IMMIGRATION IN AMERICA & THE GROWING SHORTAGE OF HIGH-SKILLED WORKERS

Mary Meeker / Liang Wu

5.29.13

WHY HIGH-SKILLED IMMIGRATION MATTERS TO U.S. TECHNOLOGY COMPANIES...

Americas technology industry is the global leader, thanks in large measure to immigrants. Immigrants and the children of immigrants helped build some of our most important companies, including Apple, Google, Oracle, Amazon, eBay, Yahoo! and LinkedIn...and this trend continues. These companies drive innovation, create jobs and help grow our economy. To maintain our leadership advantage and competitive momentum, U.S. firms need the worlds best engineers, programmers, mathematicians and scientists. Global competition for talent will rise; foreign nations will likely increasingly pursue U.S.-trained talent. While it has become harder to immigrate to America, opportunities to work for tech companies abroad have grown.

WHY HIGH-SKILLED IMMIGRATION MATTERS TO U.S. TECHNOLOGY COMPANIES

Many high-skilled foreigners graduate from our top universities. But immigration policy makes it difficult for them to stay in America. In short, we are training many of the most talented students in the world and leaving many of them with these options go work in another country for a non-U.S. company or work for a U.S. company in another country. At the same time, tech companies are prevented from bringing into the U.S. enough of the high-skilled workers they need to remain competitive. As a result, U.S. companies are moving some jobs overseas and other countries are focused on luring away talented workers who cant get H-1B visas.

THE GOAL OF THIS REPORT

In previous reports*, we have provided insights on the U.S. economy USA, Inc. and Internet Trends, based on our work in and around the tech industry. We believe the immigration debate merits a similar databased analysis. The U.S. needs broad and comprehensive immigration reform to address the large number of undocumented immigrants, border security concerns, the need for agricultural workers and reforming the path to citizenship. In this report, we focus specifically on the shortage of highskilled tech workers. We use a data-driven, common-sense approach to understand the many complex threads in the immigration debate. A better informed public debate over high-skilled immigration would enhance reform efforts now under way in Washington. We hope others take our observations, share them and improve upon them.
*To see our previous reports, visit www.kpcb.com/insights

TECHNOLOGY INNOVATION THESE ARE UNUSUAL TIMES

Rapid growth in high-speed, inexpensive Internet access first on PCs, now on mobile phones and tablets and increasingly on devices of all sorts has transformed the way people (and companies) around the world connect and communicate. The breadth + depth + speed + magnitude of technology innovation are unprecedented and accelerating. Widespread adoption of mobile access to the Internet is a global phenomenon and is still in the early stages of evolution.

TECH INDUSTRY SURPRISES OVER PAST HALF-DECADE

Americas innovation & leadership in mobile device technology After ceding leadership to other regions (Europe & Asia), Americas global share of smartphone operating systems has jumped to 88% recently from just 5% in 2005, thanks to Apple and Google. American leadership in global Internet innovation 8 of the top 10 top global Internet companies (based on users) are American led by Google, Microsoft, Facebook, Yahoo!, Wikipedia and Amazon and 81% of their users are outside the U.S.. How rapidly new U.S. companies have won users to do new things Like Facebook, Twitter, Linkedin, Tumblr, Groupon, Zynga, Pinterest, Dropbox Intensity of competition for high-skilled engineers Five American technology companies (IBM / Intel / Microsoft / Oracle / Qualcomm) alone have a combined 10,000 current U.S. job openings. The ability to innovate (and secure capital) is at an all-time high Coding meets Kickstarter As is the ability of U.S. companies to attract high-skilled tech experts from around the world.
6

WHERE WE ARE NOW

Americas tech leaders want to continue to lead in innovation but to do so, they need to hire the best and brightest. Demand for science, technology, engineering and math (STEM) experts exceeds supply U.S. STEM job vacancy rate (unfilled jobs as a share of the labor force) is 3-4 times higher than that of other sectors. U.S. policy caps H-1B work visas at 85,000/year (including 20,000 exemption for holders of masters degrees) despite much higher demand. Native-born Americans account for a declining portion of STEM graduates at U.S. universities 54% in 2006, down from 74% in 1985. High-skilled foreign graduates from U.S. universities are often sent home and thereby prevented from contributing to our economy. Demand is likely to increase for high-skilled workers as advanced economies realize the importance of tech skills in a slower-growth world with aging societies. Opportunity for immigration reform is real and reflects needed changes and theres momentum, given Senate Judiciary Committee approval of comprehensive immigration reform measure on May 21. Full Senate debate expected in June.

WHERE WE ARE NOWWHERE WE SHOULD BE

The U.S. has the best research universities in the world, which is why we attract the best students from around the world. Forcing them to leave, rather than allowing them to stay and add their skills and knowledge to our economy, is one of the most short-sighted policies we have. - John Hennessy (President) Stanford University With more international students than virtually any university, and graduating more engineers and technologists than any campus anywhere, Purdue sees as clearly as anyone the senselessness of our current policies. Its time we begin - in the nations interest - taking sensible steps to welcome more of the extremely talented people that seek to come and strengthen the American economy...much of that talent prepared and trained at universities like Purdue. - Mitch Daniels (President) Purdue University (Former Governor) Indiana

WHERE WE SHOULD BE
High-skilled immigration policy should be designed to create jobs and spur economic growth. Note that high-skilled immigrants contribute significantly to the economy yet account for only ~3% of Americas workforce (and fewer than 15% of all legal immigrants). All in, immigrants account for ~16% of Americas workforce; almost one-third are undocumented.

