Trump’s H-1B Visa Plan Will Backfire

MAGA Republicans have long criticized the H-1B visa program, which allows U.S. organizations (businesses, non-profits, and government) to enter a lottery for the right to hire high-skilled foreign workers temporarily. Up to 85,000 visas are up for grabs annually. Critics argue the program takes jobs away from American workers, who are purportedly President Donald Trump’s top priority. So, it wasn’t surprising to see him require any organization petitioning to employ an H-1B worker to pay $100,000—a fee few can afford.  

Will this de facto ban on H-1B visas protect American workers? Don’t count on it. Likely the opposite will result: Fewer U.S. jobs and weaker U.S. companies. 

There are shortages of American STEM workers, and a de facto ban on H-1B visas would make several things more likely. First, American tech firms competing in global markets will be more likely to hire persons to work overseas, either as remote workers or via a foreign affiliate. The consequence would be fewer tech jobs in America. Second, because American companies “export” services when U.S.-based workers deal with foreign clients, shifting workers overseas would recategorize these exports, worsening the trade balance that is Trump’s obsession. Indeed, America enjoys a surplus in service exports that would diminish if firms increased their offshoring.  

Finally, if U.S. companies had less access to foreign talent, they would be less competitive than their foreign counterparts, including Chinese companies. As peer-reviewed research shows, the share of workers with H1-B visas in any given state positively correlates with patents issued in that state, controlling for other variables, such as the number of high-tech workers more broadly. Foreign workers contribute to innovation and, by extension, job growth.  

Opponents of the H-1B program base their critique on faulty assumptions. For instance, they argue that employers use the program to undercut American workers’ wages. However, a 2010 peer-reviewed study found that after controlling for the state in which IT professionals work and for job titles, IT professionals with an H-1B earn 2.6 percent more than their American counterparts. That wouldn’t be the case if firms like Apple bypassed American IT professionals in favor of cheaper foreign ones. 

There’s also evidence that H-1B workers boost workers’ wages at their firms.

Research finds that firms that win H-1B visas are more likely to survive long-term than other firms, and that most employees working at these firms experience wage increases. One study found that young college-educated workers, whether foreign- or native-born, experience a 4 to 5 percent wage increase at firms with H-1B visa workers, while young, non-college-educated workers experience a 3 percent wage increase. Moreover, this study found no adverse effect on the employment of native-born workers at the firms. Critics of the H-1B program ignore the shortage of qualified high-caliber workers in America due to the poor quality of the U.S. educational system. H-1B opponents assume that a worker is a worker and that companies can hire an American if they need someone. At the signing ceremony for Trump’s proclamation, Commerce Secretary Howard Lutnick made this point: “If you’re going to train somebody, you’re going to train one of the recent graduates from one of the great universities across our land. Train Americans, stop bringing in people that take our jobs.” Ah, if only it were that simple. 

Compared to other fields, few Americans earn STEM degrees, and many who attempt them don’t finish. In fact, the Department of Education reports that only 41 percent of students who started STEM majors in college in 2009 earned a STEM degree. Part of the reason is likely inadequate high school preparation. By 2016, more high school students in California took ceramics than computer science. Additionally, 15-year-old U.S. students ranked 28th out of 37 OECD countries in math. More recently, the latest scores from the National Assessment of Educational Progress (NAEP)—also known as the “Nation’s Scorecard”—show that only 55 percent of twelfth-graders achieved “basic” proficiency in math.  

As a result, America simply isn’t turning out enough STEM graduates to fill the expected demand. According to the Bureau of Labor Statistics, employment in STEM fields is expected to grow more than double that of non-STEM occupations by 2029. This shortage of homegrown talent is why 45 percent of U.S. STEM employees with a doctorate are foreign-born. 

Even if we could wave a magic wand and improve education—a highly dubious proposition—employers wouldn’t realize the benefits for another two decades, though they need qualified workers now. 

But there is one more factor: The United States does not have a monopoly on aptitude, and workers with high aptitude are, on average, more valuable to employers than workers with less ability. Given the world’s population relative to America’s, the sheer volume of talent outside the United States is larger than inside it. If the president is truly worried about some U.S. companies hiring skilled foreign workers when they could be hiring skilled Americans, a better solution would be for Congress to allow the U.S. Citizenship and Immigration Service to auction off the 85,000 H-1B visa slots available each year to the highest bidders. Organizations needing them will bid up the price and win the auctions. In contrast, organizations that can find skilled American workers to hire for less than the auction price, plus salary and benefits for a foreign worker, will do that instead. To make the process fairer for startups and young firms, as well as for non-profits and universities, Congress could establish two auctions: one for firms under five years old and one for firms five or more years old. It could also establish auctions based on firm size, revenues, or category of organization (non-profit, university, etc.) to ensure a level playing field for competitors.  

It’s time for an honest debate. We can turn inward and protect a relatively small number of American workers, weakening the nation. Alternatively, we can allow U.S. employers to recruit a modest number of the best and brightest from around the world, yielding a more innovative and stronger nation.