The Contribution of International Students to US Labor Supply

Nearly one-quarter of the international students who earn master's degrees at US universities find post-graduation jobs in the state in which they graduated.

The United States is home to world-class universities that attract hundreds of thousands of international students each year. Between 2000 and 2015, the number of international students who received either a bachelor's or master's degree from a US college or university ranged between 500,000 and 1 million per year. Many of these students acquired substantial human capital in the course of their studies. Whether these graduates deploy their skills in the US labor market is the focus of International College Students' Impact on the US Skilled Labor Supply (NBER Working Paper 30431). In this study, Michel Beine, Giovanni Peri, and Morgan Raux estimate the probability that international students find jobs after graduation in the state where they studied. They rely on enrollment variation that is driven by variation in the tuition charged to international students by US public universities to address this question. They analyze a new university-level database on international graduates merged with individual data on Optional Practical Training (OPT) permits. These permits represent the primary way students on F-1 visas transition into the US labor market.

The researchers find that about 23 percent of international students who earn master's degrees and 12 percent of those who earn bachelor's degrees find a within-state job post graduation. The data suggest that most foreign graduates who transition into US employment find their first job in the state in which their universities are located.

These estimates have potentially important implications for labor markets and immigration policy. For example, in 2020, foreign enrollment in US graduate and master's programs dropped from 400,000 students on F-1 visas to about 100,000 due to the COVID-19 pandemic. The study's findings suggest that this decline of 300,000 students will translate into 30,000 to 60,000 fewer foreign graduates working in the US between 2022 and 2024. This is a time when some analysts forecast that the US labor market will experience labor shortages.

The researchers also find substantial differences across fields in the likelihood that a graduate remains in the US and finds a job. STEM graduates have a roughly 20 percent chance of joining the US labor force, but for non-STEM graduates, the researchers find employment rates that are not statistically different from zero. They also find that the 2008 reform that extended the duration of the OPT work permit from 12 to 29 months for STEM graduates led to an increase in the probability that foreign graduates would become employees, while also extending the period of time over which they could work.

— Lauri Scherer