WHERE WE SHOULD BE
Increase H-1B Quotas There is clear evidence that we need a higher cap on H-1B visas for foreign STEM workers. Keep More Foreign Graduates in the U.S. We should make a greater effort to retain the large number of non-Americans getting advanced degrees (especially in STEM areas) from U.S. universities, while making sure that the system does not simply become a short-cut to getting an easy Green Card. Streamline Immigration Process / Paperwork Reduce current backlog, create predictable and easier process by increasing efficiency across government agencies related to immigration. Ensure American Worker Wage and Job Protection Follow the compromise in recent Senate legislation which creates good rules of the road for H1-B visa dependent and non-dependent companies. Create a New, Dedicated Visa for Entrepreneurs H-1B visas focus on job seekers with advanced degrees; we should offer an alternative for people creating new technology businesses (as Canada does.)
10

PRESIDENT BARACK OBAMA, 2013

Our journey is not complete until we find a

better way to welcome the striving, hopeful immigrants who still see America as a land of opportunity, until bright young students and engineers are enlisted in our workforce rather than expelled from our country.

11

AMERICA IS A COUNTRY OF IMMIGRANTS

12

99% OF AMERICANS ARE IMMIGRANTS OR DESCENDANTS OF IMMIGRANTS

USA Population by Ancestry, 2010 Census

Immigrants or Descendants of Immigrants

15%

11% 9%

15%

13%

16% 5% 15%
English Hispanic

306 Million

German Other European Asian

Irish African American* Other / Unclassified

Native Americans

0.9%

3 Million
0% 20% 40% 60% 80% 100%

Note: *African-American total includes those who came as slaves and not as voluntary immigrants. Other includes North America (Canada), Australia, New Zealand, and those who have more than one ethnicity reported. Source: Census Bureau, 2010 data.

13

HIGH-SKILLED IMMIGRANTS ARE ONLY 1% OF TOTAL U.S. POPULATION

U.S. Population at a Glance, U.S. Born vs. Immigrants by Type of Admission, 2010
4MM, 1%

Legal Immigrants (High-Skilled) Legal Immigrants (Family-Based) Legal Immigrants (Refugees & Other) Undocumented Immigrants

270MM U.S. Born 87% of Total Population

19MM, 6% 40MM Immigrants 13%

6MM, 2% 11MM, 4%

Total USA Population = 310MM

Note: Number of undocumented immigrants currently residing in USA is an estimate by PewResearch Hispanic Center based on Census data. Precise breakdown of legal immigrants currently residing in USA by type of admission is not available and is an estimate based on Census data as well as Department of Homeland Security immigrant admission data from 1986 to 2010. Source: Census Bureau, PEW, DHS.

14

WHY PEOPLE COME TO AMERICA THE SPIRIT OF FREEDOM & OPPORTUNITY

15

ECONOMIC OPPORTUNITY + RULE OF LAW = KEY DRIVERS OF IMMIGRATION TO AMERICA

For each of the following, please tell me if you think the United States or your home country does a better job when it comes to the item, or if theyre about the same?*
Having a trustworthy legal system Having more opportunity to earn a good living Making good health care available Having a good education system Being a good place to raise children Having free and independent media and free expression Having a higher standard of morality Letting people practice the religion they choose

Note: *Numbers may not add up to 100 due to rounding. Source: Public Agenda survey of 1,138 foreign born adults via telephone interviews conducted between 4/23 & 6/7/2009.

16

PRESIDENT RONALD REAGAN, 1988

You can go to live in France, but you cannot

become a Frenchman. You can go to live in Germany or Turkey or Japan, but you cannot become a German, a Turk, or a Japanese. But anyone, from any corner of the Earth, can come to live in America and become an American.

17

IMMIGRANTS HAVE BEEN KEY TO AMERICAS ECONOMIC SUCCESS

18

SECRETARY OF STATE CONDOLEEZZA RICE

The essence of America that which really

unites us is not ethnicity, or nationality or religion it is an idea and what an idea it is: That you can come from humble circumstances and do great things. That it doesnt matter where you came from but where you are going.

19

42% OF AMERICAS FORTUNE 500 COMPANIES FOUNDED BY 1st OR 2nd GENERATION IMMIGRANTS

Founders of 2012 "Fortune 500" Companies

19%
Immigrant Child of Immigrant

58% 23%

All Others

Source: The New American Fortune 500, June 2011 A Report By The Partnership For A New American Economy.

20

THESE COMPANIES HAVE CREATED 10+ MILLION JOBS AND $4.5 TRILLION OF ANNUAL REVENUE (= TO 30% OF USA GDP)
10+ Million
Jobs Created by Immigrant Founded Companies, 41% of Total Fortune 500

$4.5 Trillion
Annual Revenue by Immigrant Founded Companies, 30% of USA GDP, 39% of Total Fortune 500
$1,732B

4MM

15MM

Total Jobs Created by Fortune 500 Companies = 25 Million

$7,211B

7MM Immigrant Child of Immigrant All Others

2012 Total Revenue by Fortune 500 Companies = $12 Trillion

$2,807B

Source: FactSet, data as of 4/13.

21

7 OF 10 MOST VALUABLE & RECOGNIZABLE GLOBAL BRANDS FOUNDED BY 1st & 2nd GENERATION IMMIGRANTS

Source: The New American Fortune 500, June 2011 A Report By The Partnership For A New American Economy.

22

1820 TO 1950 AMERICAS ECONOMIC GROWTH WAS EXTRAORDINARY, DRIVEN BY IMMIGRANTS & THEIR DESCENDANTS

23

U.S. SHARE OF WORLD GDP PEAKED JUST AS POPULATION AS % OF WORLD PEAKED

USA Percent of Global GDP & Global Population, 1820 2012
40%
GDP Share Peak @ 36%, 1944

10% 8% 6% 4%
Population Share Peak @ 6%, 1950s

35% USA Population as % of World (Right Axis) % of World Population

24

% of the World GDP

30% 25% 20% 15% 10% 5% 0% 1820 1835

USA GDP as % of World (Left Axis)

2% 0%

1850

1865

1880

1895

1910

1925

1940

1955

1970

1985

2000

Source: Angus Maddison, University of Groningen, OECD. GDP & population data from 1980 to 2012 based on adjusted World Bank / IMF data. Note population & GDP growth highly correlated (92%).

