Just days before the 2020 election, the Trump administration proposed a new rule to change how H-1B visas are allocated. The final rule was announced last week and is set to go into effect before the 2022 H-1B lottery. The Biden administration will have many Trump-era immigration rules to reverse. But this rule — uniquely — is worth supporting after the end of the Trump administration, since it ensures visas go to the best and brightest, reduces risk for H-1B employers, protects native workers, and fulfills one of Biden’s campaign promises.
Allocating visas efficiently
The demand for cap-subject H-1Bs consistently outpaces the 85,000 that are allowed each year. The result is a zero-sum game; one employer’s approval is necessarily one fewer visa available to other employers. And the lottery-based allocation established under the old rules dictates that virtually all employers are equally likely to win, regardless of their petitions’ relative merit.
The new rule replaces the random lottery with a wage-based ranking, awarding visas to employers offering the largest salaries. Under wage-based allocation, U.S. Citizenship and Immigration Services no longer has to be indifferent between a superstar who is a perfect fit for a lucrative niche job and a worker to fill an entry-level position. Instead, USCIS can ensure visas are going to the most valuable workers.
Of course, much of this zero-sum competition is artificially imposed by the low H-1B cap — even the less productive H-1B-eligible workers with sponsors would still be of enormous benefit to the United States. But the Department of Homeland Security can’t get rid of the cap. It can make sure that in the face of the cap, visas go to the best and brightest of the best and brightest.
Pro-worker and pro-business
In addition to allocating H-1Bs efficiently, wage-based allocation yields three other significant benefits.
First, it protects native workers. Labor market competition between H-1B workers and natives is largely overblown, with H-1B workers earning much more on average than natives of the same level of education. However, there are several disturbing cases where businesses use H-1B workers to replace or undercut natives, even if such cases are quite rare. However uncommon, such cases are bad for the native workers affected and bad for the H-1B program’s political prospects. After all, how can lawmakers be persuaded to raise the cap if H-1Bs are already displacing workers?
Naturally, the issue is the lottery system, which often awards visas to the least deserving petitions and incentivizes the proliferation of outsourcing companies and H-1B dependent firms. Assigning visas to the workers who will earn the highest salaries automatically makes cases of abuse financially unviable. Making employers compete for visas by offering better wages is pro-worker and can help recover some of the program’s damaged reputation.
Second, wage-based allocation is good for business and reduces a tremendous amount of waste. Under a lottery, businesses face costly uncertainty about whether all the money and time spent trying to secure a visa will pay off. If an employer wins the lottery, their new employee will make the process worth it, but if they lose, the resources are squandered. On top of the waste, the uncertainty and risk deters some businesses from participating at all. Wage-based allocation addresses these issues, giving high-paying employers security and reliability, while providing lower-paying employers the signal they need to know they won’t win a visa if they petition for one.
Third, a wage-based allocation generates valuable information to lawmakers about the value of H-1Bs. Each year’s salary cutoff — that is, the lowest salary that still secures a visa — sends a much stronger signal about the demand for H-1B labor than does the number of lottery applicants, which can obscure the underlying need for workers by only including employers who are willing to take on the risk inherent in entering the lottery. As demand for labor increases, it might not show up clearly in the number of H-1B applications because the value of an H-1B application decreases as the probability of winning the lottery decreases. Therefore, the number of H-1B applications is a mixed signal about the demand for workers and the risk-aversion of employers that is hard to disentangle. On the other hand, movement in a salary cutoff can more transparently inform lawmakers how to set the cap and assure them that increasing it won’t lead to low-wage labor.
As it happens, this policy is included in Biden’s immigration plan. “An immigration system that crowds out high-skilled workers in favor of only entry level wages and skills threatens American innovation and competitiveness,” his plan reads. Then it follows with Biden’s proposal to fix it: “first reform temporary visas to establish a wage-based allocation process.” Granted, Biden’s plan indicates that he hoped the change would come from Congress.
Nevertheless, allowing the rule to stand would make sure that talent and resources aren’t squandered in the next lotteries before Congress has a chance to get to it — if it does at all. Meaningful H-1B reform to charge innovation and productivity growth doesn’t stop at wage-based allocation, but it’s a promising start.