H-1B visa workers from 1994-2001 helped US innovation: NBER research paper

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NEW YORK: Highly skilled immigrants who worked on an H-1B visa in the United States from 1994-2001 had a positive effect on innovation, and increased the overall welfare of natives through their contribution to the economy, though wages for native computer scientists would have been 2.6% to 5.1% higher and employment in computer science for native workers would have been 6.1% to 10.8% higher in 2001 if not for them, according to a new research paper released by the National Bureau of Economic Research (NBER).
The new paper, titled, ‘Understanding the Economic Impact of the H-1B Program on the US’ was jointly done by the trio of John Bound from University of Michigan, Gaurav Khanna from the University of California, San Diego, and Center for Global Development; and Nicolas Morales from the University of Michigan.

Over the 1990s, the share of foreigners entering the US high-skill workforce grew rapidly. This migration potentially had a significant effect on US workers, consumers and firms. The research says the induction of H-1B workers from 1994-2001 also helped in US production, and immigration lowered prices and raised the output of IT goods by between 1.9% and 2.5%. Also, firms in the IT sector earned substantially higher profits due to immigration.
The researchers, however, warn that high-skill immigration does tend to crowd out US workers to some extent. They also are not in favor of granting a Green Card to all foreign graduates from US universities.

“We suspect that allowing essentially unlimited immigration of high-skill workers by, for instance, awarding green cards to all foreign students attending US colleges and universities would have dramatic effects on the US labor market. Not all of these would be positive,” the trio reason.

The mid-nineties witnessed a large influx of IT talent because of rise of R&D expenditures in the US IT industry. Specifically, the share of total private R&D expenditures increased from 19.5% to 22.1% between 1991 and 1998. The entry and then extraordinary appreciation of tech firms like Yahoo, Amazon, and eBay provide a further testament to the boom in the IT sector prior to 2001.

The researchers point out that in India, an important source of computer science workers in the US, the number of degrees conferred in science and engineering rose from 176,000 in 1990 to 455,000 in 2000. All this contributed significantly to the tech boom in the US.

According to the Census, the number of employed individuals working either as computer scientists or computer software developers increased by 161% between the years 1990 and 2000. In comparison, during the same period, the number of employed workers with at least a bachelor degree increased by 27% and the number of workers in other science, technology, engineering, and math (STEM) occupations increased by 14%. Indeed, by 2000 more than half of all STEM workers were computer scientists.

To complement it, the US Congress raised the cap for H-1B visas twice: to 115,000 for FY1999 and then to 195,000 for FY2000-2003, after which the cap reverted to 65,000.

The NBER researchers say even in a closed economy, the contribution of computer scientists to innovation reduces the negative effects foreign computer scientists might have on the labor market opportunities for native high-skill workers. They warn of protectionism, which many Republicans led by President Donald Trump favor.

“In addition, in an increasingly global world, US restrictions on the hiring of foreign high-skill workers are likely to result in greater foreign outsourcing work by US employers. Indeed, if computer scientists are a sufficient spur to innovation, or if domestic employers can readily offshore computer science work, any negative effects that an increase in the number of
foreign computer science workers might have on the domestic high-skill workforce would be offset by increases in the domestic demand for computer scientists,” they rationalize.

The research also looked into wage differentials between Green Card holders and those on the H-1B visa. Green card holders earn 25.4 percent more than observably comparable temporary foreign workers. IT professionals with green cards earn roughly 5 percent more than observationally equivalent H-1B visa holders.