IMMIGRANTS HAVE NEARLY ALWAYS ACCOUNTED FOR MATERIAL PORTION OF AMERICAS POPULATION GROWTH
USA Population Growth from Immigration, 1900-2008
50% % of USA Population Growth from Immigration 44% 40% 34% 30% 24% 20% 11% 18% 16% 9% 2% 0% 1900-09 1910-19 1920-29 1930-39 1940-49 1950-59 1960-69 1970-79 1980-89 1990-99 2000-08 30% 31% 36%

10%

Source: Census Bureau, data as of 2008.

25

1980 TO 2013 AS THE WORLD HAS GROWN MORE COMPETITIVE, AMERICA HAS LOST SHARE OF GLOBAL ECONOMIC GROWTH

26

AS CHINA AND INDIA GAINED SHARE OF GLOBAL GDP, AMERICAS SHARE HAS DECLINED
Percent of Global GDP, 1820 2012. USA vs. Europe vs. China vs. Latin America vs. India
USA 40%
33%

Europe

China

India

Latin America

% of Global GDP

30%
27%

20% 16% 10%

2% 2%

19% 16% 15% 8% 6%

0%

Source: Angus Maddison, University of Groningen, OECD, data post 1980 per IMF (GDP adjusted for purchasing power parity).

27

BUT AMERICA IS THE GLOBAL LEADER IN TECHNOLOGY AND INTERNET AND IMMIGRANTS HAVE MADE OUTSIZED CONTRIBUTIONS AS FOUNDERS AND KEY PERSONNEL

28

AMERICAN TECHNOLOGY COMPANIES = 69% OF GLOBAL PUBLIC TECH MARKET CAPITALIZATION

Total USA Public Technology Companies = $2.9 Trillion in Aggregate Market Capitalization
Company Apple Google IBM Microsoft Oracle Amazon.com Cisco Intel Ebay Facebook EMC Hewlett-Packard Texas Instruments VMware Priceline Automatic Data Processing salesforce.com Dell Yahoo! Cognizant Technology Adobe Systems Broadcom Intuit LinkedIn Symantec Other U.S. Tech Companies Total Mkt Cap ($MM) $416,622 268,445 239,530 234,828 172,044 119,011 116,904 105,721 65,357 63,472 53,347 43,118 38,756 35,917 35,583 31,274 25,840 25,003 24,306 23,648 20,640 19,713 19,393 19,357 16,916 622,632 $2,857,376

USA Public Technology Companies* = 69% of Aggregate Market Capitalization of Global Top 100 Technology Companies
Other 4% S. Korea 6% Japan 7% Europe 8% USA 69% India China 3% 3%

USA* = $2,519B Europe = $298B Japan = $245B S. Korea = $203B

India = $118B China = $111B ROW = $160B

Note: *While total USA tech companies support aggregate market cap of $2.9T as of 3/13, those in the global top 100 support aggregate market cap of $2.5T. Source: FactSet, data as of 3/13.

29

80% OF TOP 10 GLOBAL INTERNET PROPERTIES MADE IN USA81% OF USERS OUTSIDE USA
Top 10 Internet Properties by Global Monthly Unique Visitors, 2/13
Google Microsoft Facebook Yahoo! Wikipedia Amazon.com Apple Glam Media Tencent Baidu.com 0 200 400 600 800 Monthly Unique Visitors (MMs) 1,000 1,200 USA Users International Users

Source: comScore Global, 2/13.

30

INNOVATIONS IN MOBILE CONNECTIVITY HAVE TILTED TECH INDUSTRY MARKET SHARE TO AMERICA
Global Smartphone Operating System Market Share (by Units Shipped), 2005 vs. 2012
100% Market Share of Smartphone OS

5%
80%

Made in USA Operating systems

Other OS Apple iOS Google Android Microsoft Windows Phone

60%

88%
40%

20%

BlackBerry OS Linux

0% 2005 2012

Nokia Symbian

Source: 2005 data per Gartner, 2012 data per IDC.

31

IMMIGRANTS ARE KEY DRIVERS OF INNOVATION & GROWTH IN AMERICAS TECHNOLOGY INDUSTRY
Immigrant-Founded Start-Ups as Percent of Total in Tech Centers, 2007
60% 50%

Foreign-National Contribution to U.S. Global Patent Applications, 1998-2006

30% 25%

% of Total

40% 30% 20% 10% 0

Portland Research Denver Seattle Austin
Triangle Park

% of Total
D.C Boston San Chicago N.Y Diego Silicon Valley

20% 15% 10% 5% 0%

1998 1999 2000 2001 2002 2003 2004 2005 2006

Percentage of Companies Founded by Immigrants, 2007

Defense / Aerospace Environmental Bioscience All Industry Fields Innovation / Manufacturing-Related Services Software Computers / Communications Semiconductors

8% 9% 20% 25% 26% 28% 32% 35%

Source: The Kauffman Foundation, Americas New Immigrant Entrepreneurs reports, published in 2007.

32

60% OF TOP 25 TECH COMPANIES FOUNDED BY 1st & 2nd GENERATION AMERICANS = 1.2MM EMPLOYEES, 2012
C Mkt Cap ($MM) LTM Rev ($MM) o 1 Apple $416,622 $164,346 S 2 Google 268,445 49,958 S 3 IBM 239,530 104,507 S 72,764 4 Microsoft 234,828 S 5 Oracle 172,044 37,230 S 61,093 6 Amazon.com 119,011 S 7 47,252 Cisco 116,904 S 8 Intel 105,721 53,341 S 9 14,028 Ebay 65,357 S 10 Facebook 5,089 63,472 S 11 EMC 53,347 21,714 S 12 Hewlett-Packard 43,118 118,397 S 13 Texas Instruments 12,690 38,756 S 14 VMware 35,917 4,605 S 15 Priceline 35,583 5,261 S 16 Automatic Data Processing 10,945 31,274 S 17 salesforce.com 25,840 3,050 S 18 Dell 25,003 56,982 S 19 Yahoo! 24,306 4,987 S 20 Cognizant Technology 23,648 7,346 S 21 Adobe Systems 20,640 4,373 S 22 Broadcom 8,006 19,713 S 23 Intuit 19,393 4,153 S 24 LinkedIn 19,357 972 S 25 Symantec 16,916 6,839 S Total Founded by 1st or 2nd Gen Immigrants $1,590,800 $507,516 Rank Company

