Talent

The President should direct the Department of Commerce and the Department of Education to immediately co-establish the U.S. Business-Education Workforce Dialogue – a framework of ongoing discussion and collaboration between business and education leaders to regularly examine kindergarten through grade 12, community college, and university curricula to ensure that the nation’s education system serves the broader educational needs of American students, as well as the skill requirements of 21st century businesses.

The Dialogue should include educators at K-12 schools, community and vocational colleges, and universities, as well as leaders of multinational corporations, regionally active firms, small businesses, and young startups.  Dialogue participants should meet on a regular basis – at least semi-annually – in pursuit of a robust and specific agenda, facilitated by a dedicated staff.

Importantly, the Departments should neither set the agenda for the Dialogue nor seek to pre-determine its outcomes.  Rather, the Administration’s role should be to establish, facilitate, and encourage the Dialogue, allowing business and education leaders to identify the relevant issues and, working together, develop and implement effective solutions, with the help of policymakers.

A particular focus of the Dialogue should be to better leverage the value of the nation’s 1,200 community colleges.  Whether serving as an educational “on-ramp” for first generation college-goers or low-wage/low-skill adults, offering cutting-edge occupational training, or working with businesses to provide continuing education and training for their employees, community colleges are the natural backbone of the nation’s workforce development efforts.

At its best, the Dialogue should seek to make employers fully integrated partners with American schools, colleges, and universities in producing both a highly educated and appropriately trained, “ready-on-day-one” workforce.  Employers should not only communicate their skill needs to educators, but also provide business community input into curricula determinations, help set aptitude standards, develop apprenticeship programs and work/study arrangements, and encourage active business professionals and other practitioners to serve as teachers, instructors, assistants, advisers, and mentors.

This kind of active collaboration would likely produce substantial savings for businesses – U.S. employers spend about $415 billion each year on informal on-the-job training and an additional $175 billion each year on formal education and training, according to Georgetown University’s Center on Education and the Workforce.

A regular and robust dialogue between U.S. business and education leaders offers tremendous and highly tangible potential benefits to the nation and its citizens.  Economists at Harvard University have estimated that if the math proficiency of U.S. students were raised to levels currently observed in Canada and South Korea, U.S. economic output could be expanded by “nothing less than 75 trillion” over the next 80 years – roughly $1 trillion annually.

Even if domestic education and workforce development efforts are successful, the need for skilled talent still outstrips the nation’s capacity to produce sufficient numbers of tech-educated graduates – meeting the demand requires imported talent as well.  In this regard, the United States has an enormous competitive advantage – our higher education system.  Nearly a million foreign-born students from 200 nations study at U.S. colleges and universities each year  – the largest foreign-born student population in the world, nearly twice as many as our closest competitor, the United Kingdom.

Even more important, between 50 and 82 percent of the full-time graduate students in key technical fields at U.S. universities are international students, including 74 percent in electrical engineering, 72 percent in computer and information sciences, 71 percent in industrial and manufacturing engineering, 58 percent in mechanical engineering, 56 percent in mathematics, 54 percent in chemical engineering, and 53 percent in metallurgical and materials engineering.

But current immigration policy requires most international students to return home after graduation, taking their U.S.-acquired education and training with them.  In other words, after investing hundreds of thousands of dollars and countless hours educating foreign-born students, we deport them.

If America is to meet its 21st century technical talent needs, that needs to change.  Specifically, a permanent residency card – “green card” – should be awarded to any foreign-born student meeting national security requirements who completes an undergraduate or postgraduate degree from an American college or university and wants to remain in the United States following graduation.

Survey results released on November 14th by the Economic Innovation Group (EIG) reveal that 70 percent of Americans favor more high-skilled immigration to the United States – including 83 percent of Democrats, 60 percent of Republicans, and 72 percent of Independents.

Foreign-born entrepreneurs have been an important part of America’s economic landscape for many decades.  A study released by CAE in December of 2017 found that 43 percent of Fortune 500 companies – and 57 percent of the top 35 companies – were founded by immigrants or a child of immigrants.  These companies are headquartered in 68 metro areas across 33 states and employ millions of Americans.

