Or: How I Learned to Stop Worrying and Love New Restrictions on Capped H-1Bs

The new H-1B rules are more restrictive, but some of the effects are more subtle than they may first appear.

The H-1B program is unambiguously good for the United States, beneficiaries, and the businesses that employ them. To the extent that restrictions affect the total supply of visas, they are almost certainly harmful. But overwhelming excess demand above current caps means that some restrictions don’t affect total supply of visas as much as they affect the distribution.

To be clear, ending H-4 employment authorization is harmful and destructive, as my colleague Matthew La Corte explains. So too is making renewals more onerous, removing the International Entrepreneur Rule, or placing more restrictions on the flexibility of H-1B holders. But the new restrictions on petitioners are more ambiguous. The same effects I explored in the context of the policy memorandum issued days before the petition window apply to new regulations being considered by USCIS.

For cap-exempt petitioners, more scrutiny and restrictions will reduce the total supply of H-1B labor. But for petitioners subject to the cap, new H-1B applications are not the win-win proposition that they could be in the absence of a cap. Instead, it’s a zero-sum game where an approval for one employer means one fewer approval available for another. And under the lottery-based allocation, USCIS must give equal weight to all employers, even if one is petitioning for an employee worth much more.

Without legislation, USCIS cannot adopt an auction system, which would allocate visas to the most valuable workers, nor can it set its own minimum salary threshold so that the number of petitioners is equal to the capped number of visas. But that does not mean USCIS has no ability to shift the allocation of visas toward higher value workers. It can do this imperfectly with new restrictions. While not as efficient as an auction would be, new restrictions can be an approximation of an efficient allocation. If new rules screen out more relatively-lower salaried jobs and raise the average salary of applicants, they raise the expected value of our H-1B program. They make it harder for some people to get an H-1B but they simultaneously make it easier for others. The trick is to make it harder and easier for the right people respectively.

Winnowing the applicant pool by new regulations is a third-best solution, at most. But it might be the first-best solution possible via regulation. Most of the new restrictionist rules coming out of USCIS deserve severe criticism. But the new restrictions on capped visas deserve some leniency.