Last Friday, April 6, U.S. Citizenship and Immigration Services (USCIS) announced it had closed the annual window for H-1B petitions after only five days because total petitions had already surpassed the caps. For the sixth year in a row, the window was closed on the earliest possible date allowed by law due to overwhelming demand.
While USCIS has not yet announced it, we can safely assume that a lottery will be conducted in the coming week to determine which petitions will be approved. And if the last few years are any indication, cap-restricted petitions likely number more than two or three times the cap. By turning away productive workers as well as creating uncertainty for employers who now have to win the lottery to hire their workers, the program’s shortcomings impose costs on the U.S. economy.
Every year, 65,000 temporary H-1B visas are made available to new high-skilled workers, with an additional 20,000 available to applicants who have advanced degrees. The application window is required to be open for at least five days and is closed once there are more petitions than visas available.
Just days before the petition window opened, USCIS issued a policy memorandum establishing new limits on potential beneficiaries having multiple petitions sponsored for essentially the same job. While the Trump administration has proposed a couple of regulatory changes to the H-1B program, those changes have not yet been published, let alone finalized.
This memorandum was the latest in an apparent annual trend by which USCIS issues new rules in the immediate lead-up to the filing window. Making these changes on such short notice unnecessarily raises the uncertainty and compliance costs for employers trying to make use of the program.
That said, this rule may very well make the visa lottery more fair by preventing one beneficiary from having more than one “lottery ticket.” Putting questions of equity—important as they may be—aside, it is doubtful that the rule will make any meaningful difference in reducing excess demand. Without some response from Congress, the program will almost certainly continue to run with significantly more demand than visas.
Still, the new rule will likely increase the societal value generated by the H-1B program, albeit in a rather limited and small way. To understand why, it is important to bear in mind that reducing excess demand should not be an end in itself. The goal ought to be to reduce the costs associated with excess demand, which are twofold: the uncertainty caused by the probability a petition will not be selected, as well as the lost value of workers turned away. In the abstract, those costs can be reduced by increasingthe number of visas offered as well as shifting the allocation of the visas to the highest-value workers. Legislation, like the High-Skilled Integrity and Fairness Act of 2017, is needed to substantially move the H-1B program in that direction. Short of legislation, rules and regulations may not be able to affect the numerical caps, but they can affect allocation of H-1Bs.
The mechanism by which the latest rule might marginally improve the allocation side of the equation is by slightly shifting the lottery results away from H-1B dependent employers. H-1B dependent firms are more likely than non-dependent firms to be consulting for clients who are ultimately the ones who need foreign laborers. Those clients may use try to fill roles through multiple consulting companies. Hence such H-1B dependent firms are more likely to have been filing petitions in previous years in the way the new rule prevents. According to a recent analysis by the Migration Policy Institute, H-1B dependent firms are likely to have lower average salaries than H-1B employers who are not H-1B dependent. Therefore, if the rule slightly reduces the number of petitions by H-1B dependent firms, the average salary of H-1B beneficiaries will probably increase slightly.
We should be careful not to exaggerate the magnitude of the effect. It is unknown how many petitions were never filed for 2019 that would have been filed but for the new rule, though probably nonzero. And it is even less certain what effect that has on the average salary of H-1B holders, though it is probably positive. Though the effect in this case may be small (or perhaps even trivial), the rule raises the same questions that must be considered if more substantive proposed regulations that affect visa allocation move forward .
While the overwhelming majority of would-be H-1B holders are productive, they aren’t equally productive. And while any given would-be H-1B beneficiary would likely benefit the U.S., they wouldn’t all equally benefit the U.S. So, in the face of a cap, it is for the best that scarce visas go to the best and the brightest of the best and brightest.