And yet the United States is one of only a few industrialized nations that do not have a visa category for foreign-born entrepreneurs.  In recent years, many other nations including China, Canada, Germany, France, New Zealand, Australia, Chile, and the UK – have overhauled their immigration laws to attract foreign-born entrepreneurs, including American entrepreneurs.

It should also be pointed out that many of the well-documented abuses of the existing H-1B visa process are attributable to the current lack of a clearly defined and lawful pathway for foreign-born entrepreneurs who want to build their new companies in America.  Problems associated with the H-1B visa include the fact that such visas are arbitrarily capped at 85,000 per year, the demand far outstrips the supply, large companies benefit disproportionately while smaller businesses are virtually shut out, and recipients must be sponsored by a U.S. company.

With these realities in mind, CAE proposes the creation of a new visa category – a “Startup Visa” – specifically designated for foreign-born entrepreneurs who want to launch new businesses in the United States.  To qualify, applicants would have to meet national security requirements and would have to have raised initial funding – perhaps $100,000 – from private investors to validate themselves as entrepreneurs and to authenticate the validity of their business idea.  Under the terms of the entrepreneur visa, foreign-born entrepreneurs would be admitted on a temporary basis, say two years.  If by the end of that period their business has been successfully launched, is producing verifiable revenue, and has produced jobs for at least two nonfamily members, the temporary visa would be extended – say, for an additional three years.  If the new business continues to grow and has created jobs for at least five nonfamily members by the end of the initial five-year period, the foreign-born entrepreneur would be granted permanent residency in order to continue building their business and creating American jobs.

Recent research has concluded that Startup Visa would create between 500,000 and 3 million new American jobs over a decade.

Student loan debt, a serious and worsening problem for years, has now reached levels that threaten America’s economic future.  According to the Federal Reserve, total outstanding student loan debt reached $1.75 trillion as of June 30, 2024, nearly quadrupling from $480 billion in 2006. America’s college class of 2023 graduated with an average debt of $37,100.   In total, some 44 million Americans — one in four adults — are paying off student loans.

Mounting student debt poses serious challenges to the U.S. economy.  A particularly dangerous anti-growth effect of record student debt is its depressive impact on entrepreneurship.  Recent research has demonstrated that new businesses, or “startups,” are disproportionately responsible for the innovations that drive economic growth and account for virtually all net new job creation.

But starting a business is risky – nearly half of all startups fail within five years.  Launching a new business while carrying a mountain of student debt can be virtually impossible.  An analysis released last May found that “student debt is negatively related to the propensity to start a firm, particularly larger and more successful ventures.”

Indeed, millennial entrepreneurship is in free fall.  The share of Americans under 30 who own a business has plunged 65 percent since the 1980s and is now at a 25-year low.  According to a 2016 Small Business Administration report, millennials are the least entrepreneurial generation in recent history.  Such circumstances amount to nothing less than a national emergency, which requires a commensurately serious policy response.

With this reality in mind, we propose that Congress pass new legislation that we’ve tentatively entitled the “Entrepreneurship, Growth, and Opportunity Act” (EGOA).  The legislation would be modeled on the Public Service Loan Forgiveness (PSLF) program, which was created by the College Cost Reduction and Access Act of 2007 (CCRAA).  Under the terms of PSLF, former students who are full-time employees at a federal, state or local government agency, or a 501(c)(3)-designated organization, and who have made 120 on-time minimum student loan payments, are eligible to have their remaining student debt forgiven.

EGOA would have four principal elements.  First, entrepreneurs launching new businesses and those choosing to work for a startup would be permitted to consolidate all existing student loans, both federal and private, into a single fixed-rate loan under the terms of the Federal Loan Consolidation Program, created in 1986.

Second, to provide immediate debt relief, minimum payments in service of the newly consolidated debt would be capped at $200 per month, or $2,400 annually.  To provide further relief, annual payments on the consolidated student loan would be deductible from taxable income, an approach the state of Maine has recently implemented.

Third, if the entrepreneur or startup employee remains at a startup for five years (either a single firm or multiple new businesses) and has made loan payments of at least $200 on time for 60 months (five years) – for a total of $12,000 – any remaining student debt would be forgiven.

