by Connor O’Brien
The 117th Congress marked a clear break from federal policymakers’ long-term aversion to activist industrial policy. Over the past two years, the federal government made massive investments through four major bills intended to support sectors deemed key to economic and national security and in advancing technologies necessary to decarbonize the economy. But underpinning these bills was an additional goal: to ensure a new era of industrial policy doesn’t leave struggling communities behind.
All four bills included significant place-based investments to nurture new clusters of advanced manufacturing, scientific research, and regional innovation ecosystems across the country, not merely in the “superstar metros” that increasingly capture most of the country’s economic growth.
Now that this spending is beginning to go out the door, it is important to ensure these investments deliver on their promise of broad-based growth and are paired with complementary tools that maximize their odds of success. Broadening key regions’ and employers’ access to high-skilled immigration is one such indispensable tool. To supplement much-needed workforce development and human capital efforts, Congress needs to combine these bold investments with new high-skilled immigration pathways like Heartland Visas that make it easier for startups, investors, and research labs to scour the globe for the world’s top technical talent, researchers, and future entrepreneurs.
A new era of place-based industrial policy has begun.
Out is the era of “Potato chips, computer chips–what’s the difference?” that largely guided national industrial policy debates over the past several decades. Congress has not only committed to making new, substantial federal investments in industries and technologies it has deemed critical to economic and national security, but also to ensuring the benefits of such investments are dispersed geographically. Below are just some of the place-based investments in the The Infrastructure Investment and Jobs Act (IIJA), CHIPS and Science Act (CHIPS), American Rescue Plan (ARP), and Inflation Reduction Act (IRA) bills:
- The CHIPS and Science Act appropriated over $52 billion in subsidies and incentives for manufacturing, research, and development related to semiconductors and its associated supply chains. These investments will be guided by certain geographic considerations: In the CHIPS for America implementation strategy report, the U.S. Department of Commerce included as one of its guiding investment principles the goal to “strengthen and expand regional manufacturing and innovation clusters.” Commerce will also establish up to three new Manufacturing USA Institutes focused on semiconductor manufacturing and feeder supply chains.
- CHIPS also authorized $10 billion for at least 20 regional innovation hubs to be sited throughout the country. This national competition will award grants to local consortia that make investments in their region’s development of new technologies, workforce and entrepreneurial pipelines, and research ecosystems. One-third of these hubs will be reserved for states that receive very little research funding from the National Science Foundation.
- CHIPS authorized a further $1 billion RECOMPETE Pilot program to help communities with persistently low prime-age employment rates craft and implement regional economic development plans that invest in activities like workforce training, site development, and business advisory services.
- The bipartisan IIJA appropriated $8 billion to develop a national network of “Hydrogen Hubs,” or H2Hubs. This grant competition will set up Hydrogen Hubs in a diverse set of regions across the country to advance methods of production, transportation, and storage of clean hydrogen fuel.
- The ARP’s $1 billion Build Back Better Regional Challenge awarded 21 grants between $25 million and $65 million to coalitions and clusters around the country with goals ranging from growing Oklahoma City’s biotechnology cluster to Binghamton, New York’s efforts to become a leader in battery technology.
- The IRA’s renewable energy production tax credits include bonuses for siting production in low-income, Tribal, or fossil fuel-based regional economies. The IRA also includes billions in competitive grant programs for communities to invest in climate resiliency, mitigate transportation emissions, and reduce heat island effects in disadvantaged communities.
High-skilled immigration boosts regional innovation and entrepreneurship.
These place-based investments will direct billions of dollars into regional economies that sorely need it, but are at risk of yielding few new, thriving, self-sustaining innovation clusters without a sufficient focus on cultivating talent. A successful cluster is ultimately built by people—researchers attempting to break through the technological frontier, entrepreneurs taking new ideas or methods to market, workers scaling up those new firms, and constant interaction and collaboration between these groups. Many of the above investments will indeed spin up new workforce training programs and entrepreneur incubators to upskill lagging regions’ workforces and make them more attractive to private sector investment.
