An Exodus That Hurts the U.S

By Todd Henneman

Feb. 10, 2006

Economist Richard Florida begins his book The Flight of the Creative Class with the story of Oscar-winning director Peter Jackson, whose The Lord of the Rings trilogy earned more than $3.75 billion worldwide. Jackson bought an abandoned paint factory in Wellington, New Zealand, and transformed it into a high-tech filmmaking facility where dozens of transplanted Americans work with expatriates from Europe and Asia.

    “In an industry synonymous with America’s international economic and cultural might, film production, the greatest project in recent cinematic history was internationally funded and crafted by the best filmmakers from around the world,” Florida writes. “But not in Hollywood.”

    Hollywood isn’t the only industry losing intellectual capital to other countries. In his new book, Flight Capital, globalization scholar David Heenan tells of superstars like Ana Maria Salazar, an Arizona native who in 2000 left her job at the Pentagon to join a think tank in Mexico City and now hosts an English-language radio news program.

    It all points to what could be an ominous trend for domestic organizations: top-tier talent leaving the Land of Opportunity for a new Promised Land. They’re driven away by forces that, left unchallenged, could lead to a migration of American-born talent.

    “Forget terrorism and weapons of mass destruction,” writes Heenan, a former Citigroup executive. “The next global war will be fought over human capital.” This phenomenon could leave companies short on specialized talent, experts say, and may mean that executives should reassess their recruitment, location assignments and governmental lobbying strategies.

Immigration hurdles
The forces fueling this phenomenon include tighter restrictions on visas since the September 11 terrorist attacks, making it difficult for colleges and companies to bring foreign talent into the nation, and other countries’ aggressive recruitment of talent, globalization experts say.

    The U.S. Citizenship and Immigration Services, for example, announced it had hit its annual cap for issuing H1-B visas for fiscal year 2006 more than a month before the fiscal year began. Last year, the cap of 65,000 H1-B visas was reached October 1, the first day of fiscal 2005.

    The shortage of work visas costs companies money. Denials of and delays in processing visas cost U.S. businesses $30.7 billion from July 2002 to July 2004, according to the Santangelo Group, a consulting firm in Washington, D.C.

    “Our bipolar immigration policies have ended up being counterproductive for the economy,” says Michele Wucker, a senior fellow at the World Policy Institute and author of the forthcoming book Lock Out: Why America Keeps Getting Immigration Wrong When Our Prosperity Depends on Getting It Right.

    “Most Americans think of immigrants being the source of the lowest-wage workers when, in reality, we depend on the world’s most innovative talent to come here,” Wucker says.

    Florida, a public policy professor at George Mason University, suggests that U.S. attitudes are alienating foreign nationals. His 2002 best-sellerThe Rise of the Creative Class demonstrated that economic growth prospers in places with technological innovation, a well-educated workforce and tolerance of diverse populations, typified by a sizable gay community.

    “Talented people are saying, ‘The place is difficult enough to get into and it’s so overwhelmed with the security mentality and it’s overwhelmed with fighting terrorism, it doesn’t look the kind of place that I necessarily could fit into,’ ” Florida says.

    Foreigners look less favorably upon the United States these days. The Pew Global Attitudes Project reports that anti-Americanism continues to grow because of the U.S. war in Iraq and what is perceived as a unilateral foreign policy. Sixty-one percent of those polled in France, 57 percent in the Netherlands, 39 percent in Great Britain and 39 percent in Germany see the U.S. as too religious.

“Forget terrorism and weapons of mass destruction. The next global war will be fought over human capital.”
–David Heenan, author of
Flight Capital

    “At precisely the point we’re so dependent on foreign talent, that talent flow may be being redirected across the world,” Florida says. “This really hits at the breadbasket of our innovative and creative capability, which has always come not from American creativity, but because the United States was the meeting ground for the world’s best and brightest.”

    Before tightened immigration policies sparked by the September 11 attacks, top-tier foreign students were staying longer in the United States, filling gaps unmet by the native workforce. Seventy-one percent of foreign citizens who received doctoral degrees in 1999 remained in the U.S. in 2001, compared with a two-year “stay rate” of 49 percent in 1989, according to a study by economist Michael G. Finn of the Oak Ridge Institute for Science and Education.