To ensure that such a program is also in the interest of the taxpayer, we envision one final element of EGOA.  We propose that entrepreneurs who participate in the EGOA program for five years and have their remaining student debt forgiven and whose total compensation – salary plus the market value of any equity awarded – exceeds $250,000 at any time during the subsequent 10 years, pay the U.S. Treasury a small percentage – perhaps 1 percent – of their total annual compensation.

Under the terms of EGOA, in other words, the U.S. taxpayer would, in effect, swap the forgiven debt for a stake in the entrepreneur’s potential subsequent success, with the possibility of a major pay-off.  For example, if a successful entrepreneur’s total earnings over the 10-year period following debt forgiveness were $5 million, a 1-percent assessment would generate a taxpayer bonus of $50,000 – far greater in most cases than the amount of debt forgiven.

Though not without administrative challenges – such as defining qualifying “entrepreneurs” and “startups” – EGOA is a potential solution to the obstructive impact of student debt on entrepreneurship.  Freed from the burden of servicing student debt, many would-be entrepreneurs will take the risk of launching perhaps the next Microsoft, Google or Tesla.  And the tax receipts generated by the additional economic activity and job creation driven by those new businesses, combined with potential bonus payments made by successful entrepreneurs, make the Entrepreneurship, Growth and Opportunity Act a winner for the U.S. taxpayer.

Entrepreneurship is a powerful driver of economic growth, job creation, and expanded opportunity and policymakers should do more to promote and support entrepreneurship in under-served areas of the country and among under-represented aspects of the American population.  With this priority in mind, CAE strongly supports enactment of the Next Generation Entrepreneurship Corps Act, introduced on February 23, 2021 by Senators Chris Coons (D-DE) and Tim Scott (R-SC), along with  Representatives Jason Crow (D-CO) and Troy Balderson (R-OH).  The Act will create a selection committee of 12 industry experts to review applications and select 320 entrepreneur fellows annually from diverse backgrounds to start both traditional and high-growth businesses in distressed or low-income census tracts.  Selected fellows will be provided a $120,000 two-year stipend for living and basic startup expenses, healthcare coverage, interest-free deferral of federal student loans, immersive training, matching with a local business mentor, and support from an advisory board of CEOs and venture capitalists.

Thriving entrepreneurship requires entrepreneurs not only willing but also able to launch new businesses, as well as the talented employees they need to turn new ideas into reality. Roundtables that CAE regularly conducts with entrepreneurs across the country have revealed that access to affordable, portable (not connected to a particular corporate job), high-quality healthcare is a top “mobility” priority among entrepreneurs – especially women entrepreneurs – enabling them to strike out on their own, and to attract and retain the employees they need.

The Primary Care Enhancement Act would provide more affordable, flexible, high-quality healthcare to 23 million Americans – including entrepreneurs.  The legislation – introduced in the House on July 11, 2019 by Reps. Earl Blumenauer (D-OR), Devin Nunes (D-CA), Bradley Schneider (D-IL), and Jason Smith (R-MO), and in the Senate on December 9, 2019 by Senators Bill Cassidy (R-LA), Doug Jones (D-AL), Jerry Moran (R-KS), and Jeanne Shaheen (D-NH) – would correct an outdated aspect of the U.S. tax code that currently classifies Direct Primary Care (DPC) as insurance rather than medical care, which has prevented millions of Americans with tax-exempt Health Savings Account (HSA)-qualified High Deductible Health Plans (HDHP) from getting high-quality primary care from a doctor of their choice.

DPC is one of the most important value-based reforms to U.S. healthcare in recent years.  First defined in section 1301(a)(3) the Affordable Care Act, DPC practices offer affordable primary care for a low flat monthly fee without co-pays or deductibles.  DPC is typically offered by an employer who also provides insurance coverage for healthcare outside of primary care, and is most often delivered virtually (by phone or on-line) to encourage less frequent office visits, but more frequent communication with the doctor of one’s choice.

