Highly Skilled, Highly Helpful: The H-1B Shortage
Ryan Zhu
Edina High School
Edina, MN
The H-1B visa provides a temporary work visa for specialty and educated workers to work in the United States, with a current H-1B visa quota of 85,000 visas issued per year.[1] These visas overwhelmingly go to STEM workers, making up 64% of visas in FY 2011.[2] Despite these temporary visas, the United States still has a dramatic shortage of STEM workers, with roughly 3 million more jobs than the number of available, trained professionals who could potentially fill them.[3] Unfortunately, President Trump has continued to make the H-1B process more restrictive in line with his protectionist “Hire American” policies.[4] Instead, the United States should increase the H-1B visa quota in order to alleviate the skills shortage, thus expanding the United States economy and improving the general welfare of society.
An increase of H-1B visas would allow US businesses to increase their productive capacity. In the status quo, skill shortages impede on business productivity because companies struggle to find qualified workers for specialized positions.[5] Thus, rather than taking American jobs, H-1B workers fill job openings, as the number of job vacancies could increase by 1 million by 2020 because the supply of qualified professionals is not keeping up with demand.[6] In particular, H-1B demand is concentrated in tech hotspots such as Boston and Silicon Valley, where unemployment for US engineers is already low but excess demand continues to outpace supply.[7] In fact, H-1B jobs support a bevy of other complementary jobs, with every one H-1B worker created another 3 complementary jobs for lower-skilled workers.[8] Indeed, an increase of H-1B visas could create 1.3 million new jobs and would increase the US GDP by $158 billion by 2045 due to increased labor productivity.[9]
An influx of skilled workers within the industry also brings greater collaboration and ideation with domestic innovators, creating an innovative echo chamber that allows businesses to innovate faster.[10] Consequently, data shows that a 10% increase in H-1B population corresponded with 12% growth in inventions by the largest immigrant groups and a 1% growth in patents by US natives.[11] Under economic theory, innovation and technological growth drive long-term economic growth by increasing our productive capacity. By allowing foreign and American innovators work together, H-1B visas increase American productivity. Overall, the H-1B visa program fosters a “brain-gain” effect, inducing substantial increases in firm productivity and consumer welfare.[12]
Not only would increasing the H-1B cap result in growth in the economy, but it would also prevent companies from looking overseas for skilled workers. In theory, when companies are unable to satisfy their labor demands domestically, they move entire business operations abroad to access greater foreign talent pools. Without enough skilled workers in America, companies must expand outside of the United States, preventing jobs from being created in the US.[13] This effect has been shown empirically, as 65 percent of American companies have outsourced jobs because of the lack of skilled workers created by the low visa quota.[14] Increasing the H-1B quota would help keep both high-skilled, high-demand positions and lower-level, complementary jobs in America by allowing greater access to skilled labor.
Moreover, raising the H-1B cap would raise government revenues both directly through application fees paid by companies and indirectly by expanding the taxpayer base. In fact, raising the H-1B cap to 195,000 a year would increase tax revenues by $69 billion over eight years, providing much-needed funding for redistributive policies and public benefits.[15] These contributions have already had concrete applications; since 1999, H-1B application fees have funded over 70,000 National Science Foundation scholarships for US students.[16]
Lastly, ending the skills shortage in America would help to reduce income inequality. Wage inequality in the United States has increased substantially, nearing levels the United States had before the Great Depression.[17] Problematically, a 2008 Harvard study found that the leading cause of growing income inequality over the last generation has been the market’s response to a shortage of skilled workers.[18] Due to the excess demand not being met by supply, companies are driven to have excessive wage competition for the limited supply of skilled workers. Consequently, skilled worker wages have skyrocketed relative to overall wages, driving income inequality. Increasing the amount of H-1B visas each year would fulfill demand for these specialized workers, subsequently slowing wage growth and reducing the wage gap. Even more so, increasing H-1B workers also induces higher demand for complementary, less skilled work, creating upward pressure on wages. Empirically, a 2015 study of 219 US cities shows that a 1% increase of H-1B workers increases the wages of non-college educated workers by 3-4%.[19] Increasing the H-1B cap engenders both greater supply for high skilled workers while also creating greater demand for complementary workers, thereby reducing the wage differential.
In conclusion, increasing the H-1B visa cap would bring many benefits to our economy. We suffer from vital skill shortages and must be able to fill these jobs to both improve our economic performance, prevent outsourcing, and reduce wage inequality. The United States should not be focusing on protectionist policies, but rather on welcoming more high skilled workers to fill the skills shortage. While other immigration policy may bring in some skilled labor, H-1B visas are the most efficient way to target specialized workers that American businesses critically need. Therefore, increasing the annual quota for H-1B visas would transform our society and economy for the better.
References and Endnotes
[1] “H-1B Fiscal Year (FY) 2019 Cap Season.” USCIS, U.S Citizenship and Immigration Services, 30 Jan. 2019, www.uscis.gov/working-united-states/temporary-workers/h-1b-specialty-occupations-and-fashion-models/h-1b-fiscal-year-fy-2019-cap-season.
