Encourage Innovation in America With a Startup Visa

Canada’s immigration policy is far ahead of that of the United States.

The Canadian system is simple. Education, experience, French and English language skills, age, adaptability, and job offers are all accounted for when an immigrant applies for Canada’s federal skilled worker program. Each category is assigned a certain number of points, and with 67 (out of 100 possible) points, an immigrant is granted an entry visa.

In the United States, entry for even the most highly skilled immigrants is much more complicated. One of the biggest problems with the U.S. immigration system lies within the H-1B visa program. H-1B visas are meant to allow highly skilled immigrants to enter the country and work. However, the number of visas granted each year is limited, with only 85,000 visas granted per year, and they only last for a maximum of six years. This quota is clearly far below demand. For fiscal year 2016, USCIS reached the cap of H-1B applications in only seven days.

The process for acquiring permanent residency (a “green card”), even for H-1B visa holders, is even more of a bureaucratic nightmare. Permanent residency provides many benefits for immigrant workers. They may come and go from the country, work wherever they want, and start their own business. But the process is often too burdensome for most foreign workers or entrepreneurs to go through with it.

According to most economists, the economic benefits that highly-skilled immigrants bring to the United States is uncontested. Educated immigrants tend to complement, not compete with, the skills of native-born Americans. Foreign-born workers have degrees in Science, Technology, Engineering, or Mathematics (STEM) at nearly double the rate of American workers. Foreign scientists and engineers contribute to U.S. economic growth through innovation and increases in productivity. Even low-skilled immigrants are likely to pursue different careers than native-born American low-skilled workers.

One of the most limiting characteristics of the H-1B visa is that it is tied to the worker’s employer, not the immigrant himself. If the immigrant is fired or laid off, he must leave the country. If he wants to leave his current job in pursuit of a better opportunity, he is out of luck. Highly skilled immigrants, then, can be stuck in positions that underutilize their skills or leave them undercompensated.

This limitation may also lead to exploitation. Since immigrant workers are tied to their employers, they are unable to leave without the risk of deportation. Therefore, if employers underpay, immigrants are not allowed to seek out a better place of employment. In addition, they may not report abuse out of fear of losing immigrant status.

The H-1B visa could be improved by taking away the necessity of employer sponsorship. Visas could be awarded to skilled immigrants on an individual basis, which would allow them to seek opportunities for themselves beyond their original employer. Exploitation by employers would be less likely because workers could find employment elsewhere.

Foreign entrepreneurs, even those with degrees from U.S. universities, are especially adversely affected by the current immigration system. Since H-1B visa recipients must be sponsored by a qualified employers, entrepreneurs with the visa must work for their employers during the day while starting their businesses in order to legally remain in the country.

Another way to improve the U.S. immigration system is to look up north to Canada. In Canada, there is an immigration program called the Startup Visa. Foreign entrepreneurs can apply for the startup visa once they have acquired a Letter of Support from a Canadian angel investor group or venture capital fund. Once entrepreneurs have secured an investment of $75,000 (from an angel investor group) or $200,000 (from a venture capital fund), they are eligible for the visa.

There is already a program in place, called the E-2 visa, that allows entrepreneurs from a treaty country to enter the United States by investing in a franchise or small business. But these visas are generally intended for immigrants seeking to invest in established revenue-generating businesses, not for entrepreneurs who are seeking to start their own business, since the visa requires a fairly large investment in the business. Entrepreneurs who are not from a treaty country are also not eligible. A new program like Canada’s startup visa would allow many more immigrant entrepreneurs from all over the world to come to America and invest in their own businesses. 

Immigrant entrepreneurs such as Alexander Torrenegra are attracted to the economic opportunities available in the United States. But Torrenegra fears that America is losing its competitiveness because it is difficult for foreign entrepreneurs to legally immigrate. He says that the United States should implement an immigration program similar to Canada’s startup visa.

He admits the program would not be perfect, but proposes several improvements to startup visa programs that have been introduced to Congress in the past. First, the programs should allow for “bootstrapping”—or self-funded—entrepreneurs to participate. In Canada, only those with backing from an angel investor group or venture capital fund may qualify for the visa. Second, the visa should have a provision for startups that are not successful. Up to 40 percent of all startups completely fail. Immigrant entrepreneurs who fail the first time should be given time to try again, as long as they can support themselves.

A solution that has been proposed by the late Nobel Prize-winning economist Gary Becker and others is the sale of visas and green cards at a set price. Becker advocated for a fee of $50,000. This price would be high enough to “ensure that economically active migrants who had a real commitment to the country were most attracted.” It would also be low enough to allow relatively low-income immigrants to enter the United States if there were skill shortages. His proposals could be improved by allowing the permits to be traded so that the market could set the price (similar to the use of tradable permits to solve certain environmental problems).

A combination of reforming the H-1B visa program, implementing a startup visa, and selling tradable permits would improve immigration policy. It would free up resources to combat illegal immigration that actually causes a strain on the economy, especially on state and local budgets.

Politically, immigration reform has always been difficult. The startup visa could be a first step. The Startup Act 3.0 had bipartisan support from 14 representatives in the House, but never made it to a vote. Both Republicans and Democrats should be able to agree that permitting the legal entry of foreign entrepreneurs work and to create jobs is the right step towards faster economic growth.