Empirical research finds that supplementing these efforts with new pathways for high-skilled immigration would provide a further boost to entrepreneurship, innovation, and firm growth in recipient regions. Immigrants often bring with them closer ties to foreign technologies, inventors, and ideas which would not have otherwise been utilized. This is, in part, why one estimate finds that immigrants are responsible for an outsized share of innovation, perhaps as much as 30 percent of aggregate U.S. innovation since 1976. Immigrants tend to be highly entrepreneurial, and are twice as likely as native-born Americans to start a business. Among Fortune 500 companies, 43 percent were co-founded by an immigrant or a child of immigrants.
While additional high-skilled immigration will yield benefits for any region attempting to build an innovative high-growth cluster, the need to access the global talent pool may be even more pressing near the technological frontier. Simply trying to reduce the cost differential between manufacturing leading edge semiconductors in the United States and East Asia, for example, is insufficient. Reshoring one of the most complicated manufacturing processes on the planet will require at least some staff to have the tacit knowledge (or “know-how”) that only comes from first-hand experience. In fact, central to China’s strategy to become a world-leader in semiconductors is the poaching of thousands of engineers from Taiwan’s TSMC, a recognition of talent’s importance in the race for technological supremacy.
But the benefits at the technological frontier of immigrants with extremely specialized, hard-to-find skills and experience are hardly limited to accelerating progress in long-established industries. The right mix of brilliant people can produce world-changing breakthroughs and industry clusters we may not yet foresee, and you don’t need to look further than the origins of the semiconductor industry and Silicon Valley to see the importance of immigration policy on this front. Half of the “traitorous eight” who left William Shockley’s lab in 1957 to found Fairchild Semiconductor were immigrants or children of immigrants. By 2014, 70% of publicly traded Bay Area tech companies could be traced back to Fairchild founders and employees, including modern household names like Intel and Apple. Immigrants were at the core of the founding of Silicon Valley.
If the United States’ nearly unmatched ability to welcome the world’s smartest talent and allow them to flourish was not already evident, consider this: 34 percent of all U.S.-based Nobel Prize winners since 1901 were immigrants, accounting for 16 percent of all Nobel Prizes won worldwide. Welcoming more of the world’s brightest minds to nascent American technology hubs will indeed increase the productivity and innovative capacity of strategically-important sectors and firms in those regions and beyond, but it is also important to remember that this is only the starting point for the likely contributions they will make to the American economy in the long-run.
Current immigration policy is poorly aligned with the goal of growing new technology hubs. Universities, governments, and non-profit research institutions, for instance, face no annual nationwide limits on sponsoring H-1B visas (the primary pathway for high-skilled immigration to the U.S.) for scientific or technical talent. Meanwhile, entrepreneurs or firms who want to commercialize or build upon that research in the open market are instead subject to the H-1B lottery, where their hopes of hiring a brilliant, young, foreign-born researcher come down to mere chance. (The odds of winning the H-1B lottery were less than 30 percent this year, and likely to fall even further in the future.) For potential entrepreneurs who might want to invest in these clusters, the immigration system is even more of a black box. The top-down, centralized, and rigid structure of today’s immigration system is very much at odds with the economic logic of flexible, decentralized technology clusters.
Heartland Visas and tweaks to H-1Bs will help place-based investments succeed.
An adaptation of EIG’s Heartland Visa concept, first proposed in 2019, is one such creative way Congress can better align the immigration system with the goal of broad-based growth and open up access to the global talent pool for firms and other organizations receiving federal support from bills like CHIPS or the IRA. Rather than tying a visa to a specific employer likely to already be located in a “superstar metro” or existing cluster, a Heartland Visa tailored to the recent suite of place-based investments would give prospective immigrants with highly specialized and sought-after talent access to a regional labor market and an expedited path to legal permanent residency. Communities receiving a certain level of federal investment from a list of industrial policy programs like CHIPS, Hydrogen Hubs, Regional Technology Hubs, or RECOMPETE should be eligible to opt-in to this supplemental visa category, either at the county or state level.