    No comparable study has been conducted in the changed political environment since 2001.

Grads leaving
    Downward statistics show that fewer foreign students are coming to the United States. For example, 31 percent of the class of 2004 from the Massachusetts Institute of Technology’s Sloan School of Management were foreign students, compared with 38 percent in 2000. Visa applications for students fell by 74,000 from 2001 to 2003, according to The Flight of the Creative Class.

    One of the most pressing problems is the loss of foreign nationals who repatriate upon graduation. Julie Gavage, a native of Belgium, is a second-year student at Harvard Business School. She’ll return to Belgium after graduation, working for McKinsey & Co., a management-consulting firm with locations in 45 countries.

    Gavage says she always planned to return home. “My decision is motivated by the fact that Belgium is a very open country and that I will have opportunities to work on international projects,” she says.

    Visa shortages have forced some foreign students who would have preferred to work in the U.S. to fall back on their second choice: accepting jobs in their home country, says Sheryle Dirks, director of the Career Management Center at Duke University’s Fuqua School of Business.

    Overseas jobs appeal to U.S. students who believe that gaining international experience will help propel their careers long term, Dirks says. Employers filling positions abroad tend to seek Americans with track records within organizations or who are familiar with the country’s culture, says Kip Harrell, associate vice president of career and professional development at Thunderbird, the Garvin School of International Management.

Duke University’s Sheryle Dirks says some foreign students must return to their home countries to work due to visa shortages, while some U.S. students opt to work abroad to gain international experience.

    They also look for U.S.-educated foreign nationals who can be wooed back home. “Companies want graduates who have proven themselves domestically before they ship them off” to another country, Harrell says.

    It isn’t just high-potential graduates that the U.S. is losing. When foreign nationals return home, they take their children with them. These are the groups whose brainpower produced such business successes as Yahoo and eBay.

Countries court U.S. talent
Simultaneously, several countries have launched initiatives to poach American talent, Heenan reports in Flight Capital. A program known as Contact Singapore has offices in five countries to court talent. Its U.S. office is in Cambridge, Massachusetts, home of Harvard and MIT.

    An agency under the country’s Manpower Ministry, Contact Singapore’s coups include attracting American Ron Frank, who taught at Harvard, as president of Singapore Management University, the country’s first private higher-education institution.

    Israel, known for talent in science and technology, hopes to attract 1 million emigrants from the U.S. during the next 15 years, Heenan writes. The reasons Americans pursue careers abroad can be “loosely defined as a better life,” he says. Americans are persuaded to move for many reasons, including the opportunity to conduct cutting-edge research and to live in cities that are safer.

    Indirect threats also could lure talent away. Architects of the European Union’s so-called “Lisbon Strategy,” intended to prepare Europe for surpassing the U.S. economy by 2010, calls for a scientific institute to rival MIT.

    As other regions pursue its talent, the U.S. private sector isn’t helpless. Organizations can take steps to retain talent, Heenan says. He recommends providing mentors who can help with cultural adjustments. Workers from India, China and Mexico told Heenan that one of the reasons they returned to their homeland is because organizations stereotyped them as “good technicians, good individual contributors,” but “not worthy of broader responsibilities.”

    Heenan proposes a 12-step plan for winning the talent war, including making it easier for foreign students to get visas. He calls on chief executives to follow the leads of Intel CEO Craig Barrett and Microsoft co-founder Bill Gates by “speaking out aggressively” on immigration and educational reform.

    Economist Florida says the U.S. private sector “lacks a powerful voice calling for change.”

    “If you ask me the difference between 1930 or 1980 and today, it’s that in those days the private sector would stand up and say, ‘We’ve got a problem.’ Right now no one is willing to stand up.”

Workforce Management, January 30, 2006, pp. 46-50Subscribe Now!

Todd Henneman is a writer based in Los Angeles.

Schedule, engage, and pay your staff in one system with