If there is one thing that the new Obama administration could do right away to increase America’s competitiveness, it would be to increase access to graduate education for more Americans.
Consider the chart below, from which it is quite clear that we do a good job at producing undergraduates but fail to create enough advanced degree holders, especially at the doctoral level.
But programs like the H1-B are not the solution because they encourage us to become dependent on foreign talent while neglecting the vast pool of human capital we already poses as a large nation of over 300 million. Nor is a policy of making it easier for foreign students to stay after they get their advanced degrees a good bet. Such a policy would have the effect of crowding out domestic students, at least in the short term, including immigrants who grew up in America. Programs like the H1-B encourage more and more foreign students to compete for admission to a limited number of openings in graduate programs in hopes of getting their green cards with diplomas. We are better off making it easier for those who earn undergraduate credentials to continue to graduate school. One way of making this easy is to reduce the costs of graduate education.
The most aggressive policy would involve a grant program that would make graduate education free, especially at the doctoral level, where we seem to have a shortage. A really smart and aggressive program would make STEM graduate education free. Such a program would pay for itself. For example, a study by Arlene Holen for the Technology Policy Institute found that over a decade, high skilled workers generate as much as $100 billion in increased tax revenues. By easing access to graduate programs, we increase the number of highly skilled workers in the America, which has the effect of broadening the tax base.