.

National Academy of Sciences, National Academy of Engineering, and Institute of Medicine (2010). The introduction to thisreport stated, “It is widely agreed that addressing America’s
competitiveness challenge is an undertaking that will require
many years if not decades…So where does America stand relative
to its position of five years ago when the Gathering Storm report
was prepared? The unanimous view of the committee members
participating in the preparation of this report is that our nation’s
outlook has worsened…The only promising avenue, in the viewof the Gathering Storm committee and many others, is throughinnovation. Fortunately, this nation has in the past demonstrated
considerable prowess in this regard. Unfortunately, it has increasingly placed shackles on that prowess such that, if not relieved,
the nation’s ability to provide financially and personally rewarding
jobs for its own citizens can be expected to decline at an accelerating pace…The Committee’s overall conclusion is that…The
Gathering Storm increasingly appears to be a Category 5.”

14.

The White House (2011): “America cannot rest on its laurels.
Unfortunately, there are disturbing signs that America’s innovative performance slipped substantially during the past decade.
Across a range of innovation metrics…our nation has fallen inglobal innovation-ranked competitiveness.”

15.

For the three studies listed below, see World Economic Forum(2012), World Intellectual Property Organization and INSEAD(2012), and Atkinson and Ezell (2012).

16.

Gordon (2012). See also, e.g., Cowen (2012). The Economist(2012) summarizes much of this recent academic work.

17.

All data in this subsection on America’s educational attainment
are taken from Goldin and Katz (2008), unless otherwise noted.

8.

Hunt and Gauthier-Loiselle (2010) and Zucker and Darby (2009).

9.

See world university rankings at www.awru.org.

18.

National Governors Association (2011).

10.

Figures 1.1 and 1.2 are based on data from the American Community Survey (ACS). We define total employment to be total hours
worked for individuals in the civilian population aged 25 to 54 (notliving in group quarters). Hours worked is calculated as weeks
worked last year times usual hours worked per week (weighted by
ACS sampling weights). To increase the number of observations
and thus reduce the imprecision of calculations, we pool the threemost-recent ACS years of 2009, 2010, and 2011.

19.

America Achieves (2013).

20.

These figures are taken from Science and Engineering Indicators,
2012, by the National Science Foundation (2012).

21.

See Adams (2009); Blanchard, Bound, and Turner (2009); andBound, Turner, and Walsh (2009).

22.

Council on Foreign Relations (2012).

11.

12

Our definition of STEM occupations follows that of the Department of Commerce (Langdon et al. 2011), except that we exclude
the relatively low-skill categories of technicians, computer
support staff, and drafters (which include a high fraction ofworkers who have completed no more than a high school degree).
The occupations we classify as STEM are: computer occupations(computer programmers, database administrators, information
security analysts, network architects and systems analysts,
software developers, web developers), engineers (aerospace,
agricultural, biomedical, chemical, civil, computer hardware,computer software, electrical and electronic, geological, industrial
and health systems, materials, mining, nuclear, petroleum), life
scientists (biological scientists, conservation scientists, medical
scientists), physical scientists (astronomers and physicists,
atmospheric and space scientists, chemists, computer scientists,
environmental scientists, geoscientists, materials scientists,
mathematicians, operations research analysts, statisticians),and other STEM occupations (surveyors, cartographers, andphotogrammetrists).

Section 1 – Talent, Immigration, and U.S. Economic CompetitivenessSection 2

Immigration’s Contribution to
U.S. Talent: Strong Past and Growing
Importance Today

Immigration has played a critical role in helping
America meet its growing demand for talent—especially for highly skilled STEM workers. Immigrants
have long made significant contributions to America’s
innovation, both in the top tiers of R&D and throughout the economy. Over time, America’s reliance ontalented immigrants has been steadily rising.
At the highest levels of achievement in a number ofprofessions such as the academy, the arts, and athletics, immigrants have excelled at rates beyond theirshare of the overall population or labor force. And
across America’s innovation ecosystem, immigrants
help at all stages of discovering and developing
new ideas. In business, immigrants tend to be moreinnovative than native-born Americans on many
economic indicators such as starting new companies (especially in high-innovation industries) andpatenting. Indeed, over much of the 20th century acornerstone of America’s economic success was its
ability to attract large numbers of immigrants andthen integrate them into the economy to allow themto contribute to U.S. productivity growth—including
through the serendipity of the best and brightest
uncovering their potential and reaching the apex of
their professions.
Our key findings for this section are that:• Today, foreign-born individuals make up one-fifthof STEM workers with bachelor’s degrees andtwo-fifths of those with advanced degrees. Theseshares underscore the essential role that immigration plays in allowing America to meet its demand
for the highest talents—in particular for specialized
personnel in many areas of STEM.

• People who immigrate to the United States are
particularly well suited to STEM jobs both because
they tend to achieve higher levels of education
and because the education they tend to seek is in
STEM fields.
Immigrants’ Contribution to American
Talent: Innovation at the Highest Levels
The contribution of immigrants to American talentand creativity has perhaps been most visible at the
pinnacles of success. Among the truly outstanding
in a number of fields such as academics, the arts,
and athletics, immigrants are significantly overrepresented when compared to their presence inthe overall U.S. population or labor force. Today,
immigrants account for about 12% of U.S. residents
and 17% of total U.S. employment. Yet, immigrants
account for higher—often much higher—shares ofAmerica’s most accomplished individuals. Consider
their presence among America’s highest achievers as indicated by the following accolades andachievements.
• Nobel Laureates: “Since 1901, the Nobel Prize
has been awarded to men and women from all
corners of the globe for outstanding achievements
in physics, chemistry, physiology or medicine,literature, and for work in peace.”1 Since 1980,
immigrants have been 27% of U.S.-resident Nobel
Prize winners in chemistry, medicine, and physics.
• Members of the U.S. National Academy of
Sciences (NAS): “Members are elected to the
National Academy of Sciences in recognition of
their distinguished and continuing achievements inoriginal research. Membership is a widely accepted

Talent, Immigration, and U.S. Economic Competitiveness – Section 2

13

Section 2

mark of excellence in science and is considered
one of the highest honors that a scientist canreceive.”2 U.S. immigrants constitute 29% of
current NAS members in applied mathematics,
21% in biochemistry, 37% in engineering sciences,and 36% in mathematics.
• Top-Ranked STEM Departments in U.S. Universities: In nearly all STEM fields, the three topranked departments (in terms of quality of faculty
and overall research impact) are consistently the
Massachusetts Institute of Technology, Stanford
University, and the University of California,
Berkeley. Across these three universities, foreignborn academics account for 24% of the facultyin mathematics, 30% of the faculty in computerscience, 39% of the faculty in physics, and 44% of
the faculty in electrical engineering.
• Gold Medals from the American Academyof Arts and Letters: Each year since 1950,
this Academy awards two gold medals “fordistinguished achievement in several different
categories of the arts” in rotating categories that
include “Belles Lettres and Criticism, and Painting; Biography and Music; Fiction and Sculpture;
History and Architecture, including LandscapeArchitecture; Poetry and Music; and Drama andGraphic Art.”3 Since 1950, foreign-born artists havewon 21% of these gold medals.
• MacArthur Genius Awards: “The MacArthur
Fellows Program awards unrestricted fellowships
to talented individuals who have shown extraordinary originality and dedication in their creative
pursuits and a marked capacity for self-direction.
There are three criteria for selection of Fellows:
exceptional creativity, promise for important
future advances based on a track record ofsignificant accomplishment, and potential for the
fellowship to facilitate subsequent creative work.”4Since 2000, 25% of MacArthur Fellows have been
U.S. immigrants.
• Professional Sports: In recent decades, mostpremier professional sport leagues in America
have become far more global in terms of hiring top
athletes from around the world. In Major League
Baseball, 28% of players during the 2012 season
were foreign born. In the National Basketball
Association, a sport long dominated by athletes

14born in America, 19% of all players in the 20122013 season were immigrants. On the PGA Tour,
among top-ranked golfers in 2013 who reside in the
United States, 27% were immigrants. And in the
National Hockey League, 34% of all players in the
2012-2013 season were born outside Canada or
the United States.5
The success of immigrants in the United States
is due in part to America’s attractiveness to top
performers. U.S. industries and institutions lure theworld’s most talented because high compensation, alarge domestic economy, and easy access to global
markets deliver rich rewards to those with outstanding ability. At least as important, America allows
individuals—native and foreign-born alike—to rise to
the top of their professions as they blossom throughvarious meritocratic methods of talent identification,
development, and sorting. For example, technology
entrepreneurs have access to a deep and competitive market for venture capital. If a promising young
innovator has a brilliant idea but no funds, there areabundant opportunities to make a pitch to prospective investors. In many other economies, and in theemerging world in particular, venture capital is far
less developed. In a similar vein, American universities seek out the most promising students fromaround the world to populate their undergraduate
and graduate programs. Those who excel in theirstudies and go on to seek careers in U.S. academia
are drawn by a competitive environment thatrewards objective measures of success (publishing
top research, winning major grants), rather thanconnections to university insiders or other arbitrary
criteria, which are often cited as the basis foracademic-career advancement in Europe.6
The celebrity status of elite immigrants makes theirpresence in many fields easy to recognize: former
Secretary of State Madeleine Albright, Google
CEO Sergey Brin, Oscar winner Penelope Cruz,
NBA champion Tim Duncan, Nobel laureate Albert
Einstein, PepsiCo CEO Indra Nyooi, MLB MVP Albert
Pujols, Grammy-winning singer Rihanna. Equallysignificant for the U.S. economy is the less visible
contribution of talented immigrant STEM workers
all along the innovation production chain, to which
we next turn.