[2] Choudhury, Shyamali, et al. “The Search for Skills: Demand for H-1B Immigrant Workers in U.S. Metropolitan Areas.” Brookings, Brookings, 18 July 2012, www.brookings.edu/research/the-search-for-skills-demand-for-h-1b-immigrant-workers-in-u-s-metropolitan-areas/.
[3] “Sizing Up the Gap in Our Supply of STEM Workers.” New American Economy, 29 Mar. 2017, research.newamericaneconomy.org/report/sizing-up-the-gap-in-our-supply-of-stem-workers/.
[4] Clark, Gabrielle. “Trump's 'Buy American and Hire American' Initiative Won't Actually Help Workers.” The Washington Post, WP Company, 10 Oct. 2018, www.washingtonpost.com/outlook/2018/10/10/trumps-buy-american-hire-american-initiative-wont-actually-help-workers/?noredirect=on&utm_term=.f31763c47c1f.
[5] Torres, Nicole. “The H-1B Visa Debate, Explained.” Harvard Business Review, Harvard Business School Publishing, 4 May 2017, hbr.org/2017/05/the-h-1b-visa-debate-explained.
[6] Economist. “A Blueprint for Getting More Women into Information Technology.” The Economist, The Economist Newspaper, 12 Dec. 2016, www.economist.com/science-and-technology/2016/12/12/a-blueprint-for-getting-more-women-into-information-technology.
[7] Wadhwa, Vivek. “Debunking Myths About Highly-Skilled Immigration and the Global Race for Talent.” Harvard Business Review, Harvard Business School, 7 Aug. 2014, hbr.org/2013/06/its-not-about-skills-shortages.
[8] Zavodny, Madeline. American Enterprise Institute. American Enterprise Institute for Public Policy Research, 2011, American Enterprise Institute, www.aei.org/wp-content/uploads/2011/12/-immigration-and-american-jobs_144002688962.pdf.
[9] American Immigration Council. “The H-1B Visa Program: A Primer on the Program and Its Impact on Jobs, Wages, and the Economy.” American Immigration Council, 6 Apr. 2018, www.americanimmigrationcouncil.org/research/h1b-visa-program-fact-sheet.
[10] Smith, Noah. “Cuts to Skilled Immigration Degrade a U.S. Strength.” Bloomberg, Bloomberg, 12 Mar. 2018, www.bloomberg.com/opinion/articles/2018-03-12/cuts-to-h-1b-visas-for-skilled-immigrants-hurt-u-s-economy.
[11] Kerr, William. THE SUPPLY SIDE OF INNOVATION: H-1B VISA REFORMS AND US ETHNIC INVENTION. National Bureau of Economic Research, 2010, pp. 17–18, THE SUPPLY SIDE OF INNOVATION: H-1B VISA REFORMS AND US ETHNIC INVENTION.
[12] Khanna, Gaurav, and Nicholas Morales. The IT Boom and Other Unintended Consequences of Chasing the American Dream. Center for Global Development, 2017, The IT Boom and Other Unintended Consequences of Chasing the American Dream, www.cgdev.org/publication/it-boom-and-other-unintended-consequences-chasing-american-dream.
[13] Nell, Guinevere. “More H-1B Visas, More American Jobs, A Better Economy.” The Heritage Foundation, 30 Apr. 2008, www.heritage.org/immigration/report/more-h-1b-visas-more-american-jobs-better-economy.
[14] National Foundation for American Policy. “H-1B VISAS AND JOB CREATION.” National Foundation for American Policy, Mar. 2008, http://www.nfap.com/pdf/080311h1b.pdf
[15] Sherk, James. “H-1B Workers: Highly Skilled, Highly Needed.” The Heritage Foundation, 6 May 2008, www.heritage.org/jobs-and-labor/report/h-1b-workers-highly-skilled-highly-needed.
[16] Anderson, Stuart. “Setting the Record Straight on High-Skilled Immigration.” National Foundation for American Policy, Aug. 2016, nfap.com/wp-content/uploads/2016/08/Setting-the-Record-Straight-on-High-Skilled-Immigration.NFAP-Policy-Brief.August-20162.pdf.
[17] Pettit, Bruce, and Becky Pettit. “20 Facts About U.S. Inequality That Everyone Should Know.” Stanford Center on Poverty & Inequality, 2011, inequality.stanford.edu/publications/20-facts-about-us-inequality-everyone-should-know.
[18] Autor, David H., et al. Trends in U.S. Wage Inequality: Revising the Revisionists. Harvard University, 2015, pp. 19–21, Trends in U.S. Wage Inequality: Revising the Revisionists.
[19] Peri, Giovanni et al., "STEM Workers, H-1B Visas, and Productivity in US Cities.” Journal of Labor Economics, 21 Jul. 2015, http://giovanniperi.ucdavis.edu/uploads/5/6/8/2/56826033/stem-workers.pdf