Founders / Co-Founders of Top 25 U.S. Public Tech Companies, Ranked by Market Capitalization
Employees 76,100 2nd-Gen, Syria 53,861 1st-Gen, Russia 434,246 2nd-Gen, Germany -94,000 115,000 2nd-Gen, Russia / 2nd-Gen, Iran 2nd-Gen, Cuba 88,400 -66,639 -105,000 31,500 1st-Gen, France 4,619 1st-Gen, Brazil 60,000 2nd-Gen, Italy 331,800 -34,151 1st-Gen, UK / 2nd-Gen, Sweden 13,800 1st-Gen, Switzerland 7,000 -2nd-Gen, Poland 57,000 -9,800 111,300 -11,700 1st-Gen, Taiwan 156,700 Francisco D'souza / Kumar Mahadeva 1st-Gen, India** / 1st-Gen, Sri Lanka -11,144 -11,300 2nd-Gen, Poland Henry Samueli 8,500 --3,458 Konstantin Guericke / Jean-Luc Vaillant 1st-Gen, Germany / 1st-Gen, France 20,500 --1,151,835 1st or 2nd Gen Immigrant Founder / Co-Founder Steve Jobs Sergey Brin Herman Hollerith -Larry Ellison / Bob Miner Jeff Bezos ---* Pierre Omidyar Eduardo Saverin Roger Marino -Cecil Green / J. Erik Jonsson Edouard Bugnion -Henry Taub --Jerry Yang Generation

*Note that while Andy Grove (from Hungary) is not a co-founder of Intel, he joined as COO on the day it was incorporated. **Francisco Dsouza is a person of Indian origin born in Kenya. Source: FactSet as of 3/13; The New American Fortune 500, a report by the Partnership for a New American Economy; American Made, The Impact of Immigrant Founders & Professionals on U.S. Corporations

33

JOBS AT TOP 50 U.S. TECH COMPANIES GREW 4X TO 2.5 MILLION OVER 2 DECADES
Aggregate number of employees among (current) Top 50 Public USA Technology Companies by Market Cap, 1993-2013 YTD 3,000

Aggregate Number of Employees (000s)

2,500 2,000 1,500 1,000 500 0 1993

1996

1999

2002

2005

2008

2011

Source: FactSet as of 3/13.

34

BEYOND COMPUTING
42% of Scientists in Top 7 U.S. Cancer Research Centers Are Foreign Born
University of Texas MD Anderson 62% Memorial Sloan-Kettering Cancer Center 56% Fox Chase Cancer Center 44% Johns Hopkins Sidney Kimmel Comprehensive Center 35% Dana-Farber Cancer Institute 33% UCSF Diller Family Comprehensive Cancer Center 32% Fred Hutchinson Cancer Research Center 30%
Source: National Foundation for American Policy, based on National Cancer Institute data, policy brief published in 2013.

35

STEM (SCIENCE / TECHNOLOGY / ENGINEERING / MATH)-RELATED EMPLOYMENT HAS INCREASED ~2X FASTER THAN NON-STEM EMPLOYMENT
36

U.S. DEMAND FOR HIGH-SKILLED STEM WORKERS KEEPS GROWING 7MM STEM WORKERS* IN 2010, UP FROM 3MM IN 1983
USA Science & Engineering Workers & % of Workforce, 1983-2010
8MM Science & Engineering Workers (MMs) USA Science & Engineering Workers % of USA Workforce 8%

6MM

6%

4MM

4%

2MM

2%

0MM 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

0%

Note: *Potentially understated - according to the National Science Foundation, over 4 million people in America use their science & engineering degree in their job even though their occupation is not formally classified as a science & engineering occupation. 37 Source: National Science Board, data as of 2010.

% of Total USA Workforce

40-85%* INCREASE IN STEM + CMS* JOBS VS. 30% FOR NON-STEM JOBS SINCE 2000
Total USA Employment % Change from 2000 by Sector, 2000-2012

Employment Change (%) Since 2000

Note: *CMS is Computer / Math Sciences. Source: U.S. Census Bureau, Current Population Survey (CPS); Ian Hathaway, Engine.is report published in 2013. Note: Data have been smoothed using a 12month moving-average.

38

3-4X* MORE STEM JOB OPENINGS THAN NON-STEM

Job Openings as % of Respective Labor Force by Sector, 2005-2012
Job Openings as a Share of Labor Force

Note: Calculated as job openings in each sector divided by labor force in each sector. Note that the job vacancy data used here arent available by level of educational attainment. Therefore, we are unable to restrict this portion of the analysis to workers with a bachelors degree or more. As a result, the differences here between STEM, Computer / Math Sciences & non-STEM may be somewhat overstated. Source: Ian Hathaway (Engine.is) analysis of data from U.S. Census Bureau, CPS; Conference Board; Bureau of Labor Statistics, JOLTS.

39

BUT AMERICA CANNOT FILL ALL STEM-RELATED JOB OPENINGS

40

COMPUTER SCIENCE JOB OPENING FORECAST = 2.4X # OF COMPUTER SCIENCE GRADUATES

Projected Average Annual # of Graduates w/ Bachelors Degree in Computer Science vs. # of Job Openings Requiring a Bachelors Degree in Computer Science, 2010-2020E

# of Graduates w/ Bachelor's Degree in Computer Science

51,474

# of Job Openings Requiring a Bachelor's Degree in Computer Science 0 50,000

122,300

100,000

150,000

Number of People, per Year

Source: Microsoft analysis (released in 2013) based on Bureau of Labor Statistics data.

41

STREET VIEW COMPANIES & STARTUPS CANT HIRE ENOUGH ENGINEERS

View outside of Quixeys office on Castro St. in Mountain View, CA. Castro St. in Mountain View, CA. Photo: Joshua Stanton-Savitz, 5/13. Source: Joshua Stanton-Savitz.