Section 2 – Talent, Immigration, and U.S. Economic CompetitivenessImmigrants’ Contribution to American
Talent: Throughout the Innovation
Ecosystem
Throughout America’s innovation ecosystem, immigrants have long contributed to the discovery anddevelopment of new ideas. Research spanning many
generations and many empirical approaches hasrepeatedly documented this broader contributionof immigrants to American talent along a number ofdimensions of innovation, both in the STEM realm
itself and in the contributions of STEM to broader
productivity and economic growth.
In business, immigrants tend to be more innovative
than U.S.-born Americans on indicators such as
launching new companies—especially in highinnovation industries—and patenting.
• One recent study found that 25% of all U.S. hightechnology firms established between 1995 and2005 had at least one foreign-born founder. In 2005,
these new companies employed 450,000 people andgenerated more than $50 billion in sales.7• Looking over a longer horizon, immigrants or theirchildren founded 40% of Fortune 500 companies,
including firms behind seven of the 10 most valuable brands in the world.8
U.S. regions that attract larger numbers of talented
immigrants are more successful at innovation.
• One study of U.S. states from 1940 to 2000 foundthat those that attracted more college-educatedimmigrants created more patents than otherstates. A rising share of state population made up
by college-educated immigrants was associatedwith an increase in patents produced at the statelevel (in per capita terms) by approximately 13%.
Other research has found a similar positive association between immigration and employment growthacross U.S. regional economies.9 Similar innovation
results hold for U.S. cities. In the 1990s and 2000s,
U.S. metro areas that were more attractive to H-1B
workers (largely because of the companies that
populate the tech sectors in these cities) saw larger
increases in the production of patents during time
periods when the supply of H-1B visas was expanding. America’s H-1B visa program admits immigrants
with at least a bachelor’s degree to work temporarily
in high-talent occupations.10

Other research finds that having access to foreignborn talent enhances the productivity of U.S.
workers. In an analysis of the changing compositionof U.S. graduate programs, one recent study findsthat U.S. graduate-school departments in STEM
that have a higher share of Ph.D. students who are
foreign born generate both more publications in top
peer-reviewed academic journals and more citations
on these publications (where citations are a standard
metric of the importance of a journal article). This
positive association between the presence of immigrant graduate students and academic innovation—
more and higher-quality publications—may reflect
benefits of intellectual diversity and breadth thathigh-talent immigrants tend to bring to U.S. research
environments.11 Given the connection between STEM
research and new-business creation, these foreign
graduate students have likely contributed to private
sector job growth, as well.12
Past immigration into America has expanded thecountry’s innovative capacity and knowledge frontier.
Perhaps the most dramatic example of high-skilled
immigration comes from the 1930s arrival of Jewish
scientists and other intellectuals fleeing Germany
during Hitler’s rise.
• In chemistry and related fields, Jewish émigrés from
Germany in the 1930s increased the production of
U.S. patents by 30% in the ensuing three decades.13
Research has repeatedly found that the policy mechanism determining how immigrants are admitted
to the U.S. influences the innovation and economic
performance of these individuals.
• Among college graduates, immigrants who firstentered the country on a student or temporary work
visa tend to outperform U.S.-born workers in termsof earning higher wages, patenting at higher rates,
and commercializing patents at even higher rates.
The large majority of college-educated immigrants
entering America on a temporary-work visa do sounder the H-1B program. Immigrants who arrived aslegal permanent residents (i.e., on green cards) tend
to perform similarly to native-borns.14
America’s innovation success has long depended
on talented immigrants at all levels; yes, on the
superstars, but also on the many less-decorated but
nevertheless highly skilled professionals who areindispensable in making breakthroughs possible andTalent, Immigration, and U.S. Economic Competitiveness – Section 2

15

Section 2

in bringing these breakthroughs to market. For every
Nobel laureate scientist there are scores of talented
colleagues who helped transmit the Nobel-worthy
insights throughout science and to broader society.
The Rising Share of Immigrants in
America’s STEM Labor ForceThe body of research discussed above documented
immigrants’ contributions to American innovation
for different types of innovation and different typesof immigrants. Over time, the magnitude of theseimmigrant contributions has been growing because
immigrants’ share of America’s STEM labor force
has been growing. In recent decades, adding highly
educated immigrants to the U.S. economy has beensynonymous with expanding the STEM labor force.
To see the rising immigrant share of STEM employment, start with Figure 2.1. For every year since 1993,
Figure 2.1 reports the share of American employment accounted for by three segments of the U.S.
labor force: all workers (solid line), all workers whose
highest degree is a bachelor’s (dotted line), and all
workers with an advanced degree (dashed line),
which includes master’s, professional (e.g., JD, MBA,MD), and doctorate degrees.15

The solid line shows the steadily rising presenceof immigrants in the overall U.S. labor force. Theirshare of U.S. employment rose from about 11% in1993 to over 17% in 2011. The rising importance ofimmigrants to U.S. employment is especially pronounced among the highest-educated: as the dashedline shows, immigrants’ share of advanced-degree
workers has long been higher. This share rose from
12% in 1993 to over 18% in 2011. Immigrants are lessrepresented among workers with just a bachelor’s
degree (dotted line), with just a 15% share in 2011.
The predominance of immigrants among the highest-educated reflects a number of factors. One is thetendency, discussed earlier in Section 2, for America
to attract highly motivated, highly talented immigrants. A second factor is signaling: to gain entry to
the United States immigrants need to communicate
to U.S. employers or universities their abilities, while
competing against native-born U.S. residents whosebackgrounds are typically more familiar to U.S.
business recruiters or university admission officers.
A high level of schooling is one way for immigrants
to broadcast their ability and gain the recognition
they need to qualify for skill-based entry visas (e.g.,
a student visa or H-1B temporary employment visa).

Figure 2.1
Foreign born share of US employment (%)
20

All workers

18
Workers withBA degree

16

Workers withadvanced degree

14
12
10
1993
YEAR

16

1996

1999

2002

2005

2008

2011

(Source: CPS, 1994 to 2012.)

Section 2 – Talent, Immigration, and U.S. Economic CompetitivenessFigure 2.2
Foreign born share of employment, STEM jobs (%)
50
Workers in STEM
occupations withBA degree

40

Workers in STEM
occupations withadvanced degree

30

20

10
1993

1996

1999

2002

2005

YEAR

As important as immigrants have become to theoverall U.S. labor force, their contribution to the STEM
labor force is even more pronounced. Figure 2.2
reports the foreign-born share of U.S. employment
in America’s STEM occupations (i.e., as defined in
Section 1) for two education categories: workers witha bachelor’s degree or the equivalent (solid line) andworkers with an advanced degree (dashed line).16 Of
workers with an advanced degree, having a master’sis the largest category—professional and doctorate
degrees are smaller categories within this group.
The pronounced STEM reliance on immigration isvisible in the rising shares of Figure 2.2.
• For workers in STEM occupations with a bachelor’s
degree, the immigrant share rose from 12% in 1993
to 20% in 2011. For workers in STEM occupations
with an advanced degree, the immigrant share rosefrom 27% in 1993 to a remarkable 40% in 2011.
It is notable that most of the growth in the foreignborn share of STEM employment occurred during
the late 1990s and very early 2000s, when the U.S.
tech sector boomed. Congress accommodated thisboom by raising the annual supply of H-1B visas (to115,000 in 1998, up from the previous cap of 65,000,
and further still to 195,000 in 2001). Also notable isthat there has been no net growth in the foreign-born

2008

2011

(Source: CPS, 1994 to 2012.)

share of STEM employment since 2004 whenCongress reduced the supply of H-1B visas back to
its original annual level (of 65,000).
For some STEM occupations, the immigrant sharesare even larger than those shown above. Figure 2.3
presents the foreign-born share of employment in
STEM occupations for workers with a bachelor’s
degree or master’s degree, each averaged over theperiod 2009 to 2011.17• Among bachelor’s degree holders, the foreignborn share is 25% for electrical and electronicengineers, 31% for computer programmers andsoftware developers, and 35% for computer software engineers.
What brings the overall average down to the 20%
level shown in Figure 2.2 is the lower foreign-bornshare among the category of other engineers (i.e.,engineers other than those related to the computer
software or electrical and electronic fields), whichis the largest employment category among STEM
occupations. Immigrant presence in the labor force istherefore most pronounced in fields most closely tied
to IT—computer hardware and software—but it isnevertheless important across the entire economy’s
STEM occupations.

Talent, Immigration, and U.S. Economic Competitiveness – Section 2

17

Section 2

Figure 2.3
Foreign born worker share

BA DEGREE

Operations Research
Other Engineers
Network Administrators
Electrical Engineers
Computer Scientists
Software Developers
Software Engineers

MA DEGREE

Operations Research
Other Engineers
Network Administrators
Electrical Engineers
Computer Scientists
Software Developers
Software Engineers
0

10

20

30

40

50

SHARE OF EMPLOYMENT (%)

In Figure 2.3, we see that among workers in STEM occupations with a master’s degree the foreign born share ishigher still, especially for computer-related professions:• For master’s degree holders, the foreign-born
employment share is 45% for network administrators, 50% for electrical and electronicengineers, 51% for computer scientists, 63% forsoftware engineers, and 65% for programmers
and software developers.
Figure 2.3 shows evidence that strongly reinforces
the message of Figure 2.2: the presence of immigrant
workers in STEM occupations increases with thelevel of education. Immigrant presence rises further
still when we examine doctoral-degree holders.
• Data from the National Science Foundation showsthat the foreign born now account for an incredible
55% of those receiving PhDs in STEM fields from
U.S. universities.18
What do these patterns mean for industry employment of immigrant STEM labor? Recall from Section
1 that all major U.S. industries rely to some extent on
STEM workers. This fact combined with Figure 2.3
means that all major U.S. industries rely on immigrant
STEM workers. Figure 2.4 documents this important
finding. Across the years 2009-2011, for each of 14
major U.S. industries it reports the share of eachindustry’s STEM workers who are foreign born.19
The message of Figure 2.4 is that immigrants constitutea substantial share of STEM workers in all major U.S.

