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H-1B Visas Keep Down U.S. Tech Wages, Study Shows

 

Silicon Valley has long portrayed the U.S. visa program for skilled foreign workers as a win-win, providing much-needed tech talent and fueling innovation and economic growth.

Critics—including President Donald Trump—have said that the H-1B visa program disadvantages American workers by allowing companies to hire cheaper foreign labor for roles that would have gone to U.S. workers.

A new research paper on the effects of the H-1B visa program on workers suggests the influx of skilled foreign workers has historically led to lower wages and employment for American tech workers. Such findings could further inflame debate around immigration of high-skilled workers, but some economists caution against making too much of the result.

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Economists from the University of Michigan and the University of California, San Diego, analyzed employment, wages and other factors over an eight-year period ending in 2001. They found that, while the visa program bolstered the U.S. economy and corporate profits, tech-industry wages would have been as much as 5.1% higher in the absence of the H-1B visa program and employment of U.S. workers in the field would have been as much as 10.8% higher in 2001.

Giovanni Peri, an economics professor at the University of California, Davis, said the new research is noteworthy, but would like to see more studies on the issue. Mr. Peri’s own research on immigration of highly skilled workers—not solely H-1B holders—found overall positive effects on wages across a variety of job sectors.

John Bound, a professor at the University of Michigan and one of the authors of the new study, said he and his fellow researchers focused their paper on the 1994 to 2001 period because it was the longest stretch of time when employers claimed all available H-1B visas. However, in an earlier paper, they found that a similar model did “a good job capturing the movement of wages and employment in the 2001 to 2011 period,” Mr. Bound said.

“There is little reason to believe the overall impact of high-skilled immigrants on the U.S. economy has changed dramatically since 2001,” he said.

Since the Immigration Act of 1990 established the H-1B visa for college-educated foreigners, tech employers have relied on the program as an important source of labor to make up for a persistent shortage of American tech workers. U.S. employers can sponsor up to 85,000 H-1B holders a year. The visas last for up to three years and holders can seek one renewal, which allows for a total stay of six years.

Sustaining and expanding the H-1B program has long been one of the tech industry’s top lobbying concerns. Under a president who has encouraged the nation to hire American and buy American, such findings could make the industry’s fight more difficult.

As president-elect, Mr. Trump hinted that his stance on H-1B program may have softened.

The U.S. Citizenship and Immigration Services recently announced that it will temporarily suspend fast-track processing of H-1B visas for up to six months starting in April. The halt means immigration services won’t allow sponsoring companies to pay an extra fee to expedite their applications for foreign workers. The agency says the freeze will give it time to address a backlog of applications and help it improve overall H-1B visa processing times.

Jennifer Hunt, former chief economist at the U.S. Department of Labor under President Obama, said she’s noticed an increasingly politicized response to research on immigration and wage inequality. She said she would have preferred that Mr. Bound and his co-authors focus on more recent time periods, but added that the paper is “the best work we have by a long way” in quantifying the “negative” effects of high-skilled immigration.

The paper, “Understanding the Economic Impact of the H-1B Program on the U.S.,” written with co-authors Nicolas Morales of the University of Michigan and Gaurav Khanna of the University of California, San Diego, was published in February by the nonpartisan National Bureau of Economic Research.