H-1B employees crowd out other workers, says study

Three economists use a new approach to looking at H-1B hiring

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The battle over the H-1B visa is mostly a battle of brute political muscle on Capitol Hill, coupled with campaign spending. But in the quieter academic sphere, the visa is a topic of ongoing research, and a new paper by three economists is challenging some of the assertions made by the tech industry that H-1B workers deliver economic gains.

The paper's two strongest claims concern applying for patents and hiring. It found that winning additional H-1B visas has "an insignificant effect on patenting," and that "H-1Bs substantially crowd out employment of other workers."

This paper, written by researchers at the University of California, Notre Dame University and the U.S. Department of Treasury, makes no policy recommendation to lawmakers. The paper (PDF) is called "The Effects of High-Skilled Immigration on Firms: Evidence from H-1B Visa Lotteries."

To reach its conclusions, the paper uses government data in what may be a novel way.

Once the combined H-1B visa cap of 85,000 is reached, the U.S. distributes the visas via a computer-generated lottery. To study what is going on at firms that hire H-1B workers, the paper's authors used data from the H-1B lottery as well as Internal Revenue Service data showing overall employment at a particular firm.

It turns out that firms that won the lottery have no statistically significantly higher employment rates than firms that lost the lottery. At most employment rises "a tiny, tiny bit, which means they must be employing the H-1B [worker] rather than [employing] someone else," said Alexander Gelber, a University of California at Berkeley economist, and one of the paper's authors, in an interview.

"We are making a definitive conclusion that H-1Bs are crowding out other workers," said Kirk Doran, an economist at Notre Dame University and a co-author along with Adam Isen of the Office of Tax Analysis, U.S. Dept. of Treasury. The researchers aren't able to say exactly who those other workers may be, whether they are permanent residents, U.S. citizens or some other category of worker.

The researchers don't know the pay of H-1B workers specifically, but they did find that H-1B use increased median profits as well as lowered the average pay at firms employing H-1B workers. In short, the paper suggests that H-1B workers are paid less -- "that's more likely than not," said Doran, in an interview.

Norm Matloff, a University of California at Davis computer science professor, on his blogdescribed the paper "as one of the most careful, insightful works I've seen on either side of the H-1B field." Another H-1B researcher, Hal Salzman, a professor of planning and public policy at Rutgers University, said the researchers "have better data than anyone to date, best I can tell," reported Beryl Lieff Benderly in Science Careers.

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