18

60

70

(Source: ACS 2009, 2010, 2011.)

industries, rather than being concentrated in just hightech sectors. The foreign-born share of STEM workers ishigh in industries most intensive in STEM occupations,such as professional services and manufacturing. Yet,the foreign-born share of STEM workers is also high inindustries less intensive, but still important, in STEM,
such as health care, mining, transportation, and trade.
Figure 2.4
Share of Immigrants in STEM Employment by Industry
Industry

Share

Agriculture

6.8%

Construction

16.3%

Education

32.5%Entertainment, food, lodging

18.4%

Finance, insurance, real estate

29.6%

Health care

28.6%

Information

27.3%

Manufacturing

24.9%

Mining19.3%

Other services

21.7%

Prof services, management

29.1%

Public administration

12.9%

Transportation, utilities

18.8%

Wholesale, retail trade

21.8%
Source: ACS, 2009, 2010, 2011.

Section 2 – Talent, Immigration, and U.S. Economic CompetitivenessWhy Immigrants Are Well Suited
to America’s STEM Labor Force
What characteristics of immigrants account for theirlarge and rising shares of America’s STEM labor force?
An important clue comes from Section 1, which showedthat innovation talent is essential for so much STEM
activity in America—and that education has longcreated this talent. One reason that immigrants are well
suited to America’s STEM labor force is they are more
likely, relative to native-born workers, to have obtained
degrees in STEM fields. Not every single worker in
a STEM occupation has pursued STEM education.
However, most have, and STEM-educated workers areoften best suited to the tasks of STEM occupations.
Figure 2.5
Share of U.S. Workers with a STEM Degree,by Highest Degree Obtained
Natives

Immigrants

BA

19.1%

32.8%

MA

20.4%

49.7%

Prof

32.2%

47.0%

PhD

42.0%

68.6%
Source: ACS, 2009, 2010, 2011

For the most-recent years of data available, 20092011, Figure 2.5 compares the field of study of
U.S.-born and U.S. immigrant workers by highest
degree obtained.20 For each nativity-education group,
Figure 2.5 reports what share of the graduates holda degree in a STEM field. For example, the upper-leftcell entry of 19.1% means that of all native-bornworkers in America who hold a bachelor’s degree,
19.1% earned a degree in STEM.
The message of Figure 2.5 is that at every level of
educational attainment, immigrant workers aremuch more likely to have obtained STEM degrees
than are native-born American workers.
• Among those with a bachelor’s, immigrants arenearly 14 percentage points more likely to have a
STEM degree. This differential is even larger for
holders of master’s degrees—over 29 percentage
points—and doctorate degrees as well—nearly
27 percentage points.

Why are immigrants more likely than U.S.-bornworkers to have studied STEM? Reasons may
include home-country educational systems that arestrongest in STEM disciplines (e.g., the Institutes ofTechnology in India and the long-standing emphasison engineering at top universities in China, Korea,
and Taiwan). Regardless of the underlying causes,
immigrants study STEM more than U.S.-born workers do, which stands them in good stead for obtaining U.S. STEM jobs. Of course, education reform in
America might increase the number of U.S.-bornstudents who pursue STEM degrees. Even with suchwelcome reform, it is clear from Figure 2.5 that today
and in at least the near future, immigrants study
STEM more intensively.
The second reason that immigrants are well suited
to America’s STEM labor force is that, within STEM
fields, immigrants are much more likely than nativeborn Americans to obtain advanced degrees rather
than just a bachelor’s. For native and immigrant
workers who hold a STEM degree (again for 20092011), Figure 2.6 disaggregates each group acrosstheir highest degree.
Figure 2.6
U.S. Workers with a STEM Degree, Shares by
Education Level
BA

MA

Prof

PhD

Natives

59.5%

24.0%

10.2%

6.3%

Immigrants

43.7%

33.6%

9.1%

13.5%

Source: ACS, 2009, 2010, 2011

Figure 2.6 reveals that within STEM education, a larger
share of immigrants obtains advanced degrees thando natives. Comparing foreign and U.S.-born workers:• 59.5% of STEM-educated native-born workers
stop with the bachelor’s degree—but only 43.7% of
STEM-educated immigrants stop at that level,• 33.6% of STEM-educated immigrants have a master’s degree—versus just 24.0% of STEM-educatednative-born Americans, and• 13.5% of STEM-educated immigrants have adoctorate degree—versus just 6.3% of STEMeducated natives.

Talent, Immigration, and U.S. Economic Competitiveness – Section 2

19

Section 2

One reason that STEM immigrants have higher
degree levels may be to signal their quality toprospective U.S. employers or schools, thereby
offsetting uncertainty that may be less present with
U.S.-born candidates.
To summarize: immigrants are more likely to pursue
degrees in STEM fields (Figure 2.5), and immigrants
are more likely to pursue advanced degrees within
STEM fields (Figure 2.6). These two factors together
explain why immigrants are especially well suited
to STEM occupations—and the related demand forinnovation talent—in the U.S. labor force.
The dual impact of these factors means that theshare of immigrants among workers both with a
STEM degree and working in a STEM occupation ishigh and sharply rising with education.
• While 22.0% of U.S. workers with a bachelor’s
degree in a STEM field are foreign born, 34.9%
of STEM master’s-degree workers and 45.3% of
STEM doctorate workers are.
• Similarly, while 20.6% of workers in STEM occupations with a bachelor’s degree are foreign born,
41.1% of workers in STEM occupations with amaster’s degree are foreign born—and 57.8% ofworkers in STEM occupations with a doctorate areforeign born.
• Among all U.S. workers both with a STEM doctorate and in a STEM occupation, a remarkable
59.8% are immigrants.
The conclusion is clear: immigrants are especiallywell suited to STEM jobs both because the foreignborn who gain entry to the United States tend toachieve higher levels of education and because theeducation they tend to seek is in STEM subjects.
For Immigrants’ Contributions to
U.S. Talent, When and Why They Enter
America Matters
Immigrants succeed economically in the UnitedStates in large part because of their high educationlevels. Foreign-born workers in the United States may
first enter the country legally in three main ways:

20(1) on student visas, (2) on temporary work visas (ofwhich H-1B visas are the most important group for
entrants who have at least a bachelor’s degree), or(3) on legal permanent resident visas (green cards).
Different visas admit immigrants based on different
criteria. Immigrants who enter the United States on
student visas must have first gained admission to a
U.S. college or university; similarly, immigrants whoenter on temporary work visas must have obtained
a job offer from an employer. Student and work visas
thus select for admission based largely on somefeature of talent, whether academic or professional.
No publicly available and nationally representative
data tracks immigrants by their visa status andhistory.21 However, immigrants’ age of arrival is often
tracked. Many student or work visas that select ontalent are awarded to first-time immigrants at orafter about age 18 (i.e., at or after the typical age at
which one begins the freshman year of college). In
contrast, many green-card visas that do not selecton talent are awarded to first-time immigrants
earlier than 18 (e.g., individuals entering as children
accompanying older family members). We use arrivalin America at age 18 or later as a proxy for arriving on
a student or temporary work visa.
Younger-arrival versus older-arrival immigrants havemarkedly different education outcomes.
• Immigrants arriving after age 18—i.e., those who
more likely arrived on a talent-based visa—aremuch more likely at all levels of educational attainment to either work in a STEM occupation or tohold a STEM degree.
• This finding strongly suggests that student visas
and temporary work visas attract immigrants withSTEM interests and aspirations. The importanceof recently arrived immigrants for STEM degrees
is even more pronounced when we examine the
STEM occupations that are most reliant on foreignborn labor. Figure 2.7 plots the share of foreignborn workers who arrived at age 18 or later for the
major STEM occupations, broken out by highest
educational degree obtained.

Section 2 – Talent, Immigration, and U.S. Economic CompetitivenessFigure 2.7
Share of Foreign-Born Workers Who Arrived At or After Age 18

BA DEGREE

Operations Research
Other Engineers
Network Administrators
Electrical Engineers
Computer Scientists
Software Developers
Software Engineers

MA DEGREE

Operations Research
Other Engineers
Network Administrators
Electrical Engineers
Computer Scientists
Software Developers
Software Engineers
0

10

20

30

40

50

60

SHARE OF FOREIGN BORN EMPLOYMENT (%)

STEM occupations that employ foreign-born workers
overwhelmingly employ those who arrive after age
18. In Figure 2.7, among bachelor’s-degree holders
those arriving at age 18 or older account for over
60% immigrants in electrical and electronic engineers, network administrators, computer scientists,
software developers, computer programmers, andsoftware engineers.

70

80

90

100

(Source: ACS 2009, 2010, 2011.)

This pattern is even more pronounced among
master’s degree holders. Immigrants arriving at age
18 or older account for over 80% of foreign-born
employment in four of the seven categories in Figure
2.7. Again, we cannot say for sure the visa type on
which these individuals entered the United States.
But the pattern of post-age 18 entry suggests thatstudent and work visas are a major channel for
STEM-oriented immigrants.

