Which one is right? I have tended to side with the first narrative. But that seems like all the more reason to give some further consideration to the second, which gets a comprehensive treatment in a new paper by the economists John Bound and Nicolas Morales of the University of Michigan, and Gaurav Khanna at the University of California, San Diego.
During the internet boom between 1994 and 2001, technology companies took in many more high-skilled foreign born workers, as the annual cap on H-1B visas grew from 65,000 to 195,000. In their analysis of this period, Bound, Khanna, and Morales conclude that high-skill foreign workers led to more innovation, cheaper products, and higher tech profits. But the availability of cheaper labor also hurt native-born engineers. “In the absence of immigration, wages for U.S. computer scientists would have been 2.6 percent to 5.1 percent higher and employment in computer science for U.S. workers would have been 6.1 percent to 10.8 percent higher in 2001,” the authors write.
This is not the first time economists have pointed out a dark side of the H-1B program. A 2016 paper by several economists from the University of Notre Dame, UC Berkeley, and the U.S. Department of the Treasury similarly found evidence that H-1B visas crowded out employment for other workers and "lead to lower average employee earnings and higher firm profits."
The technology community has been outspoken in its defense of the H-1B program, framing it in language that pays homage to American values like diversity, inclusion, and innovation. But it also serves the less honorable goal of restraining wage growth. In 2015, several tech companies including Apple and Google agreed to pay $415 million after accusations that they had a so-called "no-poaching" agreement that prevented workers from bidding up their wages with competing offers. The H-1B visa program similarly restrains the growth of labor costs, except it’s disguised as a policy of openness.
Those are the reasons to be cynical about the H-1B program. But here are several reasons to still support the H-1B program, despite an understanding of its downsides.
First, foreign-born students have become an integral part of higher-ed financing. Cash-strapped public universities get billions of dollars from foreigners who pay full tuition. But once these students have graduated with a valuable degree, it doesn’t make much sense for the United States to kick them out. Yes, they have already paid for college. But U.S. colleges have also invested resources and time in them, too. Sending their talent and future earnings to other countries wastes their potential contribution to U.S communities, business, and tax coffers.
Second, if tech companies cannot hire immigrants through the H-1B program, it is too simplistic to assume they’ll always give that job to another American at a higher wage. Any company has options beyond hiring an immigrant and hiring a native born worker. They can often offshore or automate the work. Indeed, if the U.S. were to shut down or dramatically shrink its H-1B program, companies might hire talent outside the U.S.