H1B visas boosted overall welfare of Americans: study

Foreign computer scientists granted H1B visas to work in the US during the IT boom of the 1990s had a significant impact on workers, consumers and companies, researchers said


The H1B visa allows US companies to temporarily employ foreign workers in specialised occupations. Photo: Bloomberg
The H1B visa allows US companies to temporarily employ foreign workers in specialised occupations. Photo: Bloomberg

Washington: H1B work visas—the most sought after by Indian IT professionals—had a “positive effect” on innovation and increased the overall welfare of Americans, a new study has found, amidst uncertainty over the regulations of such visas by the Trump administration.

The H1B visa allows US companies to temporarily employ foreign workers in specialised occupations. The number of these visas granted annually is capped by the federal government.

Recently, the Trump administration issued a stern warning to companies not to discriminate against American workers by “misusing” the H1B work visas programme. Researchers, including John Bound and Nicolas Morales from the University of Michigan in the US, studied the impact that the recruitment of foreign computer scientists had on the US economy.

They selected the time period of 1994-2001, which marked the rise of e-commerce and a growing need for technology workers. Foreign computer scientists granted H1B visas to work in the US during the IT boom of the 1990s had a significant impact on workers, consumers and tech companies, researchers said.

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Bound, Morales and Gaurav Khanna of the University of California-San Diego found that “the high-skilled immigrants had a positive effect on innovation, increased the overall welfare of Americans and boosted profits substantially for firms in the IT sector.”

Immigration also lowered prices and raised the output of IT goods by between 1.9% and 2.5%, thus benefiting consumers. Such immigration also had a big impact on the tech industry’s bottom line.

“Firms in the IT sector also earned substantially higher profits thanks to immigration,” said Morales, a U-M economics doctoral student. On the flipside, the influx of immigrants dampened job prospects and wages for US computer scientists.

US workers switched to other professions lowering the employment of domestic computer scientists by 6.1% to 10.8%. Based on their model, wages would have been 2.6% to 5.1% higher in 2001, researchers said.

“As long as the demand curve for high-skill workers is downward sloping, the influx of foreign, high-skilled workers will both crowd out and lower the wages of US high-skill workers,” said Bound, U-M professor of economics.

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