H-1B visa caps no help in boosting local jobs

In a working paper published by the National Bureau of Economic Research, Britta Glennon of the Wharton School argues that multinational firms (MNCs) tend to offshore jobs when faced with visa constraints.

These MNCs have responded to restrictions on H-1B immigration by hiring more people at their existing foreign affiliates and even by opening units in new countries, Glennon finds. She has made the finding after studying the impact of a drop in visa caps in 2004, and companies’ needs for workforce in high-demand years.

This is especially true for companies that are engaged in high-skilled activities such as research and development, in industries where services could be easily offshored, such as software, Glennon finds.

When this happens, visa restrictions on skilled foreign workers do not yield the desired effects of increasing employment of locals. Rather, they increase employment in foreign countries where such jobs are offshored, the paper says.

Such expansion of foreign affiliate employment has been largely concentrated in three countries: China, India, and Canada. Jobs moved to China and India due to their high-skilled human capital, and to Canada due to its more relaxed policies and geographical proximity, Glennon finds.

The findings of the paper have important policy implications, according to Glennon. She says that skilled foreign workers drive innovation in the country where they work. So restrictive H-1B visa policies could not only be exporting jobs overseas, but also limiting the United States’ innovative capacity, Glennon concludes.

Also read: How do restrictions on high-skilled immigration affect offshoring? Evidence from the h-1b program

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