U.S. markets open in 3 hours 34 minutes
  • S&P Futures

    -40.50 (-1.11%)
  • Dow Futures

    -257.00 (-0.88%)
  • Nasdaq Futures

    -171.00 (-1.51%)
  • Russell 2000 Futures

    -16.30 (-0.98%)
  • Crude Oil

    -0.34 (-0.43%)
  • Gold

    -10.00 (-0.61%)
  • Silver

    -0.34 (-1.84%)

    -0.0045 (-0.47%)
  • 10-Yr Bond

    0.0000 (0.00%)
  • Vix

    +2.34 (+7.25%)

    -0.0048 (-0.45%)

    -0.0460 (-0.03%)

    -1,528.40 (-7.58%)
  • CMC Crypto 200

    -32.30 (-7.04%)
  • FTSE 100

    -122.65 (-1.76%)
  • Nikkei 225

    -397.89 (-1.50%)

Do H-1B Visas Help or Hurt American Workers?

·13 min read

(Bloomberg Opinion) -- At a time of high U.S. unemployment and in an election year, the H-1B visa program has become a hot-button issue. President Donald Trump in June ordered a temporary ban on such skilled foreign workers, though his administration has carved out exceptions after court challenges by business groups and others. Trump’s rival for the presidency, Joe Biden, has promised to end Trump’s ban, expand the number of skilled-worker visas and drop limits for individual countries. Bloomberg Opinion columnists Rachel Rosenthal and Noah Smith, both of whom have written about this issue, recently got together online to debate it.

Noah Smith: In a recent article, you criticized the H-1B program, arguing U.S. companies don’t need these workers because they aren’t suffering a skills shortage. But this seems a bit like saying I don’t need a free $100 because my bank account isn’t suffering a money shortage. Skilled immigration seems like a thing where more is simply better, and framing the conversation in terms of “shortages” makes little sense.

There’s copious evidence of the benefits H-1B workers provide their native-born peers. Two of these, surprisingly, are higher wages and more jobs. Research has found that when a city gets more H-1B workers, employment growth for college-educated native-born workers in that city accelerates, and wages rise. H-1B workers might compete with educated native-born workers within specific companies, but this effect is overwhelmed by the investment a pool of skilled foreign workers attracts. Effectively, by bringing skilled workers here, we prevent tech investment from going elsewhere. And that benefits native-born workers. And research shows H-1B workers increase innovation, both in patenting and new product development.

So we shouldn’t depict the H-1B program as a zero-sum game between foreigners and native-born Americans, as Trump would have it. Instead, bringing skilled workers to the U.S. is a win-win.

Rachel Rosenthal: I couldn’t have said it better myself: Corporate America sees H-1Bs as a free $100 bill. Make that free stacks of $100 bills. Companies stand to save billions of dollars a year by hiring cheaper guest workers.

The whole point of the H-1B visa to address a deficit of skilled Americans, so framing the debate around shortages makes perfect sense. Not only is there no evidence of a shortage, but hundreds of thousands of surplus guest workers compete for a limited supply of jobs.

Can you name a single market where excess supply over a 30-year horizon would be considered healthy? The labor market is no exception. Just take a look at what’s happening in computer occupations, where most H-1Bs end up. Wage growth has flat-lined. And a study with access to companies’ actual wage records, using confidential Treasury Department data, found H-1Bs have an “insignificant” effect on patenting, lead to lower average employee wages and raise corporate profits. Research that relies on questionable evidence and methods, or conflates immigration and guest-worker policy, often only serves the interests of tech-industry employers.

(Consider, too, that top H-1B employers are IT services firms — not exactly the bleeding edge of patent generation. And whether patents are a proxy for innovation remains an open question.)

It’s tempting to say there’s no such thing as too much talent. But that assumes workers are like cans of tuna. Rather, human capital is a perishable good — you can’t stockpile it. Even a one-year delay of entry to the labor market can hurt wages. This is what makes conversations about H-1Bs’ contributions to the economy a distraction. The problem is the scale of the program, which caps opportunities for qualified Americans, including women and minorities. Blacks and Latinos’ proportion of computer science bachelor’s degrees earned, for example, far exceeds their representation in the IT workforce.