View outside of Quixeys office on

42

FIVE HIGH-TECH COMPANIES ALONE IBM, INTEL, MICROSOFT, ORACLE AND QUALCOMM HAVE COMBINED 10,000 CURRENT OPENINGS IN THE UNITED STATES.
Source: Technology CEO letter to the president and lawmakers, 3/13. http://www.scribd.com/doc/130388692/Tech-CEO-letter

43

DEMAND FOR STEM GRADUATES / EXPERTS HAS RISEN DRAMATICALLY

44

U.S. EMPLOYER DEMAND FOR STEM EXPERTS / GRADUATES CONTINUES TO RISE

Sustained Growth is Projected for STEM Occupations Relative Employment Levels vs. 2006 Employment (2006=100), by Occupation

Relative Employment Levels vs. 2006 Level (2006 = 100)

Source: Chairmans staff of the Joint Economic Committee based on data from the Bureau of Labor Statistics. The BLS does not project employment for individual years from 2010-20. For the purposes of this chart, Life Sciences excludes Medical Sciences. Report published in 2012.

45

WHILE SUPPLY OF NATIVEBORN STEM GRADUATES / EXPERTS HAS FALLEN ON RELATIVE BASIS

46

STEM DEGREES HAVE FALLEN AS % OF DEGREES GRANTED IN AMERICA...

A Smaller Percentage of Degrees Are STEM Degrees STEM Degrees as a Share of All Degrees Granted, 1985 - 2009
STEM Degrees as % of All Degrees Granted

Source: Chairmans staff of the Joint Economic Committee based on data from the Department of Educations National Center for Education Statistics: Integrated Postsecondary Education Data, STEM Degrees include degrees in: Engineering, Physical Sciences, Geosciences, Math and Computer Sciences and Life Sciences (except Medical Sciences). Report published in 2012.

47

WHILE U.S.-BORN STUDENTS HAVE FALLEN TO 54% (2006) FROM 74% (1985) OF U.S. STEM DOCTORATE GRADUATES
Share of STEM Doctorates Granted to U.S. Domestic Students, 1985 - 2006 STEM Doctorates as a Share of All Doctorates Granted, 1985 - 2009
% of STEM Doctorates Granted to U.S. Domestic Students / STEM Doctorates as % of All Doctorates

Source: Chairmans staff of the Joint Economic Committee based on data from the Department of Educations National Center for Education Statistics: Integrated Postsecondary Education Data, STEM Degrees include degrees in: Engineering, Physical Sciences, Geosciences, Math and Computer Sciences and Life Sciences (except Medical Sciences). Report published in 2012.

48

GLOBAL SCIENCE & ENGINEERING GRADUATION RATES INCREASINGLY FAVOR CHINA

First University Degrees in Natural Sciences, By Selected Country/Economy, 19982008 Natural Sciences Doctoral Degrees in Engineering, By Selected Region/Country, 2000 To Most Recent Year* Engineering

Note: *Data for selected countries not available in 2007-2009. Natural sciences include physical, biological, environmental agricultural, computer sciences and mathematics. SOURCES: Organisation for Economic Co-operation & Development, Education Online database, http://www.oecd.org/education; & national statistical offices. Science & Engineering Indicators 2012

Degrees in 000s

Degrees in 000s

49

TO REMAIN COMPETITIVE, AMERICAN COMPANIES WANT TO HIRE BEST & BRIGHTEST FROM AROUND WORLD

50

BUT AMERICAN COMPANIES ARE CONSTRAINED BY CAPS ON H-1B VISAS (85,000 ANNUALLY OR < 0.03% OF U.S. POPULATION). THERES DEMAND FOR AT LEAST 150,000 PER YEAR.

51

U.S. DEMAND FOR H-1B WORKERS HAS EXCEEDED CAPS

Number of Initial Petitions for New H-1B Workers Submitted by Employers Relative to the Cap, 2000 2009

# of Petitions in 000s

K K K

Source: GAO analysis of Homeland Security data, Testimony Before the Subcommittee on Immigration Policy and Enforcement, Committee on the Judiciary, House of Representatives. Report published in 2011.

52

ECONOMIC GROWTH & EMPLOYER DEMAND IMPLY MORE H-1B VISAS SHOULD BE GRANTED

53

SINCE 1999, U.S. REAL GDP UP 26% WHILE ANNUAL H-1B VISAS GRANTED REMAINED CONSTANT & ANNUAL H-1B QUOTA DECLINED
USA Real GDP* vs. Employment (H-1B) Visas Issued per Year, 1999 - 2012
$14 Real GDP ($T) USA Real GDP ($T) $13 H-1B Employment Visa Issued 300 Number of Visas Issued (000s)
54

400

H-1B Visas Subject to Cap

$12
1999-2000 115K

2001-2003 195K

200

$11

2004 65K

2005-2012 85K

100

$10 1999 2001 2003 2005 2007 2009 2011

Note: *Real GDP adjusted for inflation. Source: BEA, State Dept. data as of 2012.

FLAT H-1B WORK VISA QUOTA BLOCKING U.S. FIRMS FROM HIRING SKILLED WORKERS THEY NEED
H-1B Visa Annual Cap & Availability Windows For Employers, 1999-2014
Annual Cap on H-1B visas

H-1B Availability Windows

Source: Brookings Institute, USCIS, 2013.

55

HIRING H-1B WORKERS DOES NOT DISPLACE AMERICAN WORKERS DATA IMPLY NEW AMERICAN JOBS ARE CREATED

56

COMPELLING CORRELATION BETWEEN H-1B APPLICATIONS & NEW AMERICAN JOBS CREATED
New Employment per H-1B Application, by Company Size, 2002-2005 10 New Employment per H-1B Application 8 6 4 2 0 Firms w/ <5,000 Workers Firms w/ 5,000-10,000 Workers
57

7.5

Average New Employment per H-1B Application = 5.0

4.7

Source: National Foundation for American Policy (NFAP) Study based on 2002-2005 data, report published in 2008.

