Opportunity Lost: The Economic Benefit of Retaining Foreign-Born Students in Local Economies

Giovanni Peri, Gaetano Basso, and Sara McElmurry (The Chicago Council on Global Affairs)
Published in
The Chicago Council on Global Affairs (2016)

Executive Summary:
The United States, home to many of the world’s top universities, is a higher education destination for talented students from across the globe. When foreign-born students are able to find work in local economies after graduation, the positive economic effects extend beyond their incomes, especially since many pursue degrees in sought-after science, technology, engineering, and mathematics (STEM) fields.

Yet the economic contributions of many of today’s foreign-born college students are stifled by an outdated immigration system. The temporary nature of F-1 visas, which are not connected to any immigration visa or opportunity, limits international students’ ability to work after they have completed their degrees. And undocumented students brought to the United States as children and educated in American schools face uncertain prospects for work and citizenship.

A first-of-its kind analysis of aggregate transition rates from college to work among three groups of foreign-born college students indicates that only one group—lawful permanent residents (LPR)— are fully transitioning to work in local economies. Undocumented college students are 20 to 30 percentage points less likely than their LPR peers to find local work after graduation. Aggregate transition rates for F-1 visa holders were close to zero.

Policies that increase work opportunities for F-1 visa holders and undocumented students to the same levels as their LPR peers would increase employment levels and tax revenues in nearly every state in the country. The 10 states with the most F-1 visa holders stand to gain nearly $8.3 billion in wages and $283 million in state taxes. Among the 10 states with the most undocumented students, those numbers are $1.5 billion and $40 million, respectively.

Programs like Optional Practical Training (OPT) and Deferred Action for Childhood Arrivals (DACA), which offer temporary employment opportunities for foreign-born students, are moving the needle in the right direction. But it falls to Congress to legislate lasting immigration reform, including the following:

  • Develop a provisional visa for STEM graduates.
  • Allocate H-1B visas for STEM graduates.
  • Allow US states to add geographical incentives to work opportunities for F-1 visa holders.
  • Facilitate student access to investor visas.

Local economies have much at stake in better retaining talented foreign-born students in their local workforces. But even more important are the longer-term economic effects of fully maximizing foreign-born students’ contributions, particularly to critical STEM and innovation fields, driving US global competitiveness.