Earlier today, the Trump administration announced that it would not issue new H-1B, L, J-1, and H-2B visas through at least the end of the year. Immigration programs should not be exceptions to public health measures. The stated reason for suspending these programs, however, was not as a necessary (but temporary) public health expedient but to give natives opportunities to fill available jobs while unemployment remains high. What the administration consistently ignores is that high-skilled immigrants benefit American workers. The suspensions will ultimately prolong the recovery and wreak havoc on the economic prospects of the Americans the administration claims to be protecting.
High-skilled Workers and Economic Recovery
The move to restrict high-skilled visas is based on a simplistic view of the labor market that assumes that high-skilled guest workers displace natives. This view, which holds that guest workers and natives are substitutes rather than complements, is likely to be wrong for two reasons.
First, when assessing the labor market as a whole, H-1Bs go to high-skilled workers in specialty occupations, well above the average (or median) skill level of native-born Americans and performing jobs that there are not enough Americans to do. According to a recent report, more than three out of four H-1B workers are paid well above the prevailing wage for their job and none are paid below the prevailing wage. The average native is, therefore, not in direct competition with an H-1B worker. As we will see, the current downturn is unlikely to have changed the fact.
Second, within the high-skilled labor market, H-1B workers tend to complement high-skilled natives by bringing new ideas and making more productive teams. With a few notorious exceptions, H-1B workers do not displace high-skilled natives. Rather, they make them more productive. Economists have found that H-1B workers in STEM fields actually increased the wages of college-educated natives without affecting native employment prospects. By the same token, L1 intracompany transfers help support the business operations of firms which employ natives, supporting native jobs without competing in the U.S. labor market.
Importantly, these reasons still hold even with the current pandemic-induced slump. High unemployment does not mean that natives would be better off with the H-1B program suspended. The demand for high-skilled labor is still high. Looking only at national unemployment is a poor indicator, since the latest figures from the Bureau of Labor Statistics show that unemployment among the college-educated is less than half the rate of those without a college degree. What’s more, H-1B employment support natives’ jobs and earnings.
In short, H-1B workers create more jobs than they take. Shutting off the flow is likely to drag out the recovery, hurting natives along the way. A study on the recovery from the Great Recession found that reducing the number of H-1B computer workers during the depths of the recession in 2007 and 2008 meant slower job growth during the recovery for both college-educated and non-college educated natives. Specifically, they estimate that 60,000-231,000 new jobs in 2009-2010 for native tech workers were destroyed by H-1B denials in 2007-2008. The current suspension threatens to repeat and magnify the mistakes we should have learned from the last recession.
The Permanent Effects of Temporary Measures
While the current suspensions are billed as merely temporary, their effects are likely to endure long after they are lifted. Beyond dragging out recovery, the suspensions are poised to leave permanent scars on the economy.
First, suspending OPT also deals a self-inflicted blow to a U.S. export industry: higher education. We run a surplus of tens of billions of dollars in education every year, and the international students buying this export subsidize the tuition of native students. Even before the pandemic, the number of international students was declining, and the number would have surely declined much further thanks to the pandemic. This is on top of many challenges already inevitably faced by colleges and universities in the age of COVID-19. Ending OPT will only exacerbate these challenges by making U.S. education less attractive, deterring international students from attending even after schools reopen. Schools already pushed to the brink by COVID-19 will be pushed past the breaking point.
Second, suspensions are likely to deal a blow to the native human capital stock. The OPT and H-1B programs both support the education and training of natives. OPT raises the value of a U.S. education, attracting international students who subsidize the education of Americans by reducing tuition for native students. H-1B also employers pay fees to the Department of Labor to fund grants for Americans’ high-skills job training. H-1B workers have literally funded billions of dollars worth of scholarships and training for native students and workers through DOL fees. The suspensions will, therefore, raise the cost for natives to attain the education for high-skilled jobs in the first place.
The president’s longstanding failure to understand the benefits of migration will leave enduring damage. The new rules far surpass anything required by public health and will only serve to cripple economic recovery.
Photo by Malachi Witt from Pixabay