Since 2009, almost 1,300 new DPC practices have developed as many employers, unions, and even health plans now rely on DPC doctors to provide better care for their employees.  DPC arrangements give patients a personal relationship with a high-quality primary care doctor, and a care team to help manage complex chronic conditions.  DPC practices save millions of healthcare dollars each year by reducing hospitalizations and administrative costs with a flat fee (per member per month payment) model that avoids the misaligned incentives in today’s predominately fee-for-service primary care.

In order to be eligible to fund an HSA, current law requires an individual must have an HDHP – and no other health plan or coverage that might include services similar to the HDHP.  But, at present, the IRS considers DPC arrangements as a health plan, or other coverage, based on Section 223(c) of the Internal Revenue Code, authorized as a part of the Medicare Modernization Act (P.L. 108–173) in 2003, which pre-dates most DPC agreements as they are known today.

The Primary Care Enhancement Act would create a simple exception to existing IRS rules that define DPCs as a health plans – an exemption that would apply only to DPC arrangements that cost less than $150 per month and that only include primary care services.  Procedures that require the use of general anesthesia or laboratory services not typically administered in a primary care context – so-called “concierge” practices – would not be included in the exemption. By opening access to affordable, personalized primary care provided by doctors of the patient’s choosing, the Primary Care Enhancement Act will enhance the value, flexibility, and appeal of HSA-qualified HDHPs, strengthening American entrepreneurship.

Quality and reliable childcare allows parents to enter and remain in the labor force, promotes the healthy development of young children, and supports families at a critical stage in ways that pay significant societal dividends in subsequent years.  Increasingly, however, the rising cost of childcare is jeopardizing the financial security of many American households, the health and development of the nation’s children, economic mobility and vitality, socio-economic fairness and inclusion – and American entrepreneurship.  Young adults have identified childcare costs as the top reason they are having fewer children at a time when U.S. fertility has fallen to a record low, threatening the nation’s demographic and economic future.

Unlike many developed countries where childcare and early education are heavily subsidized, the United States has no national childcare policy.  In 2019, American families spent an average of $9,100 to $9,600 annually for one child’s care, or 14 percent of median family income, surpassing the cost of housing, college tuition, transportation, food, and healthcare.  Indeed, all 50 states and the District of Columbia fail by a wide margin the definition of affordability, established in 2016 by Department of Health and Human Services’ Office of Child Care, that childcare costs should not exceed 7 percent of a family’s annual income.

Roundtables that CAE staff conduct regularly with entrepreneurs have revealed that the high cost of reliable childcare is a major obstacle to thriving entrepreneurship, particularly among women.  The Covid-19 pandemic and the disproportionate damage to employment among women – due in large part to childcare deficiencies – has underscored the urgency of the issue.  A lack of access to affordable childcare prevents many would-be entrepreneurs from pursuing their new business idea, and can significantly complicate the entrepreneurial experience, increasing the chances of failure.

Expanded access to affordable and reliable childcare, therefore, is a profoundly pro-entrepreneurship, pro-innovation, pro-growth policy imperative.

As policymakers consider various options, CAE believes that the key parameters to meaningful reform include: 1) make quality child care affordable, especially for low-income families; 2) ensure high-quality and reliable care; 3) increase the supply and range of childcare alternatives by incentivizing the development of new and innovative childcare solutions; and, 4) improve the economic circumstances of childcare workers, many of whom are women of color who make less than the minimum wage.

By increasing the supply of labor and talent in the economy, better preparing children for school and productive careers, and dismantling a major obstacle to thriving entrepreneurship, economic mobility and dynamism, policies that deliver portable and affordable childcare are likely to pay for themselves over the longer run.  Moreover, many of the benefits of effective and equitable national childcare policies would accrue to women, middle-class families, and families of color, who have disproportionately shouldered the cost and burdens of policy inaction for decades.

Noncompete agreements, which have proliferated throughout the U.S. economy in recent years, are a major barrier to labor mobility and entrepreneurship.  CAE supports the Workforce Mobility Act, re-introduced by Senators Todd Young (R-IN) and Chris Murphy (D-CT) in February of 2023.  The bill would ban the enforcement of noncompetes in all but the most necessary of circumstances, such as the sale of a business or the dissolution of a commercial partnership.