The Economic Impact of Curbing the Optional Practical Training Program
The Trump Administration has indicated plans to scale back a variety of existing immigration channels that would directly or indirectly affect the Optional Practical Training (OPT) program. To quantify the likely impacts of these potential changes on the U.S. economy, Business Roundtable developed and modeled a scenario in which new immigration policies would lead to a 35 percent reduction in the issuance of foreign-born student visas and a 60 percent decline in OPT participation by 2020. Following are key findings from the study.
What is OPT?
OPT is a key channel through which high-skilled immigrants contribute to U.S. economic growth. The program offers temporary employment authorization to international students in the United States, allowing eligible students and recent graduates to gain valuable work experience within their field of study. By infusing the economy with well-educated workers and entrepreneurs who attend and graduate from U.S. colleges and universities, OPT has proven to be a highly successful program with direct benefits for American businesses and consumers.
What are the economic benefits of immigration and OPT?
Effects on gross domestic product (GDP)
- By infusing the economy with new consumers, immigration increases total consumer spending, which accounts for roughly two-thirds of economic growth.
- Immigration increases the supply of labor, boosting overall economic output.
- By starting new businesses and developing new technologies, immigrants also increase the productivity of capital, which in turn strengthens economic output.
- A 1 percent increase in the population of immigrants in the United States is associated with a 1.15 percent gain in GDP.
Effects on the labor market
- Immigration also tends to boost total employment in the U.S. economy, reducing labor shortages and filling critical skills gaps.
- As the pool of available labor increases, businesses expand, which creates jobs that are often filled by native-born workers and leads to additional business investment.
- Immigration induces improvements in productivity in the labor market, which typically leads to wage gains. Total immigration to the United States from 1990 to 2007 was associated with a $5,100 increase in annual income for the average U.S. worker.
Effects on entrepreneurship
- Immigrants are more likely to start a business than native-born U.S. citizens.
- Immigrants account for a quarter of the entrepreneurs in America.
- In 2018, almost 44 percent of Fortune 500 companies were founded by immigrants or their children.
- A 1 percent increase in immigrant college graduates leads to a 15 percent increase in patents per capita.
Bottom line: Because OPT is available only to international students studying in the United States and recent graduates, participants tend to be young, intelligent and hardworking — perfectly positioned to contribute to economic growth.
How would changes in immigration policy affect these benefits?
If the Administration introduces policy changes that would lead to a 35 percent reduction in the issuance of foreign-born student visas and a 60 percent decline in OPT participation by 2020, the effect on the U.S. economy would be negative. For example:
Effects on GDP
Real U.S. GDP would decline by about a quarter of a percentage point by 2028. The slowdown is caused by a decline in immigrant consumers and workers who would otherwise reduce hiring shortages and fill skills gaps.
Cumulative Loss of Real GDP Due to OPT Reform
Percentage Point Difference Between Baseline and Modeled Scenario
Effects on the labor market
Over the next decade, the labor market would lose 443,000 jobs — including 255,000 jobs held by native-born workers. This result reinforces the findings of myriad studies that show that foreign-born workers actually create jobs for native-born workers on aggregate, rather than displace them.
Cumulative Job Loss Due to OPT Reform
Thousands of Jobs, Difference Between Baseline and Modeled Scenario
Average real hourly wages would decline by 17 cents by 2028, due to increased slack in the labor market and fewer productivity gains.
Cumulative Decline in Real Average Hourly Wage Due to OPT Reform
Difference in Real Average Hourly Wage Between Baseline and Modeled Scenario
Effects on entrepreneurship
While the analysis did not model the effects of curbing OPT on entrepreneurship, policies that make it more difficult for international students to work in the United States after they graduate will likely reduce business creation.
Share of Private, Billion-Dollar American Start-Ups Founded by Immigrants
As of October 1, 2018
