The U.S. government’s H-1B visa program allows highly skilled foreign citizens to work in the United States for a temporary amount of time. Each year, more than 200,000 people apply for 85,000 available visas, and to make the process more equitable, the U.S. government selects visa recipients by a random lottery.
W. Bradford Wiley Chair in International Economics Chad Sparber researches the implications of protocols like H-1B on the American economy as well as the opportunities it presents to people with international origins. Last January, he partnered with Assistant Professor of Economics Rishi Sharma to assess the lottery system in a policy brief, published by the Cato Institute.
Sparber and Sharma say that American firms are losing money trying to hire talent with visas through the lottery as it currently stands. From the vantage point of a firm, an employer could have a one-in-three chance of hiring someone who wins the visa lottery. It may only want to hire one worker, but it ends up extending three different job offers because it only has that 30% chance of being successful. Yet, every time a firm searches for a new employee, there is an associated cost, and firms spend an exorbitant amount of money seeking workers they will never hire.
Sparber and Sharma also believe that the current H-1B protocol puts small business owners at a disadvantage, as they frequently lack the financial capital and resources to compete against global corporations like Microsoft. Because of their lack of access, Sparber says, small firms will use H-1B outsourcing firms — a distinct artifact of an already controversial lottery process. In 2014, almost one third of all H-1B visas went to 13 outsourcing companies. With the majority of them based in India, outsourcing firms game the current system by flooding it with visa applications.
Sparber and Sharma believe the key issues in having a randomized lottery system could be fixed if the visas were issued based on merit and not the luck of the draw. Of the 200,000 applicants, the 85,000 selected for visas could be the individuals who have the highest wage offers. By doing this, firms would be prevented from undercutting their competition in making offers to potential employees and paying them much less than their market value — H-1B workers hired from international outsourcing firms can often earn $60,000 wages, while those hired by top corporations like Amazon, Google, and Microsoft tend to earn nearly $100,000 in salaries.
It remains to be seen as to what the H-1B visa process will look like moving forward.
“The program itself is controversial,” Sparber says. “There are a lot of people like me who’ve done research and found that it is good at getting skilled STEM workers [into] the country. They’re major innovators for the economy.”
Others, Sparber contends, have a misplaced worry that individuals from other countries will take opportunities from American workers.
During the pandemic, the government suspended visas for foreign workers in an effort to preserve what were then rapidly dwindling American jobs. In a Los Angeles Times editorial, Sparber tried to counter the move by depicting the ways in which work done by nonimmigrant employees complements the work of American workers rather than replacing it altogether.
According to Sparber’s research, Americans and people from foreign nations typically work in different occupations and, as a result, the two groups of professionals are not competing for the same jobs. This extends to the majors that American college students pick compared to foreign college students. “Relatively speaking, foreign students are much more likely to major in science, math, or economics,” Sparber says, “while native-born Americans are more likely to major in other disciplines, including the humanities.” That’s partly because STEM skills are readily transferable internationally and partly because U.S. immigration policy favors STEM majors.
Findings from the University of California–Davis suggest that policies limiting foreign-born employment could have a significant impact on the matriculation of international students on American campuses and, by extension, the hiring of international workers in America. International students could be dissuaded from studying in America or forced to leave if they cannot renew their visas. American students also only pay 40–50% of full college costs on average, compared to many international students paying 100% of those same costs for their education.
Most notably, international students play an integral role in leading innovation and research at the top college institutions across America. Almost 75% of the nation’s science and engineering research articles were written in universities and 60% of those materials had contributions from international students.
Read Sharma and Sparber’s full brief.
Editor’s note: Sparber’s work on the economics of immigration has also been cited by the Committee for the Prize in Economic Sciences in Memory of Alfred Nobel in its “Scientific Background on the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2021: ANSWERING CAUSAL QUESTIONS USING OBSERVATIONAL DATA.” Read more.