Tech Companies Say it’s Too Hard to Hire High-Skilled Immigrants in the U.S. — So They’re Growing in Canada Instead
July 25, 2019
On a recent Tuesday, Neal Fachan walked down a dock in Seattle’s Lake Union and boarded a blue and yellow Harbour Air seaplane, alongside six other tech executives. He was bound for Vancouver to check on the Canadian office of Qumulo, the Seattle-based cloud storage company he co-founded in 2012. With no security lines, it was an easy 50-minute flight past snow-capped peaks. Later that day, Fachan caught a return flight back to Seattle.
Fachan began making his monthly Instagram-worthy commute when Qumulo opened its Vancouver office in January. Other passengers on the seaplanes go back and forth multiple times a week. Fachan says his company expanded across the border because Canada’s immigration policies have made it far easier to hire skilled foreign workers there compared to the United States. “We require a very specific subset of skills, and it’s hard to find the people with the right skills,” Fachan says as he gets off the plane. “Having access to a global employment market is useful.”
In the fractious battle over immigration policy, most of the attention has been directed at apprehending migrants at the southern border. Some tech executives and economists, however, believe that growing delays and backlogs for permits for skilled workers at America’s other borders pose a more significant challenge to the U.S.’s standing as a wealth-creating start-up mecca. The risk of losing out on the fruits of innovation to Canada and other countries that are more welcoming to immigrants might be a bigger problem for our economic future than a flood of refugees. Half of America’s annual GDP growth is attributed to rising innovation.
“Increasingly, talented international professionals choose destinations other than the United States to avoid the uncertain working environment that has resulted directly from the agency’s processing delays and inconsistent adjudications,” testified Marketa Lindt, president of the American Immigration Lawyers Association, at a House hearing last week about processing delays at U.S. Citizenship and Immigration Services (USCIS). Lindt’s organization finds that USCIS processing time for some work permits has doubled since 2014, a fact cited in a May letter signed by 38 U.S. Senators on both sides of the aisle asking USCIS to explain the processing delays.
The backlogs in processing have particularly benefited our neighbor to the north. Canada has adopted an open-armed embrace of skilled programmers, engineers and entrepreneurs at the same time the U.S. is tightening its stance. Research shows that high-skilled foreign workers are highly productive and innovative, and tend to create more new businesses, generating jobs for locals. So each one who winds up in Canada instead of America is a win for the former, and a loss for the latter. “Really smart people can drive economic growth,” says Robert Atkinson, president of the Information Technology and Innovation Foundation, a think tank in Washington, D.C. funded in part by cable, pharmaceutical, television, and tech companies. “There are not that many people in the world with an IQ of 130, and to the extent that we’re attracting those people rather than the Canadians doing so, we’re better off.”
With the unemployment rate hovering below at or below four percent for the past 18 months, tech companies are long used to battling for talent by offering $100,000-plus starting salaries and perks like onsite gyms and all the kombucha you can drink. Recruiting foreign talent is one way for them to find new hires. There are a number of ways companies can hire skilled workers from India, China, and other countries, including applying for L-1 and H-1B visas, which allow foreigners to temporarily work in the United States. Demand for these visas, which are awarded by lottery, is intense. Since 2004, 65,000 H-1B visas are issued annually: this year’s ceiling was hit in only four days. (The government allows 20,000 additional visas for workers who have a master’s degree or PhD from a U.S. university.)
Amid the wider crackdown on immigration under the Trump Administration, the application process for employment-based visas appears to have gotten even tougher. The government denied 24% of all initial H-1B applications in 2018, up from six percent in 2015, according to an analysis of data from the National Foundation for American Policy, a pro-immigration think tank. It’s not just H-1B applicants who are experiencing delays. Applicants for all employment-based green cards now have to appear in person at a field office, a new policy that has created long delays, according to the American Immigration Lawyers Association, which says immigration officials under Trump are focusing more on enforcement than on processing legal applications for benefits. And despite a backlog of 5.7 million cases in 2018, USCIS has been providing surge resources to Immigration and Customs Enforcement field offices across the country, diverting more staff away from processing visa applications.
Canada’s policies, in contrast, offer an alluring alternative. Canada permits companies with offices in the country to hire skilled foreign workers in positions such as computer engineers, software designers, and mathematicians, and have their visas processed within two weeks. These workers can soon after apply to be permanent residents and, within three years, become full-fledged citizens. (The path to permanent residency for foreign workers in the U.S., by contrast, can take decades.) Officials at the Canadian consulate in Seattle work with two to three companies a week trying to set up offices in Canada.
“The visa process is just completely unpredictable for us, and we were wrestling with it for so long, we decided we needed to have some certainty,” says Thor Kallestad, the CEO of DataCloud, which uses technology to help mining companies better assess land potential. He already had offices in Silicon Valley and Seattle, but decided to open up shop in Vancouver and close his Silicon Valley office so he could more easily hire foreign workers. “In the U.S., we just couldn’t get clear answers about what the process looked like, what we as a company needed to do to rectify it.”