The central message of Section 2 is that immigrants have long made enormous contributions to
U.S. talent and innovation. At the highest levels of achievement in a number of professions such as
academia, the arts, and athletics, immigrants have excelled at rates beyond their share of the overall population and labor force. And throughout America’s innovation ecosystem, immigrants help at
all stages of discovering and developing new ideas. Today, the foreign-born share of STEM workers
with bachelor’s degrees is about 20%, and for those with advanced degrees the respective shareis about 40%. These high and rising shares underscore the essential role that immigration plays inallowing America to meet its demand for the highest talents—especially for highly trained personnel
in many areas of STEM. Relative to U.S. workers, immigrants are especially well suited to STEM jobs
both because they tend to achieve higher levels of education and because the education they tend
to seek is in STEM fields. High-tech and low-tech industries alike depend on immigrants to meettheir STEM need, needs that are likely to persist for the foreseeable future.

Talent, Immigration, and U.S. Economic Competitiveness – Section 2

21

Section 2

1.

See: http://www.nobelprize.org/nobel_prizes/lists/.

2.

See: http://www.nasonline.org/about-nas/membership/.

3.

See http://www.artsandletters.org/awards2_all.php.

4.

See: http://www.macfound.org/programs/fellows/strategy/.

5.

These percentages were calculated from data located at thefollowing sites:
http://espn.go.com/mlb, www.pgatour.com
www.nba.com/2012/news/10/30/international-players-onopening-night-rosters/index.html
www.quanthockey.com/nhl/nationality-totals/nhl-players-careerstats.html

6.

Lissoni, Mairesse, Montobbio, and Pezzoni (2011).

7.

Wadhwa, Saxenian, Rissing and Gereffi (2007).

8.

Partnership for a New American Economy (2011).

9.

See Peri (2012).

10.

These findings are, respectively, from Hunt and Gauthier-Loiselle(2010), Peri (2012), and Kerr and Lincoln (2010).

11.

This study is Stuen, Mobarak, and Maskus (2012).

12.

See Zucker and Darby (2009).

13.

See Moser, Voena, and Waldinger (2012).

14.

These results come from Hunt (2009).

15.

In Figure 2.1, the immigrant employment shares were calculated
from various years of the Current Population Survey (CPS).
Employment is defined as total weeks worked times the usual
hours worked per week, weighted by CPS sampling weights.
The sample is limited to individuals whose usual hours worked
per work is 35 or greater. Our approach has the advantage ofaccounting for the total stock of labor employed, rather thansimply bodies in the labor force.

16.

In Figure 2.2, we calculated employment shares similarly to
Figure 2.1. The definition of STEM occupations (based in thiscased on CPS occupation categories rather than ACS categories)
includes engineers, computer scientists, operations and systems
researchers, mathematicians/statisticians, chemists, physicists,
atmospheric scientists, geologists, agricultural and forestry
scientists, biological and medical scientists, cartographers andmapping scientists, computer software developments, andprogrammers of numerically controlled machine tools. We do notinclude the low-education occupations of computer support staff,
technicians, or drafters.

22

17.

Figure 2.3 (and also Figure 2.7) shows all STEM occupations
except life scientists and physical scientists, the vast majority ofwhom have doctoral training and so are absent among bachelor’s
and master’s degree holders. The sample is the same as in
Figures 1.1 and 1.2: using the ACS, we define total employment
to be total hours worked for individuals in the civilian population
aged 25 to 54 (not living in group quarters). Hours worked is
calculated as weeks worked last year times usual hours worked
per week (weighted by ACS sampling weights).

18.

See Grogger and Hanson (2013).

19.

Figure 2.4 (and also Figures 2.5 and 2.6) covers all STEM occupations based on job categories in the ACS (as described in Section1). Employment is again total hours worked (weeks worked lastyear times usual hours worked per week) for individuals in thecivilian population aged 25 to 54 (not living in group quarters),
weighted by ACS sampling weights.

20.

The recent ACS also has the advantage of reporting the degree
field for an individual’s highest academic degree earned (which is
not recorded in the CPS or in the ACS before 2009).

21.

Two data sources that do track individual visa status and history
are the National Science Foundation’s (NSF) Survey of Recent
College Graduates (http://www.nsf.gov/statistics/srvyrecentgrads/) and Survey of Doctorate Recipients (http://www.nsf.gov/
statistics/srvydoctoratework/). Samples sizes for these surveys
are small, restricted by degree field and education level, andlimited to individuals who obtained their degrees in the UnitedStates (as opposed to abroad), which limit their usefulness.
Further, these data sets are proprietary to the NSF and require
special permission to use in their complete form.

Section 2 – Talent, Immigration, and U.S. Economic CompetitivenessSection 3

Supply and Demand of STEM Talent
in America: Immigrants Continue
to Help Meet Growing Demand

Even after the Great Recession, America’s need fortalent persists. America’s demand for highly skilledworkers continues to grow, and immigrants continue
to help meet this demand—both directly and more
broadly through their expansive contributions to
America’s innovation potential. Decades of data
document the continuous increase in U.S. demand
for talented knowledge workers: despite ongoingincreases in their supply relative to the overall labor
force, their high earnings relative to the overall labor
force have persisted or even increased.
Ongoing growth in the search for talent holds not justfor broad measures of ability—such as college workers versus high school workers—but also for STEM
college graduates relative to other college graduates, and even for STEM advanced-degree holders
relative to other advanced-degree holders. This
fractal aspect of America’s talent demand reflects
the contributions to productivity of the most capable
employees. Innovative companies throughout the
U.S. economy continue to search for top-notch labor
to help boost their potential for breakthroughs. Such
striving to expand the technology frontier sustains
the intensity of America’s talent search.
Our two key findings of this section are that:• The Great Recession did not suppress America’s
need for STEM labor. Relative to non-STEM workers of the same age and education, STEM workers
earn a compensation premium of 25%—a differential that has changed little in the past 30 years.
Relative to all U.S. occupations, STEM earnings arerising: since 2000, real wages in STEM jobs havegrown, while real wages for nearly all other U.S.

occupations have fallen. Unemployment rates in
STEM occupations today have fallen to or below
historic levels.
• Looking among U.S. STEM workers, immigrants are
not paid less than natives. Using the most comprehensive data available and a number of alternative
approaches to controlling for the standard differences in earnings across workers (such as age,educational attainment, gender, and industry of
employment), the average earnings of U.S.-born
STEM workers and immigrant STEM workers are
the same in almost all cases.
The Supply of and Demand for Talent
in America
Section 1 of this report documented and analyzed
America’s rising supply of talented workers—especially STEM talent—and Section 2 similarly documented and analyzed the important and expandingrole of immigrants in this supply of skill for America.
Foreign-born STEM workers have contributed
mightily to U.S. innovation and therefore to its overall
economic growth.
The link from the supply of STEM talent to dynamismand growth is not automatic, however. Simply endowing an economy with more scientists and engineers
does not magically create innovation. What has longgrown in America along with the supply of talentis the country’s demand for talent—demand fromuniversities and colleges, demand from the government, and—in the aggregate, most important of
all—demand from companies in the private sector.

Talent, Immigration, and U.S. Economic Competitiveness – Section 3

23

Section 3

As education and immigration were expanding
America’s supply of talent over the 20th century
and into the 21st, a set of forces were expanding
America’s demand for talent. One such force isforeign trade and investment.1 The opportunity tosell new products into expanding foreign markets
spurs innovation in global companies.2 A second
important force is innovation and technologicalchange itself. Rather than enlarging proportionately
companies’ demand for basic and talented workers
alike, many advances stimulate companies’ needfor talent far more than their need for basic skills.3
Think of the computer and Internet spawning entire
new categories of STEM occupations as companies
developed demand for new skills such as computer
programming, software development, and building
and managing computer networks.4
Many policymakers are rightly concerned about
whether America’s policies toward immigration andeducation are adequately meeting the country’s
evolving demand for skilled labor. The measurement
challenge, of course, is that the demand for talent—
like the demand for workers of other skill types, ormore generally of many other goods and services—cannot be directly observed. What can be observedis the supply of skills—per much of the discussionof Sections 1 and 2. And, what can also be observedis the “price” for these skills—i.e., the wage andsalary income earned by talented workers over andabove that earned by the average worker. Examining
together America’s relative supply and relative priceof talent opens a window into how America’s demand
for talent is evolving.
Start with a broad measure of America’s talent: allworkers with at least a college degree. For every year
from 1963 through 2011, the most recent year ofavailable data on annual earnings, Figure 3.1 shows
America’s supply of college-educated workers (i.e.,
workers with a college degree or advanced degree)
relative to its supply of high school educated workers (i.e., all workers with a high school degree or theequivalent [e.g., GED] but no college degree). Thismeasure of relative supply is presented as an index inorder to facilitate comparisons over time. A value of
100 indicates equal effective supplies of college andhigh school educated labor.5
For nearly two generations, America’s supply ofcollege graduates relative to high school graduates
has been rising. Indeed, this rising relative supply
underpins the rising average educational attainmentof American workers discussed in Section 1.

COLLEGE/HIGH SCHOOL RELATIVE HOURS WORKED

Figure 3.1
College/high school relative labor supply index
100

80

60

40
1963
YEAR

24

1969

1975

1981

1987

1993

1999

2005

2011

(Source: CPS, 1964 to 2012.)