Even defenders acknowledge this visa category needs reform. What changes would you propose?

NS: When I say the H-1B program is like a free $100 bill, I don’t mean for corporations; I mean it’s a free $100 bill for the American people, including both the college-educated and the non-college-educated. The economy and the labor market are not a zero-sum game; the pool of jobs is not fixed.

The reason is that if companies don’t hire skilled tech workers in the U.S., they’ll hire them somewhere else — in India, or Israel, or South Korea, or Canada. Tech companies already have plenty of research offices overseas; it’s not hard for them to invest more in those other countries, if that’s where the talent is. By letting skilled workers into the U.S., we make sure investment dollars stay here, and our domestic tech industry expands. That raises wages and employment for native-born Americans.

The paper I linked to before, which you suggest isn’t objective, is not the only one that finds this. A 2015 paper by economists Sari Pekkala Kerr, William R. Kerr, and William F. Lincoln finds the exact opposite of the study you cite — namely, that the more H-1B workers a company can hire, the more educated native-born workers it tends to hire as well. A 2010 paper by economists Sunil Mithas and Henry C. Lucas, Jr. finds H-1B workers aren’t underpaid relative to the native-born. A 2017 report by the National Academy of Sciences surveys the research and concludes “several studies have found a positive impact of skilled immigration on the wages and employment of both college educated and noncollege-educated natives.”

So no, the H-1B program is not responsible for low wage growth in computer occupations. And it doesn’t cap opportunities for Black and Latino Americans. In fact, it expands those opportunities.

That’s not to say the program is perfect; few programs are. In his book “The Gift of Global Talent: How Migration Shapes Business, Economy & Society,” Harvard economist William Kerr gives some recommendations. One of these is to let H-1B workers self-sponsor for green cards; this will prevent them from being tied to one employer during the application process. A second reform is to raise the minimum wage for H-1B workers, so spots go to highly productive inventors and engineers rather than to less-productive IT outsourcing workers.

But despite the need for reform, the H-1B program is good for American workers overall, and should be expanded in size.

RR: Gene Nelson earned his PhD in biophysics in 1984. At one point, he struggled to get a job designing toilets and scraped by making $300 a week teaching at community colleges. Salil Choudhary worked in IT his entire career. He went from making as much as $250,000 a year to $50,000 after opting to leave an industry with diminishing prospects. Another woman I spoke with — having spent the past quarter of a century working in IT at a major U.S. insurance company — recalls watching colleagues get corralled into conference rooms to get laid off en masse. She senses she’s next.

These are the faces behind the data you refute. Do you want to be the one to tell them this program is good for American workers overall? Not to mention the thousands of others from Vanguard Group Inc., Southern California Edison Co., the University of California system, the Walt Disney Co. and the Tennessee Valley Authority (until Trump fired its chairman). Do you also tell the 15 million unemployed the pool of jobs is limitless?

If you don’t want to believe these human stories or data from the U.S. government on wage trends or the principle of supply and demand, just consider what top H-1B employers have said in their own SEC filings about their business models and the cost of U.S. hires. “Due to a vigorous focus on domestic (local) employment across many markets during the Covid-19 crisis, [restrictions on guest visas] are expected to increase substantially, resulting in increased expenses,” Infosys Ltd. recently reported.

We can play academic Ping Pong all day. A major problem with the Mithas and Lucas study on wages, for example, is that it’s based on a salary survey conducted by an IT publication and a management consulting firm. The research I cited earlier uses actual Treasury payroll information and company financials. For readers interested in going down the rabbit hole on the Kerr, Kerr and Lincoln paper, I would point them here. And if you’re going to talk about competitiveness, consider that companies compete, not countries.

I agree with the idea of raising the minimum wage to prioritize the best applicants. We also need a labor market test that requires employers to recruit U.S. workers and make sure they aren’t displaced. (For anyone who thinks that already happens, watch this immigration law firm explain how companies game the system. “Our goal is clearly not to find a qualified and interested U.S. worker,” its marketing director said.)

But if you want to understand the problem, talk to the real people living it. If the H-1B program is meant to “expand opportunities” for Americans, it’s doing a dismal job, particularly for older workers (in tech, that’s anyone over 35). Many of the people I spoke with said they’d never let their children work in the industry. That’s a shame.

