The United States has long attracted some of the world’s best and brightest. But nearly 2 million immigrants with college degrees are relegated to low-skilled jobs or can’t find work. The result of this brain waste? If these highly skilled immigrants were working at their skill level, in the professions for which they had trained for and have experience in, they would earn more than $39 billion more annually and pay more than $10 billion more in taxes, according to a report in brief issued today by New American Economy (NAE), Migration Policy Institute (MPI), and World Education Services (WES). In fact, one in four of the 7.6 million college-educated immigrants in the United States during the 2009-2013 period experienced skill underutilization, meaning that they were either working in low-skilled jobs or unemployed.

The report in brief Untapped Talent: The Costs of Brain Waste among Highly Skilled Immigrants in the United States offers the first-ever economic costs of underemployment for the college-educated immigrant population in the United States. Drawing upon analysis of Census Bureau data, the report profiles the underutilized population and quantifies the cost of brain waste nationally and in several states. An extended version of the report in brief is also available through MPI, as well as fact sheets documenting the impact of brain waste in seven states: California, Florida, Michigan, New York, Ohio, Texas and Washington State.

“The economy takes a hit in every case where a high-skilled immigrant is underemployed or can’t find work,” said John Feinblatt, Chairman of New American Economy. “Smarter immigration policy can help connect workers of every background to jobs that match their skill sets – and make the economy stronger for all of us.”

“Our research makes clear that low-skilled employment among highly skilled immigrants—the old, familiar story of doctors driving taxicabs—carries substantial economic costs,” said MPI President Michael Fix, an author of the report. “And these costs accrue not just to the immigrants and their families, but to the broader U.S. economy.”

This brain waste should be of particular concern given that the highly skilled comprise an ever greater share of new arrivals. Almost half of immigrant adults entering the United States between 2011-2015 held a bachelor’s degree or more, the researchers found. That’s compared to 33 percent in 2006–a time before the great recession–and the 27 percent share in 1990.

While these college-educated immigrants experiencing brain waste lost out on $39.4 billion in wages annually, the report finds they would have been able to narrow the gap to $28.5 billion if employed in higher-skilled work at the same rate as U.S.-born college graduates.

The report finds:

• Nearly two million highly-skilled immigrants in the United States are working in low-skilled jobs or are unemployed. There were 45.6 million college graduates in the U.S. labor force; 7.6 million were born outside the United States, according to our analysis of 2009-13 U.S. Census Bureau data. Of these 7.6 million immigrants, one in four, or 1.9 million individuals, were either underemployed or unemployed—a far higher share than for the U.S. born.

• Immigrant underemployment represents a lost opportunity for the U.S. economy, resulting in billions of dollars in forgone earnings and tax payments annually at federal, state, and local levels. If these highly skilled immigrants were working at their skill level, in the professions for which they had trained and have experience, they would earn $39.4 billion more annually. As a result, they would pay $10.2 billion more in taxes: $7.2 billion at the federal level, and $3 billion at the state and local level. If employed in adequate jobs (in other words, middle-or high-skilled jobs) at the same rate as college-educated U.S.-born workers, we estimate they could make up $28.5 billion of that gap.

• Brain waste is a concern across the nation, but it affects some states more than others. Of the seven states we examined, Florida had the highest rates of skill underutilization (32 percent), while Michigan and Ohio had the lowest (20 – 21 percent). The seven states accounted for nearly 60 percent of the $39.4 billion in annual forgone earnings that result from immigrant college graduates’ low-skilled employment: California ($9.4 billion); New York ($5.1 billion); Florida ($3.6 billion) Texas ($2.5 billion); Washington ($830 million); and half a million dollars apiece for Michigan and Ohio. The resulting forgone tax payments in the states studied ranged from approximately $700 million and $600 million yearly for California and New York respectively, to roughly $50 million for Michigan.

• Brain waste is particularly acute for immigrants who were educated outside the United States. Immigrants who earned their college degrees abroad were far more likely to be underemployed or unemployed than those who went to U.S. universities. While 29 percent of foreign-educated immigrants were underutilized, only 21 percent of U.S.-educated immigrants were. Foreign-educated immigrant women faced particularly high rates of brain waste: 32 percent, or close to one in three were underemployed or unemployed during the 2009 to 2013 period.

• Citizenship status plays a role in determining skill underutilization. Highly skilled immigrants who had become U.S. citizens were less likely than legal permanent residents (aka green-card holders), to experience brain waste: 23 percent versus 30 percent. Being unauthorized imposes a high risk of brain waste. Forty-three percent of unauthorized immigrants who earned their degrees abroad were either working in low-skilled jobs or unemployed.

Highly skilled immigrants face a range of barriers to employment at their skill levels, among them:difficulty getting foreign credentials recognized, unfamiliarity with the U.S. labor market, employers’ negative perceptions of the quality of foreign education and work experience, limited English skills and a shortage of education programs to bridge skills deficits. Many of these barriers could be addressed or at least alleviated through targeted programs and policies. The report spotlights initiatives undertaken by non-profits and some states, including Michigan and Ohio.

The report notes that immigrants are not alone in experiencing brain waste. Eighteen percent of U.S.-born college graduates, nearly 7 million people, also cannot find work at their skill level.

Download the report in brief.