The Canadian option offers workers more certainty — and a near-guaranteed path to citizenship — while many U.S. skilled workers have no idea when and if they will get approved to stay in the United States. Given the choice, talented entrepreneurs with cutting-edge companies are choosing Canada. “They really make it easy to come in and start a business,” said Nat Cartwright, one of the founders of Finn.AI, an artificial intelligence company that powers virtual assistants for banks around the world. Cartwright and her two business partners, who are from Australia and India, met in business school in Spain. When they graduated, they considered locating their new company in Silicon Valley, but ultimately chose Vancouver because they knew they would qualify for a start-up visa there, and that they would be able to quickly hire AI experts from around the world. Of the company’s 60 workers, 60% were born outside Canada. Seven of Cartwright’s business school classmates from Spain have since relocated to Canada.
Canadian officials have deftly responded to the changing climate in the U.S. In 2017, the Trudeau government announced Global Skills Strategy, the program that allows companies to get work permits for foreign talent in less than two weeks. Their spouses can also receive work permits; the U.S. Department of Homeland Security this year proposed revoking work permits of the spouses of skilled foreign workers in the U.S. In 2018, the Trudeau government also made permanent the Start-Up Visa program, which allows immigrant entrepreneurs to live and work in the country provided their start-up has secured funding from venture capitalists or angel investors. A similar start-up visa program in the United States was approved in the last days of the Obama administration, but the Trump administration is in the process of ending it. “By helping Canadian companies grow, this strategy is creating more jobs for Canada’s middle class and a stronger Canadian economy,” said Ahmed Hussen, Canada’s Somali-born Minister of Immigration, earlier this year.
Even the biggest American tech companies are expanding their Canadian operations in a quest for high-skilled labor. Software engineer Janko Jerinic moved to Canada after attending an Amazon recruiting fair in his home country of Serbia. He wanted a job in New York or Seattle, but his wife hoped to work as well, and an Amazon recruiter said it would be hard for her to get a visa. The recruiter steered the couple to Vancouver, where Jerinic has worked for Amazon since 2015. The office, which opened in 2013, rapidly grew from about 500 people when he started to triple that now. A map in Jerinic’s Vancouver office shows employees’ places of birth. There are hundreds of pins from places like India, Russia, Brazil, and Belgium. But “you have to use a flashlight to find people from Canada,” he jokes. Amazon said in April 2018 that it was building a 416,000 square foot office in downtown Vancouver that will open in 2022; it plans to hire 3,000 more people there.
That technology companies are growing across America’s border has big implications for the U.S. economy. Since World War II, the U.S. has been the epicenter of the entrepreneurial universe. But America’s entrepreneurial dominance is waning. While 95% of global start-up and venture capital activity took place in the United States in the mid-1990s, today it’s about half, according to a report from the Center for American Entrepreneurship (CAE), a nonprofit that advocates for start-ups and is funded by banks and financial institutions. And the number of start-ups still paying employees a year after their founding fell 42% between 2005 and 2015, the most recent year for which there is data available.
The innovation economy creates jobs outside of tech, too. Research by the Berkeley economist Enrico Moretti suggests that every high-paying tech job created in an economy results in five more openings, including positions like lawyers, nurses, and hairdressers. The United States allows about 140,000 immigrant skilled workers to become permanent residents annually; Canada, a country with one-tenth of the population, welcomed 160,000 skilled workers on the track to permanent residency in 2017 and hopes to get that number to nearly 200,000 by 2021. Its goal of making immigrants 1% of its population by 2021 would increase annual GDP growth by 0.6%, with immigrants driving one-third of that expansion, according to a report by the Conference Board of Canada.
At the same time, Trump himself has advocated for rethinking the system. In 2017, he backed the Raise Act, a bill introduced by Senate Republicans that would have cut legal immigration in half, while also establishing a points system designed to give priority to skilled workers and investors. While the bill would not have dramatically increased the number of visas available to in-demand workers, it did signal a preference for skilled workers over other migrants. The bill stalled out after opposition from politicians whose constituencies include agriculture and tourism companies, which rely heavily on unskilled immigrants. Trump reintroduced the merit-based immigration idea this year in a Rose Garden speech, and his staff is considering a new immigration plan that would revamp the current system to prioritize skills over family ties. “We want immigrants coming in,” he said in May. “We cherish the open door that we want to create for our country, but a big proportion of those immigrants must come in through merit and skill.”
Harbour Air, the seaplane company, used to fly buyers in and out of remote log booms across the Pacific Northwest. As that business waned, the company pivoted to tourism. Now, pilot Reggie Morisset says that tech industry demand is filling up planes once again. When the Vancouver-Seattle route launched last year, tech companies bought tickets in bulk so their employees could easily go back and forth between Canada and the United States, he said. “It’s catching fire,” he said. “If anything, it is just going to get busier.”