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Wake-Up Call America’s Losing Its Intellectual Capital

February 1, 2005

America is on the brink of a brain drain.

    The land to which people immigrated for its educational and employment opportunities is losing an increasing number of potential citizens. In 1991, 1.82 million people immigrated to the United States, according to the U.S. Department of Homeland Security’s Office of Immigration Statistics. By 2000, that figure had dropped to 849,807. Although it was back up some to 1.06 million in 2002, it had dropped again to 705,827 by the end of the 2003 fiscal year.

    David Heenan is the author of "Flight Capital," a forthcoming book discussing this phenomenon. He says that despite the decrease in foreign nationals immigrating to the United States, more of those who do immigrate are choosing to return to their homelands to live out their white-collar careers there rather than here in the United States compared with a couple of decades ago. That, he says, is going to take its toll on corporate America’s intellectual capital.

    "These people who immigrated to the United States with the notion that they would work here and never go back (to work in their home countries) started to see their former home countries move up the economic ladder and create what turned out to be some very interesting opportunities," Heenan says. Others have been disenchanted with raising their children here. "One guy described to me that the MTV generation, with its bare midriffs and vulgar languages, made him want to raise his kids in an environment that was less stressful and less fast-paced," he says.

    "This trend I am describing in terms of flight capital began as a trickle in the mid-1990s, but now has picked up speed," Heenan says. "Many of these people are going back to Ireland, Israel, Singapore and China and are feeling very good about that decision."

    But the United States is not just losing Joe and Jane Scientist. It’s losing their kids too. "If you look at USA Today’s all-American student list or look at National Merit Scholars, about 60 percent of those are kids of foreign nationals," Heenan says. "When the parents go back, the kids go back. This is the exodus of America’s best and brightest. If you do a projection, by 2010 there will be a significant shortage of high-end talent as we have not been developing our own Americans."

    Beyond those leaving the United States after some time spent in corporate America, there are also those foreign nationals who just aren’t coming in the waves that they once did.

    The number of immigrant scientists, engineers, academics and other employer-sponsored professionals and skilled workers dropped 54 percent from 179,000 for fiscal year 2000 to 82,000 in fiscal year 2003, according to data from the Office of Immigrant Statistics. Figures for 2004 have not yet been released, but given that in October 2003 the U.S. government capped H-1B status--the visa used for employee-sponsored immigration of professionals--at 65,000, the nation cannot expect the same high number of immigrants it saw in the first part of this decade.

    Heenan, a former senior executive with Citicorp and Jardine Matheson who also served on the faculties of the Wharton School, the Columbia Graduate School of Business and the University of Hawaii, says, "We are also losing that guy who is now in China seeing these people coming back and they say, ‘Gee, if they are coming back and moving up the scale, why do I have to go to the United States in the first place?’ "

Jobs aplenty in China
    Ames Gross is president of Pacific Bridge, a Bethesda, Maryland, recruiting firm and consultancy specializing in placing Asian returnees with companies. He says the quality of life in China is much better than it was a couple of decades ago. The pay is also a lot better, he says, in part because of the increased number of multinational companies with operations there paying good salary with benefits.

    Gross points out that in China there are probably three to five job openings per one educated Chinese person. It is an ideal situation for returnees who often feel that they hit the glass ceiling while in the United States.

    "The main reason many go back is because of the opportunity for more senior positions and more bang for the American buck," Gross says. "A Chinese from Taiwan or China who worked his way up in the U.S. knows he is only going to get so far if he speaks broken English and doesn’t go to the right country club. Whereas if he goes back to China he might have more opportunity"--even within an offshore division of an American company.

    Many of these countries like Singapore, Ireland and China have created attractive incentives to lure their natives back home. From tax incentives to housing incentives, especially for people in the sciences like medicine, biotech and information technology and software development--these natives with foreign work experience are in tremendous demand all around the world.

Home is beckoning
    In order to lure home Western-educated talent, the Thai government devised the so-called "Reverse Brain Drain Project." The project, developed by the Ministry of Science, Technology and Environment, is designed to recruit educated Thai citizens in Japan, North America and Europe to return to Thailand. Scientists, engineers, and doctors are the main targets.

    One way to lure these professionals is to have them return as lecturers in the universities, according to a report by Pacific Bridge. Unfortunately, the starting salary of a lecturer with a doctorate at a public university is only around $4,500 per year, the report reveals. According to the Bangkok Post, Thai professionals would consider returning if the government offered such incentives as housing loans or subsidies, a competitive salary, tax subsidies for research equipment, or relocation compensation.

    "Their governments know that if they are going to make it in innovations, they need these blue-chip personalities and will go to great lengths to bring them home," says Heenan, who traveled to several countries conducting interviews for his book.

    Enterprise Ireland, a Dublin-based economic development and recruiting agency with offices in New York, periodically holds seminars aimed at enticing people in the biosciences to go back to Ireland to work. It targets those who immigrated to the United States from Ireland five years ago or even 30 years ago who now work for Merck or Pfizer. About 60 percent of the audience attending a recent conference was prepared to go back to Ireland for at least five years for the right incentives.

    Wyeth Pharmaceuticals, which in 2004 opened a $1.5 billion bio-pharma center in Ireland, was one of several companies speaking to the crowd about working for U.S. companies back in Ireland. The biopharma campus on a 90-acre site currently employs 1,000 and for 2005 is looking to hire another 300--whether local, returnee or expatriate--a corporate spokesperson says.

    A very convenient way for foreign nationals to go home without losing a lot in terms of risk is to return with a multinational company such as 3M or Motorola. If they are Japanese returnees, they can go back with 3M and stay in the company loop as they continue with their U.S. employers. Many of them, however, get picked off by local companies because their worldwide experiences make them attractive.

Hot commodities
    The United States is also making it more difficult for some foreign nationals to come to this country if they wanted, Heenan says. The number of foreigners with advanced degrees or exceptional skills allowed into the country plummeted 65 percent last year, he says, while international student enrollments fell for the first time since the early 1970s. An important reason he gives is the length of time it now takes to get a visa--often six months or more.

    Thirty percent to 40 percent of U.S. companies report serious delays in bringing skilled employees and customers to the country, according to data in Flight Capital. Many say their businesses will be in jeopardy--and so will the jobs of many Americans. What’s more, U.S. immigration policy is heavily skewed toward reuniting families. More than 70 percent of annual visas go to family reunifications, while only 20 percent are given to professionals and skilled workers, Heenan writes.

    "My point is you better take care of these guys," he says in an interview. "In the old days if they went back to Brazil with General Motors, chances are they’d stay with GM the rest of their lives. But when these returnees go back today they are hot commodities. There are a whole lot of other options out there with the government incentives, local companies and venture capitalists who will be all over them. So companies need to take care of these people and let them continue their career paths and salary progression. This book is a wake-up call for America."