Section 3 – Talent, Immigration, and U.S. Economic CompetitivenessFigure 3.2
College/high school wage difference

COLLEGE/HIGH SCHOOL WAGE GAP (%)

60

50

40

30
1963

1969

1975

1981

1987

1993

YEAR

• Figure 3.1 shows that whereas in the mid-1960s
the effective labor supply of college graduates was
about 40% that of high school graduates, today
the two are close to par.
The pace of growth, however, has not been even.
The increasing relative supply of college-educatedlabor was most rapid from 1963 to 1993. Since 1993,
the surge in the supply of college graduates has
eased. This is flattening of educational attainment
discussed in Section 1: over time, America hasgenerated ever-more college educated labor, but at a
progressively slower pace.
We next document the relative earnings that gowith the relative supply of Figure 3.1. For every year
from 1963 through 2011, Figure 3.2 shows America’s
annual earnings of college-educated workers relative
to the annual earnings of high school educatedworkers—in terms of the gap by which the typicalcollege-graduate wage exceeds that of the typicalhigh school graduate.6
What do Figures 3.1 and 3.2 say about America’s
demand for college graduates relative to high school
graduates? Consider the 1970s, when college relative

1999

2005

2011

(Source: CPS, 1964 to 2012.)

wages were falling (Figure 3.2). Given that the relative supply of college graduates was rising strongly
during that time (Figure 3.1), we can infer that during
the 1970s the relative demand for college graduates
was falling, or was constant, or was rising but by lessthan was their supply. Indeed, during this decade
many leaders in business, government, and the academy worried about “the overeducated American.”7
What about the 30 years from 1981 to 2011? Unlike inthe 1970s, now the relative wages of college graduates were rising almost continually—even thoughcollege graduates’ relative supply was also expanding
almost continually as well. The only way that college
graduates could be earning more even as their ranks
were swelling was for companies’ demand for themto have been expanding, too—and, in the aggregate,
expanding by more than did the relative supply. Inturn, America’s demand for talent was expanding
thanks to forces such as the IT revolution and theaccession into the global economy of fast-growthcountries like China and India.
A large body of academic research has documented
the increase in the relative demand for more

Talent, Immigration, and U.S. Economic Competitiveness – Section 3

25

Section 3

STEM/NON-STEM RELATIVE HOURS WORKED

Figure 3.3
Workers with BA degree
16

15

14

13

12
1975

1981

1987

1993

1999

YEAR

2005

2011

(Source: CPS, 1976 to 2012.)

educated, more skilled workers in the United Statesfrom the 1980s onward.8 This growth in demandhas been a major force behind the expansion of U.S.
income equality in recent decades. Scholars havealso documented how the nature of labor-demand
growth has evolved over time.9 These nuances, however, do not alter the basic fact about the U.S. labormarket over the last thirty years: both the supply
and earnings of more skilled labor have risen steadily
when compared relative to the supply and earningsof less skilled labor. Figures 3.1 and 3.2 show that:• America’s expanding supply of talent, measured
broadly in terms of college graduates, was in thepast 30 years exceeded by an expanding demand
for talent.
• This growth in demand was so strong that therelative earnings of college graduates were rising,
not falling throughout the period. Demand fortalent was necessary for America’s supply of skill
to translate into productive innovations, with theresulting growth in jobs and income spreading
throughout the U.S. economy (as described in
Section 1).

The Supply of and Demand for STEM Talent
in America
The same supply, earnings, and demand analysis can
examine the evolution of STEM talent in America inrecent decades—especially to understand questions
U.S. leaders have about whether policies towards
immigration are adequate for the country’s labor
force needs.
Start with a broad measure of America’s STEM talent:
workers with a bachelor’s degree in a STEM occupation relative to workers with a bachelor’s degree in allother occupations.10 For every year from 1975 through2011, Figure 3.3 shows this measure of America’s
relative supply of STEM workers,11 again presented as
an index to facilitate comparisons over time.
Figure 3.3 shows that in the early 1980s, America’s
relative supply of STEM talent began to grow, coincident with several landmark innovations marking the
beginning of the IT revolution:• Microsoft shipped MS-DOS version 1.0 in 1981.
• Apple’s Macintosh computer launched in 1984.
• Intel introduced the 80386 microprocessor in 1985.

26

Section 3 – Talent, Immigration, and U.S. Economic CompetitivenessBooming growth in STEM employment, relative to
non-STEM, followed thereafter.
• Employment of STEM workers with a bachelor’s
degree relative to employment of non-STEM
workers with a bachelor’s degree has increased byabout 30% since 1984.
Comparing STEM workers with advanced degrees(master’s, professional, doctorate degree) to similarly educated non-STEM workers, the pattern issubstantially the same. The similarly constructedfigure shows a 30% increase in the relative supplyof STEM workers, now measured as those withadvanced degrees working in STEM occupations
relative to those with advanced degrees in non-STEM
occupations.12 From Section 2, expanding immigration accounts for an important part of the rising
supply of STEM talent. The shift in highly educatedemployment towards STEM jobs is therefore partly aconsequence of U.S. openness to skilled foreign labor.
As America’s relative supply of STEM talent has
expanded, what has happened to STEM earnings?

If the only change in the labor market was anincrease in the supply of U.S. workers seeking STEM
jobs, then the logical outcome would be lower wages

in STEM occupations when compared to non-STEM
occupations. But if, instead, the employment shift
toward STEM was driven by robust growth in demandfor STEM skills, then STEM occupations could have
expanded with constant or even rising wages for
STEM workers.
Figure 3.4 gives a simple first answer. It reports since2001 the median hourly wage for two large STEM
occupations (computer and mathematical occupations—which include computer programmers andsoftware developers—and engineering) relative tothe median hourly wage for all U.S. occupations,where each of these two wage ratios is set to equal
100 in 2001.13• The key message of Figure 3.4 is that relative toall other U.S. occupations, the earnings of STEM
workers have risen over the past decade by 3% to
6%. The inflation-adjusted wages of major STEM
occupations grew over the last decade while real
wages for most other U.S. occupations fell.
• Rising earnings for U.S. STEM workers even withthe country’s expanded STEM labor supply reveals
that American relative demand for STEM talent has
been expanding.

Figure 3.4
Median hourly wage relative to all occupations

106

Engineering
Occupations

104
Computer,
Mathematical
Occupations

102

100

2001

2002

2003

2004

2005

2006

2007

2008

YEAR

Talent, Immigration, and U.S. Economic Competitiveness – Section 3

2009

2010

2011

2012

(Source: BLS.)

27

Section 3

The measurement of relative incomes can be
sharpened by controlling for the worker characteristics—e.g., educational attainment and years in
the labor force—that tend to influence earnings forindividuals and thus for large groupings of workers
like those in Figure 3.4. So, for the Current Population
Survey—i.e., one of the largest U.S. government data
sets designed to measure labor-force outcomes—wemeasured for each year how much more STEM-occupation workers earn than do comparable workers in
non-STEM occupations, controlling for characteristics including years of schooling, age, gender, race,and geography. For each year since 1967, Figure 3.5
reports the estimated percentage premium earned
by a U.S. worker in a STEM occupation above that ofa comparable worker in a non-STEM occupation.14
We show the estimated percentage itself, along with
the interval above and below it, within which statistical analysis indicates the “true” percentage lies with
95% confidence.
Figure 3.5 documents that for nearly two generations, STEM workers in America have earned a large
compensation premium—over the past 30 years, ofabout 25%—that has changed little. From the late1960s to the late 1970s, this premium was about
15%. It then increased to around 25% by the early
1980s, at the same time the IT revolution was getting
underway. Each year since, it has persisted at aboutthat level with minor fluctuations. Now, recall from
Figure 3.3 that America’s relative supply of STEM
talent has been continually increasing. America’s
steadily expanding supply of STEM talent could
occur without reducing the STEM earnings premium
only with a steady expansion of America’s demandfor STEM talent as well.
This is a central message of this entire report:
Even with substantial growth in the size of America’s
STEM labor force thanks to the forces of educationand immigration, America’s STEM wage premiumhas been sustained by the expansion in America’s
demand for STEM talent.
Figure 3.5 also suggests periods of fluctuationsin this evolving demand that match with broader
economic forces during those periods. For example,
the rise in the wage premium in the late 1990s
coincides with the IT boom—and with such strong

.3
.2
.1
0

AVERAGE STEM WAGE PREMIUM (%).4

Figure 3.5
Estimated log wage premium for STEM occupations

1967
YEAR

28

1971

1975

1979

1983

1987

1991

1995

1999

2003

2007

2011

(Source: BLS.)