RESTRICTING H-1B QUOTAS HAS FORCED AMERICAN COMPANIES TO HIRE & RELOCATE WORKERS ABROAD
Impact of H-1B Visa Restrictions % of Surveyed Companies Agreeing

Hired more people (or outsourced work) outside of USA Delayed or changed plans for projects Affected competitiveness against foreign competitors

65%

46%

74%

Source: 2008 NFAP survey response from 27 companies who are members of TechNet, the Semiconductor Industry Association (SIA) and the larger corporate members of SEMI (Semiconductor Equipment and Materials International).

58

PLAYING BY THE RULES PRIMER ON H-1B VISAS & GREEN CARDS

59

SO, YOU WANT AN H-1B VISA?

For foreigners to get an H-1B visa to work in the U.S., youll need to be a skilled worker

With at least a bachelors degree

in designated specialty occupations.

You can stay up to six years, if your visa is renewed but they are hard to get.

Congress capped annual new visas at 85,000 in 2004 And you need to be sponsored by an employer. If you lose your job, you need to leave the country, unless you find a new sponsor or switch to another kind of visa (like a student or visitor visa).

60

BUT WAITYOU WANT TO STICK AROUND?

H-1B visa holders who want to stay in the country can apply for a Green Card which lets you stay permanently. After five years, Green Card holders can apply to be citizens. Green Card holders can live and work in the U.S. on a permanent basis But they arent easy to get. Theres an annual quota of 140,000 for skilled workers and professionals And a per-country quota of no more than 7% of total Green Cards issued, regardless of size of population of the country So it could take up to 10 years or longer for skilled professionals from some countries to get approved for Green Cards. As a result, many more H-1B visa holders must seek renewal status while their Green Card applications are being processed.

61

WHILE FOREIGN-BORN PROFESSORS PLAY A MAJOR ROLE IN U.S. COLLEGES AND UNIVERSITIES
Foreign-born engineering professors

In 1979 18% In 1997 28% In 2006 35%

Foreign-born math/computer sciences professors

In 1979 10% In 1997 25% In 2006 31%

Source: National Science Foundation survey of full-time faculty who received Ph.D.s from American institutions, 2011

62

U.S. POLICIES FORCE MANY AMERICAN-EDUCATED FOREIGN STUDENTS TO RETURN HOME

63

U.S. SENDING MORE QUALIFIED FOREIGN STUDENTS HOME POST GRADUATION 3.5X RISE IN STUDENT & EMPLOYMENT VISA ISSUANCE GAP OVER DECADE
Number of Student Visas (F1) vs. Employment (H-1B) Visas Issued per Year, 1992 - 2012
600 Number of Visas Issued (000s) 500 400 300 200 ~100K Difference 100 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
64 85K H-1B Visas Subject to Cap

F1 Student Visa Issued

H-1B Employment Visa Issued

~350K Difference

Source: U.S. Department of State, as of 5/13.

HIGH-SKILLED IMMIGRANTS CAN WAIT 35 YEARS OR MORE FOR GREEN CARDS

How long must I wait?
Estimated time to acquire a U.S. green card.

Data as of January 2012, Examples for illustration purpose only. The individual's qualifications and the requirements of their job determines the actual waiting time.

65

ALL IN, HIGH-SKILLED IMMIGRANTS ACCOUNTED FOR <15% OF LEGAL IMMIGRANTS IN 2012

66

HIGH-SKILLED IMMIGRANTS = ONLY 15% OF LEGAL IMMIGRANTS IN PAST DECADE

Total Legal Immigrants = 10.5 Million, 2002-2011
4% 3% 13%
Family Based (Relatives of US Citizens)

Employment Based (High-Skilled Immigrants)

Refugees & Asylees

15%

65%

Diversity Based (Encourage Immigration from Smaller Countries) Other

Source: Department of Homeland Security. Data as of 2011.

67

USA RIVALS, MORE FOCUSED ON JOB CREATION AND COMPETITIVENESS, GRANT 7X MORE GREEN CARDS BASED ON SKILLS (ON RELATIVE BASIS) THAN AMERICA DOES

68

U.S. PEERS ISSUE 7X MORE GREEN CARDS ON RELATIVE BASIS THAN U.S. AS THEY TARGET IMMIGRATION FOR JOBS + SKILLS
Percentage of All Green Cards Distributed by Each Country That Are Employment-Based, 2010

90% 80% % of Green Cards Distributed 70% 60% 50% 40% 30% 20% 10% 0

Weighted Average (ex. USA) = 50%

Source: OECD (2012), Trends in International Migration Flows and in the Immigrant Population.

69

U.S. IMMIGRATION POLICY OF PAST 30+ YEARS FOCUSED ON FAMILY REUNIFICATION (66% OF IMMIGRANTS), NOT HIGH-SKILLED IMMIGRANTS
USA Number of Immigrants by Type of Admission, 1986 - 2012
Total Legal Immigrants Admitted (000s) % Employment-Based % Other 1,500 % Family-Based % Refugees & Asylees 75%

Total Legal Immigrants Admitted (000s)

1,200

66%

60%

900

45%

600

30%

300

15%

0 1986 1988 1996 1998 2000 2002 2004 2006 2008 2010 2012

0%

Source: Department of Homeland Security, data as of 2012.

70

% of Total Immigrants Admitted

73%

GLOBAL COMPETITION FOR HIGH-SKILLED IMMIGRANTS WILL LIKELY INTENSIFY AS ECONOMIC GROWTH SLOWS & SOCIETIES AGE & COUNTRIES PURSUE ECONOMIC GROWTH DRIVERS

71

ECONOMIC GROWTH IS SLOWING IN MOST DEVELOPED COUNTRIES / REGIONS INCLUDING USA / EUROPE
USA + Europe Real Annual GDP Growth, 1950-2020E
USA Real GDP Annual Growth USA Trendline 10% Europe Real GDP Growth European Trendline

Real GDP Y/Y Growth (%)

8% 6% 4% 2% 0% -2% -4% -6% 1950 1960 1970 1980 1990 2000 2010 2020E

Note: Real GDP adjusts for inflation. Source: BEA, IMF, data as of 4/13.

