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Billions of Dollars in Tax Receipts Forgone Annually as Nearly 2 Million Highly Skilled Immigrants in U.S. Are Stuck in Low-Skilled Jobs or Unemployed

Press Release
Wednesday, December 7, 2016

Billions of Dollars in Tax Receipts Forgone Annually as Nearly 2 Million Highly Skilled Immigrants in U.S. Are Stuck in Low-Skilled Jobs or Unemployed

Skill Underutilization Costs College-Educated Immigrants More Than $39 Billion in Forgone Wages Annually

WASHINGTON – The United States has long attracted some of the world’s best and brightest. But nearly 2 million immigrants with college degrees are relegated to low-skilled jobs or can’t find work. The result of this brain waste? More than $39 billion in forgone wages annually and $10 billion in resulting lost tax payments, according to Migration Policy Institute (MPI) researchers.

One in four of the 7.6 million college-educated immigrants in the United States during the 2009-2013 period experienced skill underutilization, that is they were either working in low-skilled jobs or were unemployed.

The findings are included in a new report, Untapped Talent: The Costs of Brain Waste among Highly Skilled Immigrants in the United States, issued today by MPI, New American Economy and World Education Services. The report offers the first-ever economic costs of underemployment for the college-educated immigrant population in the United States. (The report is accompanied by fact sheets for seven states: California, Florida, Michigan, New York, Ohio, Texas and Washington State.)

“Our research makes clear that low-skilled employment among highly skilled immigrants—the old, familiar story of doctors driving taxicabs—carries substantial economic costs,” said MPI President Michael Fix, an author of the report. “And these costs accrue not just to the immigrants and their families, but to the broader U.S. economy.”

This brain waste should be of particular concern given that the highly skilled comprise an ever greater share of new arrivals. Almost half of immigrant adults entering the United States between 2011-2015 held a bachelor’s degree or more, the researchers found. That’s a sharp rise from the 27 percent share in 1990 and the 33 percent share arriving before the 2007-2009 recession.

Drawing upon analysis of Census Bureau data, the MPI researchers developed estimates of brain waste for the United States and 15 states with the largest numbers of immigrants experiencing skill underutilization. The report also estimates the economic penalty that immigrant underemployment imposes, both in forgone earnings and tax payments.

While these college-educated immigrants experiencing brain waste lost out on $39.4 billion in wages annually, the report finds they would have been able to narrow the gap to $28.5 billion if employed in higher-skilled work at the same rate as U.S.-born college graduates.

Among other key findings:

  • Employment of highly skilled immigrants at their skill level would have generated $10.2 billion in additional tax payments annually, with $7.2 billion going into federal coffers and $3 billion to state and local governments.
  • Brain waste is particularly acute for immigrants educated outside the United States. Twenty-nine percent of immigrants who earned their college degrees abroad experienced brain waste, compared to 21 percent of immigrants educated in the United States.
  • Immigration status plays a role in brain waste. Nineteen percent of U.S.-educated immigrants who became U.S. citizens experienced skill underutilization, compared to 24 percent of green-card holders and 34 percent of unauthorized immigrants.
  • Immigrant skill underutilization varies by state. Among the states examined, Florida had the highest rate of immigrant brain waste (32 percent), while Michigan and Ohio had the lowest (20-21 percent).

Highly skilled immigrants face a range of barriers to employment at their skill levels, among them: difficulty getting foreign credentials recognized, unfamiliarity with the U.S. labor market, employers’ negative perceptions of the quality of foreign education and work experience, limited English skills and a shortage of education programs to bridge skills deficits. Many of these barriers could be addressed or at least alleviated through targeted programs and policies. The report spotlights initiatives undertaken by non-profits and some states, including Michigan and Ohio.

The report notes that immigrants are not alone in experiencing brain waste. Eighteen percent of U.S.-born college graduates, nearly 7 million people, also cannot find work at their skill level.

“The economy takes a hit in every case where a high-skilled immigrant is underemployed or can’t find work,” said John Feinblatt, chairman of New American Economy. “Smarter immigration policy can help connect workers of every background to jobs that match their skill sets — and make the economy stronger for all of us.”

The report and state fact sheets can be downloaded at: http://bit.ly/MPIUntappedTalent.

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The Migration Policy Institute (MPI) is an independent, non-partisan, non-profit think tank in Washington, DC dedicated to analysis of the movement of people worldwide. MPI provides analysis, development and evaluation of migration and refugee policies at local, national and international levels. New American Economy (NAE) is a coalition of mayors and business leaders united in making the case for sensible immigration reform as a way to boost economic growth and create jobs for Americans. World Education Services (WES) is a non-profit that has enabled more than 1 million international students and professionals to achieve their goals by providing expert credential evaluation and advice.