Section 3 – Talent, Immigration, and U.S. Economic CompetitivenessFigure 3.6
Unemployment rates, workers aged 25+
10

All workers

PERCENT

8
Workers withBA degree

6

Workers withBA degree in
STEM occupations

4
2
0
1994

1996

1998

2000

2002

2004

2006

YEAR

demand from U.S. companies for STEM talent that
the U.S. Congress, as mentioned in Section 2, agreed
to temporarily triple the annual number of H-1B visas
granted (from 65,000 to 195,000). The wage premium dipped during the 2001 and 2008 recessions,as one might expect given the IT-concentration of the2001 downturn and the general severity of the 2008
downturn amidst the world financial crisis. But thesedips were short lived, and even in the aftermath of
the Great Recession the U.S. earnings premium for
STEM talent rose after 2008 back to about 25%.
As clear evidence of this rebound in demand for
STEM talent, here in 2013 America’s demand for
H-1B visas is again very strong—so strong that within
one week after U.S. Citizenship and Immigration Services began accepting new H-1B petitions on April 1,
2013, it announced that substantially more than the
full-year limit of 85,000—approximately 124,000—
had already been filed. Any petitions received after
close of business April 5, 2013, were rejected, and
USCIS then allocated the fiscal 2014 H-1B visas via
lottery.15 This most-recent H-1B visa lottery reprises
the similar lotteries due to similarly strong demandin the pre-crisis years of 2007 and 2008.
What combination of supply-and-demand forcesaccount for America’s persistently large compensation premium for STEM talent? There are several

possible explanations that available data cannot fully

2008

2010

2012

(Source: CPS, 1994 to 2012.)

disentangle. That said, the explanation that we findmost plausible is that STEM occupations tend to
attract relatively high-talent applicants (e.g., because
it is difficult to master the math and science needed to
excel at so many STEM jobs, and difficult to develop or
teach the creative imagination essential for innovation
discovery) who go on to be high productivity workers
on the job.16 STEM workers in America tend to be
more productive than non-STEM workers and thus
tend to earn a premium. This premium has persisted
for decades, despite the expanding supply of STEM
talent, because of America’s continuing expansionof demand for STEM skills. Innovative companies
throughout the U.S. economy continue to need anever growing pool of talent to help boost their output
of innovative goods and services.
Additional evidence that post-crisis America’s
demand for STEM talent remains strong today canbe seen in the low unemployment rates for STEM
workers. Figure 3.6 reports the monthly unemployment rate from 1994 through 2012 for three groupsof U.S. prime-age (25 to 54 years old) workers: allworkers (dotted line), all workers with at least abachelor’s degree (dashed line), and all STEM workers with at least a bachelor’s degree (solid line).17
They key message of Figure 3.6 is that in STEM occupations unemployment is falling sharply, consistent
with substantial labor-market tightening.

Talent, Immigration, and U.S. Economic Competitiveness – Section 3

29

Section 3• The unemployment rate for STEM occupations fell
from 4.5% in 2009 to 2.5% in 2012, barely aboveits 20-year average of 2.45%.
• In computer occupations—software developers,
computer scientists, computer systems analysts—the unemployment rate has declined evenmore dramatically—from 5.4% in 2009 to 2.5%
in 2012—and is now below its 20-year average of
2.8%. Today in mid-2013, the STEM unemployment
rate very likely has fallen below its long-run average.
Are Immigrant STEM Workers Paid Less
than Native-Born STEM Workers? No.
Even though demand for STEM talent has been
expanding in America for decades, perhaps oneof the most contentious issues in the U.S. policy
discussion of STEM labor is the concern that immigrant STEM workers earn less than do native STEM
workers—and thus that immigration holds down theincome and economic prospects of U.S.-born STEM
job holders.
To evaluate this concern, it is essential to think aboutdata averages, not data anecdotes. Recall from
Section 1 that today there are more than 4.9 million
Americans working in STEM occupations.
• It is simply implausible to suppose that every
single immigrant STEM worker earns more thanevery single native STEM worker—or vice versa.
• For the millions of America’s STEM workers, both
U.S. and foreign-born, there is a distribution of
earnings (and other outcomes) across which there
is substantial overlap.
So, we now examine central tendencies in the data.
When looking across large numbers of foreignand native-born workers in STEM occupations,
how do their earnings compare? With millions of

STEM employees that differ in myriad ways such as
education, experience on the job, and industry of
employment, carefully evaluating native and immigrant wages requires two important ingredients: (i)sufficiently well-constructed measures of earnings
for a sufficiently large and nationally representative
sample of workers, and (ii) sufficiently rich measuresof workers characteristics that must be properly
controlled for to consider whether nationality per sematters for worker earnings. Many existing studies

30

that try to compare the earnings of U.S.-born andimmigrant STEM workers have serious limitations
because they fail to include one or both of theseimportant ingredients.18
Our wage analysis pools the three most-recent
years—2009, 2010, and 2011—of the American
Community Survey (ACS) produced by the U.S.
Bureau of the Census. We use the ACS because it
carefully measures not just worker income but alsoa sufficiently rich set of demographic characteristics
that we can control for wage determinants using themost current and most sophisticated techniques ofresearch in peer-reviewed economics. As is standardpractice, we combine three ACS years because eachindividual year’s sample is too small to compare with
sufficient statistical confidence native and U.S.-born
earnings of STEM occupations conditional on key
worker characteristics. We also limit the sample tofull-time, non-self-employed workers to compareindividuals in comparable positions of employment.19
The simple graphic in Figure 3.7 illustrates ourcentral wage-comparison findings.20 It reports theearnings of U.S.-born and immigrant STEM workers
while controlling for two of the most important nonimmigration determinants of earnings: education
and work experience (as proxied by age). Figure 3.7
pools workers in all STEM occupations in America
across 2009, 2010, and 2011, and then reports average annual earnings of U.S.-born and foreign-bornworkers within eight broad groupings: two educational groups—those with a bachelor’s degree andthose with a master’s degree—and four age groups.
Strikingly, Figure 3.7 provides no systematic evidence that immigrant STEM workers are paid lessthan U.S.-born STEM workers. This is a second
central message of our report:
When comparing immigrant and U.S.-born workers
in STEM occupations (where these workers are ofsimilar ages and have similar educational attainment), there is no evidence of a systematic differencein earnings between the two groups.
In seven of the eight age-education groupings in
Figure 3.7, immigrants earn slightly higher averageannual earnings than their U.S. counterparts, andin one grouping immigrants earn an average of only
about 2.5% less than their U.S.-born counterparts.

Section 3 – Talent, Immigration, and U.S. Economic CompetitivenessFigure 3.7
Earnings, all STEM occupations
AGE 25-29
BA DEGREE

Foreign Born

AGE 30-34
AGE 35-39

U.S. Born

AGE 40-44
AGE 25-29
MA DEGREE

AGE 30-34
AGE 35-39
AGE 40-44
0

20

40

60

AVERAGE ANNUAL EARNINGS IN THOUSANDS

Undoubtedly, one could find instances where
immigrants in STEM jobs earn more than native-bornworkers and instances where the reverse applies. But
the central tendency of the data is clear: immigrantand native-born STEM workers have substantiallysimilar wages.21
To verify that this initial picture of immigrant-native
wage parity holds, we next replicated the basic analysis of Figure 3.7 considering only those immigrants
who arrived to the United States at age 18 or older.
Recall from Section 2 that the mechanism throughwhich immigrants gain entry to the country may wellmatter for their average talent. The age of arrival ofat least 18 is a proxy for immigrants who arrived on a
student visa to study at a U.S. university or on a temporary work visa (the ACS does not ask visa status),
and thus for whom talent was likely a more important selection criterion compared to immigrants whoarrived when younger on family-based visas. Somecritics of current U.S. immigration policy argue that
it is recently arriving immigrants on student or work
visas who are somehow exploited by U.S. companies
by being paid unfairly low wages. We find no evidence
consistent with this argument.
• For the same eight comparison groups as in Figure
3.7, now examining only immigrants who arrived
to the country no younger than age 18, we find noevidence that immigrant STEM workers are paid

80

100

(Source: ACS 2009, 2010, 2011.)

less than native STEM workers. In seven of theeight age-education groupings, immigrants earnslightly more than their U.S. counterparts—and in
the eighth grouping earn a fraction less than their
U.S.-born counterparts.
Could patterns differ for specific occupations? We
next replicated the analysis of Figure 3.7 on subsamples of three STEM occupations that are particularly important in terms of size or innovativeness:
software developers and computer programmers,
computer software engineers, and computer scientists. The pattern is varied—different occupations
may have different underlying business conditions
and thus higher or lower average earnings than otheroccupations. But the pattern of wage parity between
U.S.-born and immigrant STEM workers persists.
• For the large majority of education-experiencegroupings across the individual STEM occupations,
native-born citizens and immigrants earn nearly
identical annual incomes. The groupings withincome differences are split between immigrants
earning more than natives and vice versa, with nosystematic differences between the two.
To look for wage differences in the most complete
and sound approach, we last conducted a detailed
statistical analysis for all U.S. STEM workers acrossall three years (i.e., for the full data sample underlying Figure 3.7) that correlates the earnings of each

Talent, Immigration, and U.S. Economic Competitiveness – Section 3

31

Section 3

STEM worker with an exhaustive set of worker
characteristics using the most current techniquesof research in peer-reviewed economics. The goal of
the analysis was to search for any possible pattern ofimmigrants earning less (or more) than natives. We
found no such evidence.
• Across a large number of alternative approaches tocontrolling for the standard differences in earnings
across workers (e.g., age, educational attainment,
gender, occupation, and industry of employment), there is no systematic evidence of wage
differences between U.S.-born STEM workers andimmigrant STEM workers.22
We performed further statistical analysis in which welimited the sample to computer occupations (programmers, software developers, web developers).
We again found no consistent statistical difference
between earnings for immigrant and native-born
STEM workers.
Earnings of STEM Workers: The Importanceof the Long-Run Perspective
Why do immigrant and native STEM workers earn
about the same amount in the United States? In anarrow sense, it is because the U.S. labor market efficiently allows similarly talented workers to command
similar incomes. In a more-complete sense, comparable U.S.-born and immigrant earnings in STEM
occupations reflect the global competitive intensity
facing U.S. companies. STEM talent is critical for anumber of U.S. industries to thrive in a world whose
innovative activities are today both more contested
and more mobile. The notion that the United States
has a perpetual lock on high-profit, ever-expanding
innovation is gone (a conclusion supported by
Section 1). Even if the United States can maintainits innovation dynamism, it will do so amidst greater
competition among companies and thus, indirectly,
among their workers.
The value that U.S. companies see in talented STEM
workers is reflected in the high levels of compensation seen in Figure 3.7.
• Average annual earnings in STEM that broadly
range from about $50,000 to over $100,000
are substantially above the 2011 full-time annual
income for all U.S. occupations of just $45,230(which for 2012 was essentially unchanged at$44,795).23