72

MANY MAJOR ECONOMIES (LIKE CHINA / RUSSIA / EUROPE / JAPAN / S. KOREA) LIKELY TO EXPERIENCE LABOR FORCE DECLINES
Growth in Potential Labor Force (Population Aged 15-59), Indexed to 1950 level = 100

Indexed Value (1950 level = 100)

Source: Jack A. Goldstone, Brookings Institute based on projection by United Nations. Report published in 2011.

73

SOCIETIES ARE AGING IN MOST DEVELOPED COUNTRIES / REGIONS U.S. MEDIAN AGE WAS 37 IN 2010, UP FROM 30 IN 1950
Median Age by Country, 1950-2010
50

Japan
40

Europe Russia USA China Latin America

Median Age

30

20

India

10 1950 1960 1970 1980 1990 2000 2010

Source: United Nations, Population Division. Data as of 2010.

74

U.S. LABOR FORCE GROWTH FALLING AS POPULATION GROWTH SLOWS, GAINS FROM WOMEN JOINING LABOR FORCE EASE AND BABY BOOMERS RETIRE
Annualized USA Population & Labor Force Growth Rates, 1950s to 2000s
3% 2.6%

Annual Growth Rate (%)

2% 1.6% 1.1% 1% 1.1% 1.7%

2.0% 1.6% 1.2%

Population Labor Force

1.2%

1.3% 1.1% 0.8%

0% 1950s 1960s 1970s 1980s 1990s 2000s

Note: Labor force includes all employed & unemployed civilians 16 years old & over. It does not include those who have no job & are not looking for one. Many who are not in the labor force are going to school or are retired. Family responsibilities keep others out of the labor force. Women joining labor force has been a key driver of overall labor force growth in 1950, only ~35% of women (16+) are in the labor force, by late 1990s, ~60% of women (16+) are in the labor force since then, the 60% ratio has remained constant. Source: BLS, 4/13.

75

WITHOUT IMMIGRATION, U.S. POPULATION SHRINKS AS BIRTH RATE FALLS BELOW REPLACEMENT RATE
USA Birth Rate vs. Population Replacement Rate*, 1960 - 2010
4

3 USA Birth Rate

1 USA Fertility Rate 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Replacement Rate

Note: *Population replacement rate is the number of children each woman needs to have to maintain current population levels. In most developed countries, the natural replacement rate is close to 2.1. Source: World Bank, data as of 2010.

76

IMMIGRATION COMPETITION? LET THE GAMES BEGIN

77

OH, CANADA!

78

GOOD DEAL, EH?

[E]veryone knows the American system is pretty dysfunctional... I'm going to the Bay Area to spread the message that Canada is open for business; we're open for newcomers. If they qualify, we'll give them the Canadian equivalent of a green card as soon as they arrive Im not going to apologize, and you know what, if you guys cannot figure out your immigration system, were going to invite the best and the brightest to come north of the border.

- Jason Kenney, Canada Minister of Citizenship, Immigration & Multiculturalism, May 2013

79

AS COUNTRY-BY-COUNTRY COMPETITION FOR HIGH-SKILLED IMMIGRANTS RISES, AMERICA REMAINS A PREFERRED DESTINATION

80

AMERICA = #1 GLOBAL DESTINATION FOR IMMIGRANTS 20% (OR 43MM) OF GLOBAL MIGRANTS IN 2010

81

AMERICANS SUPPORT HIGH-SKILLED IMMIGRATION POLICY REFORM CAN MAKE IT EASIER

82

MANY AMERICANS SUPPORT HIGH-SKILLED IMMIGRATION & ARE CONCERNED ABOUT AMERICAS ROLE AS TECH INNOVATOR

Support for High-Skilled Immigration 63% of likely American voters surveyed believe America faces a shortage of high-skilled workers and that immigration policy should encourage high-skilled workers to stay in America. Worried about U.S. Innovation Status ~43% of Americans surveyed believe next major technology or innovation product will come from China while only 30% believe this discovery will come from America.

Source: TechNet / Zogby Analytics survey of 1,000 US adults, 3/13.

83

VIEWS FROM TECHNOLOGY LEADERS

At a time when talent is the key to economic success, it makes no sense to educate people in our universities, often subsidized by U.S. taxpayers, and then insist that they return homeour immigration system makes it very difficult for U.S. firms to hire high-skilled foreign workers. Last year [2008], at Microsoft, we were unable to obtain H-1B visas for over a third of our foreign-born candidates. - Bill Gates (Founder and Chairman) Microsoft Why do we kick out the more than 40 percent of math and science graduate students who are not U.S. citizens after educating them? Why do we offer so few H-1B visas for talented specialists that the supply runs out within days of becoming available each year, even though we know each of these jobs will create two or three more American jobs in return? Why dont we let entrepreneurs move here when they have what it takes to start companies that will create even more jobs? - Mark Zuckerberg (Founder and CEO) Facebook
84

VIEWS FROM TECHNOLOGY LEADERS

Improving and increasing high-skilled worker immigration to America will increase jobs and help drive economic growth. - Meg Whitman (CEO) Hewlett-Packard It's critical that America attract the best and brightest minds from around the world to drive the next wave of technological innovation and economic growth. - John Chambers (CEO) Cisco Systems Continued technological innovation depends on continued growth in technical talent. As a country, we need to use all of the available tools to increase the pipeline of Science, Technology, Engineering, and Math (STEM) professionals - from encouraging young students to pursue degrees in math and science to ensuring that our immigration policy enables us to tap the expertise of highly-skilled workers from around the world. - Tom Leighton (Co-Founder / CEO) Akamai
85

