Tag: H1B

The last week of 2024 didn’t exude the holiday spirit for several folks in the tech world. A section of billionaires, politicians, and tech workers were piqued by a specific U.S. immigration policy that allows skilled foreign workers to work in the country.

A verbal mudslinging began after President-elect Donald Trump appointed Sriram Krishnan as his senior policy advisor on Artificial Intelligence (AI). Within days after the announcement, Laura Loomer, a prominent MAGA supporter, wrote rancorous social media posts against the decision, calling Indian immigrants “third world invaders.” The right-wing influencer then doxxed Mr. Krishnan, sharing his domicile details scoured from the U.S. Federal Election Commission (FEC). While Ms. Loomer apologised for doxxing Mr. Krishnan, she remains rooted in the idea that the number of skilled foreign workers must be reduced in the U.S. as the programme is negatively impacting native workers.

Mr. Krishnan, an Indian immigrant who came through the ranks of top tech firms in the Silicon Valley, supports simplifying the legal process for tech workers to enter the U.S. His stance has been echoed by several tech billionaires. His to-be-peer in the Trump administration, former PayPal executive David Sacks, came in support of the a16z’s general partner and clarified that Mr. Krishnan did not advocate for the removal of restrictions for a green card but was only seeking the removal of country-specific caps.

Elon Musk and Vivek Ramaswamy, both immigrants and Mr. Trump’s picks to overhaul the U.S. government, are supportive of the skilled foreign worker visa programme. The world’s richest man even said he would “go to war” to defend the programme. In an X post, he wrote: “The reason I’m in America along with so many critical people who built SpaceX, Tesla, and hundreds of other companies that made America strong is because of H1B.” The H1-B issue has not just split MAGA supporters; it has also turned some prominent Democrats, who were pro-immigration during the election season, into H-1B programme bashers. For instance, Vermont Senator Bernie Sanders said the main function of the H1-B visa “is not to hire ‘the best and the brightest’ but rather to replace good-paying American jobs with low-wage indentured servants from abroad.”

Heated debates on the H-1B visa programme are not a new phenomenon. It helps to know the programme’s brief history — at least from the time it went through a major revision in the 90s — and its net impact on wages and productivity in the U.S.

A brief history

In the early 90s, the U.S. enacted the Immigration Act of 1990 to increase the number and diversity of immigrants coming into the country and to adapt to the changing economic and social needs of a globalising world. The legislation significantly revised and expanded the H-1B visa programme.

Apart from mandating employers to file an application with the labour department that hiring H-1B workers will not adversely affect wages and working conditions of U.S. workers, the law established an annual cap of 65,000 new H-1B visas for each fiscal year.

These changes led to a substantial increase in the number of H-1B visas issued and made the programme more accessible to U.S. employers seeking high-skilled foreign workers. This, in turn, contributed to the programme’s role in attracting skilled workers at a time when American companies were facing intensifying global competition, especially from Japan in high-tech and manufacturing sectors.

Silicon Valley was emerging as a global tech hub, creating unprecedented demand for scientists, technology professionals, engineers, and mathematicians (STEM workers). Traditional industries in other parts of the country were also undergoing rapid computerisation, requiring STEM talent that wasn’t readily available in the domestic workforce.

The cap on H-1B visas were hiked to 1,95,000 during the dot-com boom before returning to the base cap. Then, in 2004, an additional 20,000 slots were added for advanced degree holders from U.S. universities. Since 1990 to 2019, roughly 4.5 million H-1B visas were issued, and in the fiscal year of 2023, 72% of approved H-1B petitions were for beneficiaries born in India, and 65% of all approved H-1B petitions were for workers in computer-related occupations.

The impact of H-1B workers

A 2013 study, titled ‘STEM Workers, H-1B Visas, and Productivity in U.S. Cities’ by economist Giovanni Peri, found that H-1B workers had a positive impact on the wages of native college-educated workers and overall productivity in U.S. cities.

The study examined the influx of foreign STEM workers through the H-1B visa programme and their impact in 219 cities between 1990 to 2010. It noted that H-1B-driven increases in STEM workers boosted wages for native college-educated workers. A one percentage point increase in the foreign STEM share of a city’s employment led to an increase of around 7-8 percentage points in the wages of native college-educated workers.

Also, wages of non-college-educated native workers saw a positive, though smaller, increase. These workers experienced a 3-4 percentage point increase in wages for every one percentage point increase in the foreign STEM share of employment. The study estimates that the growth in foreign STEM workers may account for 30% to 50% of aggregate productivity growth in the U.S. between 1990 and 2010. Fast forward to 2024, and the impact of foreign workers on U.S. wages and productivity continued to be positive.

In a follow-up study, titled ‘Immigration’s Effect on US Wages and Employment Redux,’ economists Alessandro Caiumi and Giovanni Peri note that immigrants and native workers complement each other in the labour market. In their research that examines the broader impact of immigration on the U.S. labour market between 2000 and 2022, they found that immigrants often specialise in different and complementary occupations compared to native workers.

In a separate study that documents the impact of H-1B workers on innovation and product commercialisation, Harvard Business School Professor William Kerr notes that skilled immigrants have contributed significantly to U.S. patent activity, particularly in emerging technologies. Jennifer Hunt, Professor of Economics at Rutgers University, has shown in her research that H-1B workers who transition to permanent residency tend to be particularly innovative and entrepreneurial, often founding companies that create jobs for U.S. workers.

Talent conundrum in the age of AI

Despite the positive impact of H-1B workers on the U.S. economy, opponents of the visa programme are clamouring for restrictions and lowering the number of legal immigrants. Some criticisms, particularly the ones against Indian tech services companies like Infosys and Cognizant, are well-laid.

These companies developed a business model that combined offshore development centres in India with on-site presence in the U.S., facilitated by H-1B visas. This model, sometimes called the “global delivery model,” transformed how technology services were delivered to U.S. companies, but it did not truly make a path-breaking innovation for the U.S. economy.

These companies typically rank among the top H-1B sponsors annually. For instance, in many years between 2005-2019, Indian companies accounted for a substantial portion of all H-1B visa petitions. This has raised concerns about the programme’s concentration among top IT services firms.

It will do well for the incoming Trump administration to look into these practices and redraft a skilled worker immigration policy that prioritises the skill and educational background of an individual over a company’s profit-making interests.