H-1B Visa Gold: Unintended Economic Consequences Of The IT Boom

A new study by Gaurav Khanna and Nocolas Morales of the Global Development Fund shows exciting positive economic impacts of the United States’ H-1B visa program. The positive effects of the H-1B program and bringing in foreign talent in general are far reaching.

The study found that the H-1B visa scheme generated $431 million for U.S. workers across all sectors in 2010 and caused a tech boom both in the U.S. and in India between the early 1990s and 2010. The net gains for both India and the U.S. equate to an extra $1,345 per H-1B worker. The combined income of the two countries increased by 0.36%, with significantly greater growth in the Indian technology sector.

It is often argued the H-1B workers drive down wages and take jobs from Americans. However, the data indicate otherwise. Between the creation of the H-1B program and the year 2010, increases in H-1B STEM workers were associated with a significant increase in earnings for college-educated American workers, in 219 American cities.

Immigrant labor also lowered the price of computer equipment by up to 2.4%. A study published by the American Immigration Council reported that increases in H-1Bs among STEM workers resulted in wage increases for not only college-educated American workers but also non-college educated workers. There was a 7 to 8% pay increase city wide for every 1% increase in the number of STEM workers in 219 U.S. cities.

Wage growth within the technology sector also proceeded faster with a growth of 5.5% in the technology sector compared to .8% across all industries. A 1990 study found that immigration increased wages across the general economy from .04% to .28% at the height of the boom.

It bears repeating that immigrant H-1B workers do not take jobs from American employees. Foreign workers are an economic driver. In fact, every foreign-born worker in the United States with a U.S. STEM degree creates 2.62 jobs for American workers according to a 2011 study by Madeline Zavodny.

H-1B visas are particularly valuable to small businesses. Firms with fewer than 5,000 employees hire and additional 7.5 workers for each H-1B worker hired according to a report by the National Foundation of American policy. Researcher Giovanni Peri confirmed that hiring immigrants raises wages for native STEM workers and causes native STEM workers to be more likely to specialize in various roles while foreign born workers fill more technical or low-level positions.

H-1B workers compliment rather than displace American workers.  Unemployment in the tech sector remains low compared to the general economy. In 2009 to 2011 there were 1.9 STEM jobs posted online for every unemployed STEM worker. Moreover, STEM job vacancies remain posted 5% longer than non-STEM vacancies illustrating that these positions are hard to fill.

Efforts to limit the skilled foreign workers from entering the country would have an adverse effect on the economy.  Despite these positive economic factors, recent political rhetoric has singled out the H-1B visa for attack. U.S. legislators and President Trump are promoting a cut in legal immigration by up to 50%.

According to a report from the American Immigration Council, unemployment rates for specialty occupations which utilize H-1B visas are low compared to the general economy. Also, according to the same study, “Research indicates that an increase in H-1B visas could create an estimated 1.3 million new jobs and add around $158 billion to Gross Domestic Product in the United States by 2045.” Thus, the H-1B program is a catalyst for growth in the U.S. economy and innovation in the STEM industries

From 1990 to 2007 immigration accounted for as much as 9.9 percent in real income per worker and may explain between 10 and 25 percent of the aggregate productivity growth that took place between 1990 and 2010 during the technical boom. Immigration increases average income for all Americans across all sectors and boosts the economy.

Many other countries such as Germany, Australia, Canada, and Singapore are adopting a no cap policy on high-skilled immigrant worker visas. U.S. policy makers should strive to ensure America is not left behind in the race for high-skilled immigrants and entrepreneurs.