VIEWS FROM TECHNOLOGY LEADERS

Immigration has always been a key to America's future. We are more than a country founded by immigrants. We are a country whose competitive strengths are entrepreneurship and immigration. When you consider how many companies are founded by immigrants, you realize that immigration is fundamental to any long-term economic growth and prosperity The high-skill immigration question is simple: Would you rather have more great technology companies here in the U.S. or abroad? - Reid Hoffman (Co-founder, Executive Chairman) LinkedIn (Partner) Greylock The denial of U.S. visas has forced us to routinely apply for visas in Canada and Ireland We prefer that talented workers be able to work in our American offices as it would be best for our company, people and the local economy. - Mark Pincus (Founder / CEO) & Colleen McCreary (Chief People Officer) Zynga
86

VIEWS FROM TECHNOLOGY LEADERS

The tech sector in the U.S. is creating more jobs than it can fill, given the shortage of American computer science graduates. If we dont take steps as a country to address immigration in the short run and improve education in the long term, then inevitably these jobs will start to leave the United States and move to other countries. - Brad Smith (General Counsel) Microsoft As someone who came to this country as a political refugee, working at a company co-founded by an immigrant, I know first-hand how much the idea of America means to the world. The most talented people on the planet dream of coming here. Our laws, markets and educational system give us a unique and sustainable competitive advantage relative to other countries. But we will only realize this advantage if we make it possible for people to stay, build great businesses, and contribute to our economy. Immigration reform is essential to our future success, not just at Google, but as a nation. - Laszlo Bock (SVP People Operations) Google
87

VIEWS FROM TECHNOLOGY LEADERS

Our current immigration system is ridiculous - it's disrespectful or even abusive to amazing immigrants who increasingly have other choices. These people are vital to our ability to create competitive businesses - which lead to jobs and prosperity - and we should be fighting to get them here instead of making them confront a bureaucratic and arbitrary system that might or might not let them in. And we should be giving them incentives to stay, instead of making them worry as they build their lives here that they might be kicked out. - Joe Lonsdale (Partner) Formation 8, (Co-Founder) Palantir Technologies We need great engineers in order to build great companies. The current immigration system not only prevents great engineers from working at companies that need them, but also limits their ability to be entrepreneurs. In order to remain competitive in the global war for talent, we need a policy that enables the U.S. to both be competitive and win. - Mike Abbott (General Partner) Kleiner Perkins (Former VP, Engineering) Twitter

88

VIEWS FROM TECHNOLOGY LEADERS

I would argue why not raise the cap to 500,000? Why not 1 million? As long as they are truly skilled, and there is real demand for their services by U.S. companies, why limit at all? Why not let the market decide how many are needed? If the premise is that STEM jobs create more jobs, which there is plenty of evidence for, then in my mind, the more the better. And there is no reason to "protect" U.S. employees because they will benefit from the additional job openings thanks to the growth which will result from the great talent we will attract We see it every day in our companies - if they are able to get great talent, they are more likely to succeed, grow and create more jobs directly and indirectly. - Oren Zeev (Founding Partner) Orens Capital

89

A FIX MAY BE IN THE WORKS NEXT STEPS = SENATE FLOOR DEBATE IN JUNE + HOUSE DISCUSSION AND PROCESS (MAY BE MULTIPLE INDIVIDUAL BILLS IN COMING MONTHS) WITH PUSH TOWARDS CONFERENCE
90

A LOOK AT KEY PROVISIONS IN THE IMMIGRATION BILL BEFORE THE SENATE

Exempt Ph.D.s and STEM degree holders from U.S. universities from annual Green Card cap; also would exempt all family members of foreign workers. Boost H-1B base to 115,000 initially, with higher levels in years in which demand exceeds supply; current exemption for masters degree holders increases to 25,000 from 20,000. Makes it easier for H-1B holders to change jobs while keeping visa status. Sets rules to make sure H-1B holders arent displacing U.S. workers; requires U.S. employers to recruit U.S. workers. Creates fee for each H-1B petition to be paid by employers; proceeds to fund STEM education and training.

91

IN CLOSING

92

GROWTH IN PEOPLE + JOBS + GDP + PRODUCTIVITY + EDUCATION + CONFIDENCE = KEY TO USAS SUCCESS

93

PRESIDENT RONALD REAGAN, 1989

I believe, is one of the most important sources [Immigration], of America's greatness. We lead the world because, unique among nations, we draw our people - our strength - from every country and every corner of the world. And by doing so we continuously renew and enrich our nation Thanks to each wave of new arrivals to this land of opportunity, we're a nation forever young, forever bursting with energy and new ideas, and always on the cutting edge, always leading the world to the next frontier. This quality is vital to our future as a nation. If we ever closed the door to new Americans, our leadership in the world would soon be lost.

94

WHAT YOU CAN DO

With momentum for change building in Congress, we have a window of opportunity to enact true reforms that will grow the U.S. economy and create U.S. jobs. You can help keep the focus on Congress to drive change. Make sure your voice is heard.

95

ACKNOWLEDGEMENTS
A lot of people helped pull this document together and helped modify along the way. We thank the engineers and tech industry leaders H1-B + green card holders + first generation Americans + American natives that inspired us to push forward to compile the thoughts. Special thanks to Eric Savitz, Alix Burns, Mike Abbott, Juliet DeBaubigny, Fred Miller, Itamar Rosen, Greg Dingle, Jackson Gorham and John Maier. Design by

96

DISCLOSURE
This report has been compiled for informational purposes only and should not to be construed as a solicitation or an offer to buy or sell securities in any entity. Contributors to the report cannot guarantee the accuracy or completeness of any of the data (compiled from public sources believed to be reliable) and make no warranties (express, implied or statutory) as to the information in it. The information presented in this report does not necessarily reflect the views of Kleiner Perkins Caufield & Byers (KPCB) or any of its associated management personnel, investment vehicles, investors, portfolio companies or any affiliates or associates of the foregoing. Subject to the Terms and Conditions of Use http://kpcb.com/terms_of_use applicable to this Site, KPCB grants users of the Site a limited license to download this report and to use, reproduce and distribute the report, solely for non-commercial purposes.

97