Supplementing new spending with additional, place-based high-skilled immigration pathways would give greater certainty for prospective investors in technology clusters, with assurances that they can tap a wide global talent pool for their hard-to-fill positions. Access to this talent will make firms in eligible regions more productive and innovative, and put them on more even footing with booming regional economies in other parts of the country. In contrast to employment-based visas that make it difficult to change employers, a Heartland Visa has the additional benefit of allowing recipients to easily change employers within a cluster. Labor market mobility has indeed been a key ingredient to successful tech clusters, quickly diffusing knowledge and best practices.
A streamlined, place-based entrepreneurial visa would also nicely complement new federal industrial policy. International Entrepreneur Parole—a program created through administrative action that allows key partners in a startup to live in the country for five years—has seen little take-up, hampered by a web of opaque and complex requirements. An easy-to-use Heartland Visa pathway for entrepreneurs headed for a clean hydrogen, battery manufacturing, or semiconductor research cluster would channel additional investment and talent to regions in need of both.
Tweaks to the H-1B visa program could further aid in the development of regional economies throughout the country. As mentioned above, H-1Bs are uncapped for organizations like university research labs but strictly capped (and distributed via random lottery) to private sector firms that could commercialize research from such labs. This makes growing a new or nascent cluster of private-sector firms around a university especially challenging. Building on the logic of a Heartland Visa, Congress could exempt hires of firms located in communities receiving certain CHIPS, IIJA, ARP, or IRA investments from the annual, nationwide cap on H-1B visas.
A Heartland Visa will help us out-compete China.
Recognizing the benefits of joining industrial policy with high-skilled immigration reform, countries around the world are supplementing new investments with visa programs for high-skilled workers and new efforts to retain their domestic talent. As the GOP Task Force on China warned, the CCP is pairing an ambitious Made in China 2025 industrial program with an effort to both retain its foreign-educated scientific and technical workforce through coercion and incentives and attract foreign investors and highly-skilled workers. In key industries identified for growth, the Party has been particularly aggressive in poaching foreign talent, as the example of TSMC demonstrates. China has relaxed restrictions on high-skilled immigration and foreign investors in recent years, as well.
As a liberal democracy, the United States will continue to be preferred over China as a destination for most high-skilled STEM talent. But China’s efforts to retain and attract talent will intensify competition for workers with rare skills and entrepreneurs with capital to invest. If the CCP is successful in retaining more of its top minds and coaxing foreign talent from leading-edge firms abroad, it will pose a real challenge to American technological dominance in areas like artificial intelligence, renewable energy generation and storage, and microchips, with global implications.
If policymakers are serious about reasserting American leadership in strategically-important industries and countering aggressive Chinese industrial policy, they must take steps to counter the CCP’s efforts to poach top talent. Providing additional avenues for high-skilled immigration is one such way to do that while also revitalizing regional economies in need of new ideas and new investment.
Conclusion
Congress has ushered in “a new era of industrial policy” that will direct billions in federal investment towards strengthening strategically important industries while also helping struggling regions. From Hydrogen Hubs to semiconductor manufacturing, these investments should be paired with workforce policies that prime them to deliver inclusive growth. Essential to this effort is expanded access to high-skilled immigration in communities receiving such investment. A program like Heartland Visas is a perfect fit for a new era of place-based investment, preserving regions’ decision to participate and leveling the playing field with firms in countries—including our adversaries—who are aggressively recruiting technical talent. As the 117th Congress wraps up and puts the final touches on the CHIPS and Science Act, the National Defense Authorization Act, and government funding into next year, policymakers should remember that the job of actually building a more dynamic, competitive, and inclusive economy is far from done.
