Nov 12, 2020

The H-1B visa program is about to get another reboot

HTML EMBED:
COPY
President-elect Biden promises to be less restrictive with the program for highly skilled foreign workers, which could help the tech industry.

The incoming Biden administration promises a more open approach to immigration. That includes the H-1B visa program for highly skilled foreign workers employed by U.S. companies. The Trump administration has moved to restrict foreign work visas: this summer, an executive order temporarily halted new H-1B visas, and last month the Labor Department announced new rules making them more difficult to qualify for.

This matters to tech, of course, because the industry employs a huge portion of H-1B visa holders in jobs companies say there aren’t enough skilled American workers to fill. I spoke with Britta Glennon, an assistant professor at the University of Pennsylvania’s Wharton School. The following is an edited transcript of our conversation.

Britta Glennon: Denial rates for new H-1B petitions under the Trump administration rose from 6%, prior to Trump coming into office, to 30%. So that’s not any policy change. That’s internal memos that have basically increased the number of requests for evidence, slowing processing, just generally making it more difficult to get approval. So that’s something that Biden can change.

Amy Scott: What could a more friendly administration, in terms of foreign work visas, mean for American workers, many of whom supported President Trump and might be concerned about their jobs?

Immigrants creating U.S. jobs

Glennon: Actually, there’s very little evidence showing that immigrants take Americans’ jobs. In fact, there’s much more evidence showing that skilled immigrants create American jobs. I think I would say they shouldn’t be worried about this. They’re not taking their jobs. And in fact, the response to reducing immigrants is not giving Americans jobs, it’s actually just taking those jobs to another country.

Scott: Some of these policies were made by executive order and can easily be reversed. But I wonder what the lasting effect might be of the back and forth on immigration?

Glennon: I actually think that there’s already been a lot of damage that’s been done that’s going to be hard — maybe impossible — to undo. There have been impacts on the pool of international students. There’s been research that has shown that the quality of international students goes down when they know there are fewer high-skill visas available. The high quality ones, they’re likely to go somewhere else instead. That then affects the pool of labor that U.S. firms can hire. I know it’s already had impacts on offshoring. My own research has shown that U.S. multinational companies have already offshored tens of thousands of jobs and opened new foreign affiliates in response to H-1B visa restrictions. And those were much less severe than those implemented under the Trump administration. So that effect is likely much larger now.

Scott: What are the consequences of that? Does it make the U.S. less competitive in, say, the tech industry?

Glennon: I think it almost certainly does. So not only are those jobs going to another country, but then a multinational firm, but these immigrants —there’s lots of research showing that immigrants are more likely to start up new firms. They actually act more as job creators than job takers. They create 42% more jobs than native founder firms. They’re 80% more likely to start new firms, and they’re also much more innovative. They produce far more patents than Americans do. So that means that innovation, startups, investment are all going out of the country. And while maybe future investment may come back to the U.S., anything that was offshored during the Trump administration, that’s not coming back.

Scott: You also have new research on the economic impact of President Trump’s executive order from June that temporarily suspended new foreign work visas. What did you find there?

Executive order’s “negative shock”

Glennon: We found that in the aftermath of this executive order, the market valuation of Fortune 500 companies dropped by about $100 billion. And the way that we think about this negative shock is that these are firms that rely on having high-skilled labor available to them. And suddenly they’re told, “That labor is no longer available to you.” And while they have longer-term options available to them, like offshoring, so they may respond to it in a number of ways, the immediate consequences is that they’re immediately constrained. And so this has an immediate, negative impact on these firms. 

Scott: A judge blocked that executive order last month. Did you see stock prices and market valuation bounced back, or could this be a lasting impact?

Glennon: That’s hard to say. It’s still a little bit early. I think it’ll depend, at least in part, on what happens with the Biden administration. And it also depends on what degree firms have been able to respond to those constraints already. So I think that at least some of that is just gone, and we’ll be waiting to see whether some of it will come back.

President-elect Joe Biden addresses the media about the Trump Administration’s lawsuit to overturn the Affordable Care Act on November 10, 2020 at the Queen Theater in Wilmington, Delaware.
During his campaign, President-elect Joe Biden promised to be less restrictive with H-1B visas. (Photo by Joe Raedle/Getty Images)

Related links: More insight from Amy Scott

Glennon talked about how restricting H-1B visas has hurt U.S. colleges and universities, many of which rely heavily on international students paying full tuition. Many of those visas used to go to foreign students graduating from American universities. And Glennon said fewer of those students are applying to U.S. schools, partly because they worry about their chances of getting jobs here when they graduate. Though there are lots of reasons for the decline, international student enrollment fell in each of the first three years of the Trump administration. Those policies have also affected recruiting of faculty. According to Inside Higher Ed, many schools use the H-1B program to hire instructors in fields like engineering and computer science.

The Trump administration also recently started requiring companies hiring H-1B visa holders to pay them more as a way to encourage domestic hiring instead. And some research has found that the program can push down wages for all workers. According to a recent study by the union-backed Economic Policy Institute, employers underpaid H-1B visa holders. Among the top employers using the program are Amazon, Microsoft, Walmart, Google, Apple and Facebook. EPI found all of them legally paid many of their H1-B workers below the local median wage for the jobs they filled.

Listening makes you smarter…
donating makes it all possible.

Our mission is to raise the economic intelligence of the country, exploring the intersection of the economy, tech, and our daily lives. As a nonprofit news organization, we count on your support – now more than ever before.

Secure the future of public service journalism today when you become a Marketplace Investor.

The team

Molly Wood Host
Michael Lipkin Senior Producer
Stephanie Hughes Producer
Jesus Alvarado Assistant Producer