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Break the Gridlock: Unbundle Startup Visa from Immigration Reform

The American economy needs a shot in the arm: The Congressional Budget Office’s bleak forecast emphasized as much last month.

Immigrant entrepreneurs can create needed jobs and growth, helping rescue America from the dreary economic future CBO says awaits. The question is whether or not Congress will allow them.

So far, the record is not promising. By trying to mash together everything from border security to temporary agricultural workers into one comprehensive immigration bill, Congress understandably is addressing a political challenge. In theory, these omnibus bills give every legislator something of what they want. Your constituents get a path to citizenship; mine get more agents patrolling the border.

This approach, however, has gone nowhere: Comprehensive reform appears stuck. The Congressional penchant for large, sweeping pieces of legislation is stifling economic growth.

Perhaps because federal legislation has not passed, some proponents of reform are beginning to advocate state-based solutions, including the creation of state guest worker programs to meet the unique needs of different regions. Some American cities, too, have established immigration programs.

While other nations have implemented similar systems, state-led immigration reforms have a contentious history in America, and their chances of enactment also are uncertain. In addition to constitutional implications, these would lead to fragmentation, which federal lawmakers have professed a desire to avoid in this area.

For frustrated policymakers, there is another way to approach immigration: Focus on economic growth. Enacting aspects of immigration reform as a new “jobs” bill could provide a middle-of-the-road solution that could pass even in the heat of an election year. A key element of such a bill would be a startup visa that provides a dedicated means of entry for immigrant entrepreneurs so that they can launch innovative companies and create jobs in the United States.

Using data on employer firm creation and survival, plus Census Bureau statistics on job creation, the Kauffman Foundation analyzed the job-creating potential of one current legislative proposal to enact a startup visa. The results were impressive. Our estimates, which are conservative and low-end, project that a startup visa could create between 500,000 and 1.6 million new American jobs in 10 years, making it an attractive component of a new “jobs act.”

Current legislative proposals to create a startup visa would be an improvement over the present system, which offers no clear path to immigrant entrepreneurship. Kauffman Foundation research shows the positive economic impact of this type of visa could be even greater, however, if several modifications were made, including:

1. Broadening eligibility thresholds: Requiring immigrants who may lack access to U.S. investment networks to secure angel or venture capital backing may keep many potentially high-impact entrepreneurs out. Because less than one percent of new businesses receive angel or venture capital investment at the outset, revenue-generation or job creation could be other measures of potential entrepreneurial success.

2. Creating easy pathways to entrepreneurship: Since most immigrants come to the United States to work or study, a startup visa could allow foreign students and workers to smoothly transition from school or employment to entrepreneurship. Particular attention should be given to current rules that are unclear about immigrant students starting a business or working for a startup while pursuing a post-secondary degree.

3. Increasing the number of visas: Finally, adding more visas for immigrant entrepreneurs will allow a startup visa to have a greater impact on employment and economic growth.

In 2012, another contentious election year, Congress enacted the Jumpstart Our Business Startups (JOBS) Act, including controversial financial reforms to help entrepreneurs and reignite economic growth. Similarly, repackaging aspects of immigration as economic growth measures could be the key to passing much-needed policies that will create American jobs and provide a powerful boost to the economy. In particular, a startup visa can break the immigration gridlock and clear Congress as an economic growth measure.

Dane Stangler is vice president of Research and Policy at the Ewing Marion Kauffman Foundation; Jason Wiens is lead policy manager at the Foundation.

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