32

The earnings parity between immigrant and U.S.born STEM workers is not to say that over shortertime horizons and for particular niches in the overall
STEM labor market, native and foreign-born STEM
works do not compete with each other and thus
impact each’s earnings. For example, a few recent
studies have found that greater supplies of foreignborn post-doctoral fellows in the United States may
lower the wages for U.S.-born post-doctoral fellows.24
Finding that in one segment of the labor market anincrease in the supply of workers reduces their shortrun wage is not surprising. In almost all markets—labor markets or otherwise—an increase in supply
will, in the short run and thus at current demand,
reduce prices. Specific to this post-doc result, current U.S. immigration policy induces many immigrantdoctorates to take post-doctoral positions. Uponcompleting their U.S. doctoral studies, immigrants
have a finite amount of time by which they mustleave the country if they do not secure some formof legal employment. Absent a sufficient supply ofwork visas such as H-1Bs or green cards that allow
these newly minted doctorates to match into the U.S.
labor market, the only work option many unmatched
doctorates can secure is a post-doc position thatsatisfies Optional Professional Training and thus
allows staying in the country on an original student
visa. This limits the mobility of immigrant post-docs
across employers, occupations, and industries—and
therefore opportunities for wage growth for both
natives and immigrants alike.
• The more important time horizon within which toconsider the impact of immigrant STEM talent on
American jobs and incomes is the long run, not the
short run.
Recall from Section 1 that for generations, U.S. jobs
have been created and U.S. incomes have risen
almost entirely thanks to innovation and its resulting
growth in productivity. Immigrants, as Section 2 documented, have long been a key part of the America
STEM talent pool that has been the foundation of thisinnovation and thus of growth in jobs and incomes.
For the bigger-picture questions of how will America
create jobs and incomes today and in the future, thecontributions of immigrants is still large and can, withproper policies, be even larger—independent of any
short-term adjustment impacts incurred as talented
immigrants integrate into the U.S. economy.

Section 3 – Talent, Immigration, and U.S. Economic Competitiveness

The industry of the two U.S.-born authors of thisstudy, American higher education, offers a fitting
example. America maintains the world’s mostdynamic higher-education system by welcoming
foreign scholars and students (hence the high fraction of foreign-born faculty in top STEM university
departments documented in Section 2). Today, about
one-third of the tenured and tenure-track faculty areforeign born at each of the School of International
Relations and Pacific Studies at UC San Diego and at
the Tuck School of Business at Dartmouth.
Suppose that tomorrow the “Employ American
Economists Act” became a U.S. law and it forbade
foreign-born economics professors from working
in American higher education. What would happen
to our earnings? In the short run, our wages would
almost surely rise as American schools scrambled
to hire the remaining U.S.-born academics to teachtheir existing classes.25
But in the long run, our every expectation is that ourwages would fall. Our research and teaching productivity is enhanced by the opportunity to interact withand learn from the ideas brought by our foreign-borncolleagues. (Indeed, five of the past 10 winners of theJohn Bates Clark Medal, awarded every other year to
the top North American economist under age 40 andhistorically a strong predictor of a future Nobel Prize,
has gone to someone who is foreign born.) Also likely
to be hurt in the long run would be U.S. students andthe overall U.S. economy.
And where would all these foreign-born professors
go? It is likely that relatively few would simply stay in
the United States to ply their talents in other occupations and industries. Instead, given the rapid expansion of higher education around the world, mostwould leave for countries whose leaders recognize
their job-creation potential and shape policy accordingly. The exodus of these academics from the UnitedStates would strengthen university departments
abroad and weaken America’s ability to attract top
undergraduate and graduate students to its programs. Any short-run income gain for U.S. academia
would likely be offset by a longer-run loss, as productivity growth among U.S. universities diminished.

America’s demand for highly talented workers continues to grow. Immigrants continue to help meetthis demand—both directly and more broadly through their expansive contributions to America’s innovation potential. Decades of data document the continuous increase in U.S. demand for talented
knowledge workers. The Great Recession did not suppress America’s need for STEM labor; indeed,in recent years in STEM occupations unemployment has fallen sharply, consistent with substantiallabor-market tightening. Relative to non-STEM workers of the same age and educational attainment, STEM workers in America today earn a compensation premium of about 25% – a differentialthat is largely unchanged over three decades. Relative to all other U.S. occupations, the earnings of
STEM workers have risen: since 2000, real wages of main STEM occupations have grown, while real
wages for most other U.S. occupations have fallen. Looking among U.S. STEM workers, there is no
systematic evidence that immigrants are paid less than native-born workers.

Talent, Immigration, and U.S. Economic Competitiveness – Section 3

33

Section 3

1.

Autor, Dorn, and Hanson (2013) and Haskel, Lawrence, Leamer,and Slaughter (2013) are recent studies of how globalization
shapes U.S. labor demand.

2.

As documented by Bloom, Draca, and Van Reenen (2011).

3.

See Autor, Levy, and Murname (2003).

4.

Lin (2011) documents how technological advance creates newoccupations in the United States.

5.

To construct the labor-supply index in Figure 3.1, we used datafrom the CPS on total hours worked for each person (weeks
worked last year times usual hours worked per week or, inearlier data before 1976, hours worked last week), covering all
civilian workers and including the self-employed (weighted by
CPS sampling weights). Simply counting total hours worked
misses the fact that workers with different levels of educationand experience have different productivity levels. To incorporate
these productivity differences into a measure of labor supply, we
first divided workers into labor-market groups broken down bygender, five education categories (less than a high school degree,
high school degree or equivalent, some college but no bachelor’s
degree, bachelor’s degree, advanced degree), and eight experience categories (0-4, 5-9, 10-14, 15-19, 20-20, 25-29, 30-34,
and 35-39 years of potential labor market experience, following
definitions of experience in Jaeger and Page (1996) and Park
(1994)). Then, for each gender-education-experience group we
calculated average weekly earnings in each year (for full-time, fullyear workers, defined to be those working at least 35 hours per
week and 40 weeks a year) and divided this average by that for
white, male, high school graduates with approximately 10 yearsof labor-market experience (which group is used as the reference
category is unimportant). We take this relative wage to capturea group’s relative labor productivity and we average this relative
wage across years to create a time-constant labor productivity adjustment factor for each gender-education-experiencegroup. We multiply these adjustment factors by hours worked ineach labor-market group and sum across groups for each year
separately for high school graduates and for college graduates(weighting by each subgroup’s average share of hours worked
in the broader education group over the entire sample period to
avoid having differential changes in age structure between college
and high school graduates affect the measure of labor supply).
Finally, in each year we divided total labor supply for the college
educated by total labor supply of the high school educated, took
the log of this relative labor supply value, and rescaled the log
value such that equal values of college and high school labor
supply have an index of 100. This method of calculating laborproductivity follows Autor, Katz and Kearney (2008).

6.

7.

To construct the college-high school wage premium in Figure 3.2,
we used data from the CPS for average weekly earnings (annual
earnings divided by weeks worked) for full-time, full-year civilian
workers (35 or more usual hours per week, 40 or more weeks
worked last year). We excluded the self-employed; earnings aredefined as wage and salary income (i.e., excluding businessincome). We weighted each observation by weeks worked lastyear times the CPS sample weight. To keep constant acrossyears the age composition of workers, we constructed average
gender-experience weights across the sample period for eacheducation group and then held these weights constant over time.
Similar to the construction of relative supply, discussed above,
we used five education categories and ten categories for labormarket experience.
This quoted expression borrows from the title of the book byFreeman (1976).

34

8.

Early research is reviewed in Katz and Autor (1999). Recent
analyses include Autor, Katz, and Kearney (2008) and Beaudry,
Green, and Sand (2013).

9.

In the 1980s, demand grew by more at every additional step up
the skill ladder—wages for the median worker grew by more than
low-wage workers, and wages for the already highly compensatedgrew by more than at the median. In the 1990s, however, wage
growth in the middle of the U.S. labor force sagged, with strong
growth in earnings continuing only at the top. Katz and Murphy(1992) is a classic early paper, which developed methodology
to measure changes in relative labor demand. See Autor andDorn (2013) on earnings polarization in the U.S. labor market. In
the 2000s, even before the Great Recession, the story evolved
further. While earnings growth at the top yet again continued,
some college graduates (likely mostly in non-STEM fields, given
our evidence later in this Section) were pushed down the occupational ladder, taking jobs less-educated workers typically held in
the past. See Beaudry, et al (2013).

10.

CPS STEM occupations are defined as in Section 2.

11.

To construct the labor-supply index in Figure 3.3, we follow
the same procedure as for Figure 3.1, except now we sum up
productivity-adjusted hours worked for two educated groups:
workers in STEM occupations with a bachelor’s degree (but nomore) and workers in non-STEM occupations with a bachelor’s
degree (but no more).

12.

To construct this labor-supply index, we again follow theprocedure for Figure 3.1. The two groups of workers are workers
in STEM occupations with an advanced degree (master’s, professional, or doctorate) and workers in non-STEM occupations withan advanced degree.

13.

Data for median hourly wages are from Occupation Employment
Statistics from the Bureau of Labor Statistics: http://www.bls.
gov/oes/current/oes_nat.htm. Computer and mathematicaloccupations are occupational group 15-0000; engineering
occupations are occupational group 17-2000; and all occupations
are group 00-0000.

14.

