Raise the H-1B visa cap

Alex Nowrasteh Immigration Policy Analyst, Cato Institute
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Rupert Murdoch’s and Michael Bloomberg’s testimony Thursday on Capitol Hill about immigration reform missed one timely and important mention.  October 1st marks the beginning of the term for newly issued H-1B visas.  H-1Bs are employer-sponsored visas designed to allow highly skilled workers temporary entry into the United States.  It runs for three years and can be renewed for another three years.  The problems with the H-1B visa plague the rest of America’s immigration system.

U.S. Citizenship and Immigration Services began accepting applications on April 1 for the 85,000 available slots for highly skilled foreigners.  In most recent years, all 85,000 spots been filled in one day!

It took longer to reach the quota in 2009 because of the moribund economy.  The quota may not be filled in 2010 because new restrictions and regulations that clog the application process have further depressed demand.  As of mid-September, only 52,000 applications have been accepted.

But the current number of applications does not obviate the need for reform. Many skilled foreigners and talent-starved companies skipped the H-1B application altogether because of the bureaucratic hoops put in their way, including more than $5,000 in lawyer and regulatory fees per applicant.  These burdens should be lifted.

The most persistent argument against allowing more highly skilled foreign workers into the country is that they “take” American jobs.  That characterization is wrong.  There is no fixed number of jobs to be divided among Americans.

Foreign skilled workers don’t “take” American’s job; they complement them. Foreigners are not substitutes for U.S.-born workers even when they have similar skills and experience.  In many situations, H-1B workers push Americans into managerial or other higher positions.

The argument that H-1B workers decrease American wages is also wrong.  If cash-strapped businesses could drastically cut wages by hiring more H1-B workers instead of native-born workers, then applications for H-1B visas would increase during recessions as businesses cut costs.  The opposite is true.  H-1B applications fall dramatically during recessions.

Firms that employ H-1B visa workers do so when they are expanding production and have trouble meeting their labor requirements domestically.  Observing this effect, the National Foundation for American Policy reported in 2009 that for every H-1B position requested, U.S. technology firms increase their employment by five workers.

H-1B workers do not put a strain on the public finances.  They cannot receive federal welfare payments. H-1B workers are mostly male, young, and healthy.  The American welfare state assists mainly the elderly, women, and the sick. Relative to the population and to their own age and demographic group, immigrants and H-1B visa holders under-consume all government social services and pay far more in taxes.

However, H-1B visas are not a long-term solution.  There should be an unlimited number of green cards available for highly skilled or educated foreigners. Movement between firms should be free.  But in the short term, H-1Bs are a valuable way to augment the nation’s skilled workforce.

Murdoch and Bloomberg neglected mention of H-1Bs and other highly skilled foreigners, preferring to focus on the more politically sensitive issue of undocumented and, on average, lower skilled immigrants.  Advocates of immigration reform should not forget that law-abiding foreigners of all skills and education are harmed by our restrictive immigration laws.

Tens of thousands of intelligent, hard-working, and educated foreigners have been denied the opportunity to contribute to our economy due to our Byzantine immigration system.  All H-1B visa slots may not be filled this year, but a recovering economy is sure to render the 85,000 cap insufficient again.  The quota should be eliminated and the application process streamlined.  For firms trying to expand, October 1 should be just another day.

Alex Nowrasteh is a policy analyst at the Competitive Enterprise Institute.