NS: You’re right that I can come back with more and more academic studies; and I’m sure you can find some way to question the integrity of the authors of each and every study. I’m also sure you can counter those papers with any number of anecdotes of people who believe they lost their IT jobs because of competition from foreign workers, rather than from COVID-19, bad management decisions, or a host of other reasons the U.S. economy fails its workers.

I’m at a natural disadvantage there; because the benefits of the H-1B program are diffused throughout entire industries and cities, it’s hard to point to individual Americans and say “See? This person got an IT job because the H-1B program lured tech industry investment to her city!” Even companies who think they got a bargain on a foreign worker might themselves not recognize how H-1Bs contribute to the ecosystem that benefits native-born workers.

But once we start thinking of jobs, including IT jobs, as a fixed pool to be divided, it takes us to all kinds of dark places. It takes us to the expulsion of a million Mexicans (including American citizens) in the Great Depression, which was intended to save American jobs but clearly failed to do so. It takes us to the Chinese Exclusion Act, done partly in response to workers’ fears that Chinese laborers were undercutting their wages.

No immigration restriction in U.S. history has, to our knowledge, ever succeeded in raising wages or employment for the native-born. But people like presidential advisor Stephen Miller, who want to prevent U.S. demographics from changing, are eager to use misguided labor-protectionist arguments to further their schemes for racial engineering. They know the H-1B program is the gateway to permanent immigration for many (mostly Asian) workers.

Rachel, if I’m not mistaken, you and I are both Jewish. Our own immigrant ancestors suffered discrimination from some native-born Americans who were afraid they’d be displaced from elite universities and skilled jobs. But our ancestors’ successes did not come at the expense of Christians. Instead, their skills complemented each other, and the nation became richer for it. H-1B workers from China, India, and elsewhere deserve the same chance our own ancestors received. America will be richer and stronger if we let them come.

RR: Let’s be clear. The H-1B program is for guest workers, not immigrants. Because 70% of H-1Bs come from one country, there’s a green-card backlog that can stretch decades. This leaves visa holders in perpetual limbo, reliant on their employers and vulnerable to exploitation. Summoning anti-immigrant history and rhetoric may be convenient, even evocative, but our grandparents have no place in this debate.

You may recall I concluded my piece suggesting the U.S. needs a less convoluted way to help the world’s best and brightest become citizens. If the H-1B program is supposed to do that, it has failed. If the H-1B program is supposed to fill a shortage, it has failed. (The data in my piece will walk you through the math on this.)

The proposition has never been to abolish the H-1B visa category. Rather, I’ve sought to establish that the supply of qualified Americans and permanent residents is large enough to question the scale and implementation of it. Why does Corporate America perpetuate the skills gap myth? Quite simply, because employers have an interest in hiring cheaper labor. My analysis is based on data from government sources, as well as interviews with tech workers, lawyers and academics, not to mention the former congressman who wrote the original H-1B statute.

But don’t take my word for it. Crisil, a unit of S&P Global, has written that Indian IT firms (among the biggest H-1B employers) rely on “labor arbitrage for maintaining margins.” Our own Bloomberg Intelligence analysts published a note last week discussing the impact of hiring locally in “higher-cost regions” like the U.S. This is the message to people with money on the line.

My piece only reflects a splinter of the work done by academics like Ronil Hira of Howard University, Hal Salzman of Rutgers University and others, who have spent years analyzing how visa programs impact the labor market and what can be done better. Unfortunately, their suggestions keep meeting resistance from vocal and deep-pocketed employers. Yet they’re not the ones who need the megaphone.

I was moved by the reaction I got to my article. From displaced workers, I heard relief someone was finally paying attention. Many have suffered financial hardship, depression and worse. Who can blame them? All they hear from friends and family is some version of, “If there’s a shortage, why can’t you find a job? What’s wrong with you?” Even more surprising, though, were the replies from people who’ve been through the H-1B system. Rather than a flood of messages telling me how I got it all wrong, the overwhelming response was “thank you.”

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Rachel Rosenthal is an editor with Bloomberg Opinion. Previously, she was a markets reporter and editor at the Wall Street Journal in Hong Kong.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

For more articles like this, please visit us at bloomberg.com/opinion

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.