To produce Figure 3.5, we limited the sample to full-time,
full-year workers (at least 35 usual hours of work per week,at least 40 weeks worked last year) and regressed log weekly
wages (deflated for price inflation by the Personal Consumption
Expenditure index) on dummies for seven education categories(less than high school, high school, some college, college degree,
master’s degree, professional degree, PhD), a quartic in potentiallabor-market experience, dummies for race and gender, dummies
for nine Census geographic regions, and a dummy for whether
a worker is in a STEM occupation. The STEM wage premia (with
95% confidence bands) are the estimated coefficients on the
STEM dummy variables for each year-by-year regression. Estimating the regressions year by year allows returns to education,
experience, and other characteristics to vary over time. We used
as weights weeks worked last year times the CPS sample weight,
such that people who worked more influence the analysis more.
Results are essentially the same when we interact education
dummies with dummy variables for labor-market experience
categories (based on five-year experience bins).

15.

See: http://www.uscis.gov/portal/site/uscis/.

16.

There are many studies that examine the source of pay differences between industries and occupations (with a classic
being Dickens and Katz, 1987). Perhaps the definitive study on
the subject (Abowd, Kramarz, and Margolis, 1999) finds that
person-level characteristics such as talent (and as opposed tofirm or industry characteristics) are the dominant source of pay
differences across individuals observed working across a large

Section 3 – Talent, Immigration, and U.S. Economic Competitivenessnumber of firms and industries. Other possible explanations for
the STEM earnings premium we find less plausible. One is that for
the typical U.S. worker, acquiring STEM talent may be more costly
in terms of time and/or money, such that the STEM wage premium would be compensating for the higher upfront investment.
This investment-cost explanation seems unlikely, in part because
the analysis that constructs the STEM premium in Figure 3.5
controls for education and work experience—and because STEM
and non-STEM college graduates tend to be educated at thesame universities where they pay common tuition rates. Anotherpossible explanation is that companies that heavily employ
STEM workers may earn consistently higher profits than do othercompanies, where companies share some of these higher profits
with workers in the form of higher salaries or bonuses. This
profit-sharing explanation also seems unlikely, in part because
it begs the question of why STEM-intensive companies would bepersistently more profitable over decades.
17.

These unemployment rates are calculated from the CPS. STEM
occupations are defined as in Section 1. We define the employment rate as 100 times the ratio of the number of individuals whoreport being unemployed to the number of individuals who reportbeing in the labor force, where we weight each of these aggregate
counts by CPS sample weights. We limit the sample to those aged
25 to 54 to exclude individuals transitioning into (i.e., under age25) or out of (i.e., over age 54) the labor force for whom occupation may be poorly defined.

18.

See in particular Hira (2010) and Matloff (2013).

19.

We focus on younger workers, aged 25 to 44 years old, to capture
immigrants who are likely to have arrived in the country relatively
recently and to avoid concerns about high ability individuals being
promoted out of STEM occupations into higher level management
jobs. Eliminating the self-employment is standard practice ineconomics research on wages. Since the self-employed may taketheir income as salary or unrealized capital gains, it is difficult tocompare their earnings with wage and salary workers.

20.

21.

22.

The data used for Figure 3.7 are from the 2009, 2010, and 2011
ACS. We limit the sample to full-time (at least 35 usual hours
worked per week), full-year (at least 40 weeks worked last year)
civilian workers aged 25-44 employed in a STEM occupation (asdefined in Section 1). We exclude the self-employed and report
average weekly earnings (annual earnings in the previous year
divided by weeks worked in the previous year) based on wage
and salary income. Annual income is calculated by multiply
average weekly earnings by 48 (such that weeks worked is held
constant across groups). We further limit the sample either
to individuals with a bachelor’s but no higher degree or witha master’s but no higher degree. Sample sizes for individuals
in STEM occupations with professional or doctorate degrees
are quite small, making their use problematic. All figures areweighted by ACS sample weights.
It is important to mention that the absence of wage differences
between immigrants and U.S.-born workers does not hold when
we examine non-STEM occupations. In this case, we see thewell-documented pattern that immigrants, and in particular
recently arrived immigrants, earn significantly less than nativeborn workers. Clearly, however, this pattern does not translate
to STEM. Borjas (2013) discusses evidence on immigrant-native
wages gaps across all occupations.

In this analysis, we used the 2009, 2010, and 2011 ACS sample
for full-time (at least 35 usual hours per week), full-year (at least
40 weeks last year) individuals employed in STEM occupations,as defined in Section 1. We limited the sample to men, 15 years
or less beyond the standard age for their highest degree (age 23
for bachelor’s, age 25 for master’s) to capture individuals before
they were promoted out of jobs emphasizing STEM skills into
management positions. Earnings were defined as log inflation
adjusted log weekly earnings (wage and salary income last year/
weeks worked last year). Regressions were run separately for
individuals with bachelor’s degrees (N=26,462) or master’s
degrees (N=11,980). Independent variables included in the
regressions were: a quartic in age, a dummy for race, dummies
for nine geographic regions, dummies for survey year, and adummy for being foreign born. For the regression weights, weused by weeks worked last year times the ACS sample weight.
We estimated four specifications: the baseline regression as
described, adding dummies for industry, adding dummies foroccupation, and adding dummies for industry and occupation. We
summarize the coefficient estimates on the dummy variable forbeing an immigrant:• The coefficient estimate on being foreign born ranges in value
from -0.006 to 0.017 in the bachelor’s degree sample, indicating a range of -0.6% below to 1.7% above native-born wages(with only one of the four estimated coefficients statisticallysignificant at the 5% level: the coefficient of 0.017 in thebaseline specification); and ranges from -0.039 to 0.015 in themaster’s sample, indicating a range of -3.9% below to 1.5%
above native-born wages (with only one of the four estimatedcoefficients statistically significant at the 5% level: thecoefficient of -0.039 in the industry and occupation dummy
specification).
• In additional regressions, we limited the sample to computer
occupations (computer programmers, software developers,
web developers) and obtained similar results. The coefficienton the immigrant dummy was statistically insignificant andeconomically very small. We further included two immigrant
dummies, one for those arriving before age 18 and a second for
those arriving age 18 or later. The results were again similar.
• Finally, we changed the dependent variable to be log hourly
earnings (weekly earnings/ usual hours worked per week),
using as regression weights weeks worked last year times
usual hours worked per week times the ACS sample weight. In
these regressions, the foreign dummy variable was positive inall cases and sometimes statistically significant.

23.

Earnings data are from the Bureau of Labor Statistics, http://
www.bls.gov/oes/current/oes_nat.htm, which reports annual
mean wages by occupational group. The nominal value for 2012 is$45,790, which we adjust to 2011 dollars using the ratio of the CPI
for the two years (224.9/229.6 = 0.98).

24.

See Borjas (2006) and Lan (2011). Borjas (2003) studies thewage impacts of immigration across a broad set of education andlabor-market experience groups.

25.

Borjas and Doran (2012) examine the impact of the arrival oflarge numbers of Russian mathematicians on the U.S. academic
market for math professors.

Talent, Immigration, and U.S. Economic Competitiveness – Section 3

35

Section 4

Conclusions

For generations, highly talented immigrants in scienceand engineering have been a catalyst for innovation,
job creation, and rising standards of living in America.
Immigration has played a vital role in helping American companies—young and old, small and large, U.S.
based and foreign-based alike—meet their growing
demand for talent to help America expand jobs andincomes for its workers and their families.
Despite the preponderance of evidence of themany net benefits highly skilled immigrants havegenerated for America, today’s policy conversations
voice unease about these immigrants. This uneaseis driven partly by the continued fragility of the U.S.
economy and labor market in the wake of the Global
Financial Crisis and Great Recession. It is also driven
partly by the pre-crisis flagging of America’s innovation success. Even before the crisis, concern was
rising among leaders in both the private and public
sectors that America’s creative dynamism is waning.
Past need not be prologue for America’s innovation
success. In today’s increasingly global economy,
America’s competitiveness is doubly challenged by
its innovation and productivity slowdown because
the opposite is happening in so many other countries. The world’s innovative activities are now bothmore competitive and more mobile. The notion that
the United States has a perpetual lock on highprofit, ever-expanding innovation is gone. Even if theUnited States can maintain its innovation dynamism—along with all the commensurate benefitsof long-run growth in jobs and in incomes—it will doso amidst greater competition among companies
and thus, indirectly, among their workers. And,
this competition might eventually shift substantial

36

innovation activity out of America altogether—with
commensurate loss of support to jobs and to
standards of living.
What is unclear is what policies the United States
will pursue in response to this challenge of maintaining America’s innovation strength by, in part,sustaining an environment in which the world’s mosttalented—by birth and education or by immigration—are welcomed to thrive in America.
So, what will the future bring? A pessimistic futurewould entail a continued erosion of America’s global
competitiveness in innovation. This pessimistic
future would probably not involve any dramatic
crisis. But it would involve a slower-growing,less-dynamic U.S. economy with no rekindling of
the growth trajectory that talent and innovation
spawned over much of America’s 20th century.
Along this pessimistic path, 2020 may well arrivewith business and government leaders puzzling over
why the U.S. labor market and overall economy had
still not recovered its pre-crisis health.
This need not be the destiny for the United States. A
vigorous, optimistic future is very possible. But creating a healthy and optimistic outcome will require
crafting new U.S. policies to welcome the immigrant
STEM talent that America has long and increasingly
relied on to help drive its innovation and resulting
growth. Such policies should be based on empiricalfacts and patterns like those established in thiswhite paper—not on anxiety, not on assertion, andnot on anecdote. We know that America’s citizens
and its leaders can rise to this challenge.

Section 4 – Talent, Immigration, and U.S. Economic CompetitivenessReferences

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