Stricter H-1B Rules Do Not Help Consumers or the Economy

Established by the Immigration Act of 1990 (INA), the H-1B Visa was designed to allow American companies to temporarily hire foreign workers to fill specialty positions that could not be filled by domestic labor. The INA prioritized “aliens with extraordinary ability” as well as “professionals holding advanced degrees.” To protect American workers, the number of H-1B Visas has been limited to 85,000 per year. Since 1990, the H-1B visa has been critical to the success and long-term growth of the U.S. economy. Not only does the H-1B visa allow U.S. companies to “fill employment gaps,” it has created a significant number of jobs and driven innovation, particularly in the technology and medical sectors.

Despite the importance of the H-1B visa to the U.S. economy, the Department of Homeland Security has proposed a rule change that would harm businesses and consumers. The DHS’ proposed rule would narrow the number of specialty occupations eligible for the H-1B visa and would raise the wage requirements for foreign laborers to around $208,000; making it practically impossible for most companies, particularly small and medium-size companies, to afford to bring critical foreign talent into the country.

Critics of the H-1B visa, including the Trump Administration, argue more stringent rules are needed to “prioritize the highest-skilled workers and protect American jobs.” The Trump Administration also contends the H-1B program has been abused by American companies who undercut American labor by importing foreign workers. These arguments are not only wrong, but they miss the important contributions foreign workers make to the U.S. economy and American consumers.

Numerous studies have highlighted the importance of the H-1B visa to supporting U.S. jobs .A study by the American Immigration Council (AIC) showed the existence of H-1B workers ultimately expands “job opportunities for all.” The AIC reported that while the number of H-1B visa recipients has remained stable, the U.S. unemployment rate has declined from 10% during the Great Recession to around 3.5% in February of this year. By 2045, the AIC estimates the H-1B program will have created 1.3 million new jobs, most of which will be filled by American workers.

Further highlighting the importance of the H-1B program to American jobs, the AIC estimated that had DHS not rejected 178,000 petitions in 2007 and 2008, the U.S. economy could have added “as many as 231,224” new jobs.

Studies have also shown H-1B visa holders are vital to innovation and production, particularly in the technology sector that receives a significant number of H-1B visas each year. A lawsuit filed in the U.S. District Court for the Northern District of California in September 2020 spoke directly to the damage restrictions on the H-1B would cause, arguing work visas “drive American growth and innovation by attracting the world’s best talent-including engineers, doctors, bankers, biomedical researchers, software developers, and tech executives.”

The loss of foreign talent will be particularly harmful to American consumers as it will prevent American companies from producing the next technological advancement as well as slow groundbreaking medical treatments. Studies routinely show foreign labor entering the United States has consistently provided “breakthrough innovations and scientific discoveries” that have significantly benefited American consumers. Without H-1B immigrants, these breakthroughs would either be lost or occur in countries with more flexible worker immigration laws. As the Cato Institute noted, any restrictions on the H-1B program could “hit American economic innovation the hardest.”

Access to H-1B visas are particularly important to small startup firms. While most H-1B visas go to large companies, researchers from the University of Illinois- Urban Champaign found that small startup firms who are able to obtain the H-1B visa are “more likely to receive venture capital funding and to have a successful exit via an IPO or acquisition.” Without H-1B visas, it becomes apparent that startup companies will struggle to grow, challenge larger incumbent companies, and develop the next innovative product or service.

Limiting the access of H-1B visas by raising the minimum wage for foreign workers would also likely benefit large companies at the expense of small startups. Large companies, owing to their significant capital resources, likely have the ability to meet the high wages mandated by the federal government.

It is also widely apparent the H-1B visa program increases wages for American workers. Between 2008 and 2018, a May 2020 study by the National Foundation for American Policy (NFAP) found “the presence of more H-1B visa holders leads to faster earnings growth for U.S. workers.” The NFAP’ research also found “a 1 percentage point increase in the share of workers with an H-1B visa in an occupation boosts the earnings growth rate in that occupation by about 0.1 to 0.26 percentage points.” For American consumers, that not only means more money to spend on goods and services but also enhances their economic welfare.

Despite charges laid against the H-1B visa, the empirical data suggests the future success of the American economy is dependent on the flow of foreign workers. Without them, there would be fewer job opportunities for Americans, and innovation and economic opportunities for both consumers and workers would be lost. With all of this in mind, DHS should reconsider its proposal to limit job eligibility for the H-1B visa through increased the wage requirements.

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