Cracks in the Melting Pot

Visa restrictions are keeping entrepreneurial immigrants away, and they're finding new opportunities overseas.

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At the tender age of 31, Praveen Suthrum would already seem to have achieved the American dream. He came to the United States from India in 1999 to work as a software consultant. He got an MBA from the University of Michigan, worked on a book about emerging economies with the star professor C.K. Prahalad, and consulted on technology initiatives for Iraq's new government. Last year, Suthrum started NextServices, a company in Ann Arbor, Mich., that codes doctor's bills and collects insurance payments.

Yes, you could almost hear a Rotarian extolling him in a speech about the enduring virtues of the land of opportunity--except for the inconvenient fact that Suthrum is currently stuck in Mumbai. He went back to India in May to evaluate setting up an operation there. Because of visa delays, he has remained there ever since--unable to visit clients in the U.S., able to talk to his employees only by telephone.

In the post-9/11 world, Suthrum's visa hassles are unsurprising. But his situation reflects a larger debate on America's immigration policies--one that's been getting fiery lately. Along the borders, a vigilante group called the Minuteman is patrolling for illegal aliens who come looking for day-laborer work. But even foreign nationals with advanced degrees and specialized skills who hope to come to America have reason to worry. In Congress, for example, Rep. Tom Tancredo, R-Colo., has proposed getting rid of entire categories of work visas.

Business interests have largely resisted these efforts, arguing that there should be more visas, not fewer, because U.S. employers rely on immigrants to fill gaps in the domestic work force. These gaps are created, they say, by the lack of proficiency in math and science among U.S. students, and by the aging of the population.

It's a valid argument--China, for example, graduated almost nine times as many engineers as the U.S. did last year--but it also misses an important point. Debating whether immigrants take jobs from Americans ignores the fact that well-educated foreigners like Suthrum come to the States to be not employees but employers. Today's visa restrictions could keep out tomorrow's Andy Grove, Sergey Brin, or Jerry Yang.

Anti-immigrant policies are particularly destructive at a time when entrepreneurs have more options than ever as to where to start a company. Open markets and the rule of law are taking root abroad. Technology makes it easier to work with companies overseas. As was made plain by a recent report compiled by the National Academies at the request of Congress, the U.S. is no longer the only game in town. America's position as the destination of choice for foreign-born entrepreneurs is being contested as never before.

"Home's Not So Bad"

To get a sense of the problem, you can start by looking at H-1B visas, the credential that most skilled foreign workers use to enter the U.S. for employment. To qualify for an H-1B, a person must have a college degree and a job waiting for him or her at a company in a specialized field like engineering or computer science.

Five years ago, Congress increased the number of visas by 70% to 195,000. It let the higher cap expire in 2004 and set a new cap of 65,000 visas per year. As a result,

H-1Bs have become so scarce that the government stopped accepting applications for fiscal year 2006 in August--two months before the fiscal year even began (see chart). "It's about as bad as it's ever been with the H-1Bs," says Joel Stewart, an immigration lawyer with Fowler White Burnett in Miami.

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