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Immigration is at the forefront of current political and economic discussions. Of course, people have various opinions and perspectives on the issue. One central economic question: What is the impact of foreign workers on the job opportunities and wages of native workers? More competition from immigrant workers might reduce native workers’ wages and job opportunities. On the other hand, immigrant workers might enhance firm productivity and increase native workers’ wages and employment opportunities.
A recent study from the Federal Reserve Bank of Richmond analyzed the H1-B visa program to see whether more foreign workers increase or decrease native workers’ wages and job opportunities.
The U.S. Labor Department says, “The H-1B program applies to employers seeking to hire nonimmigrant aliens as workers in specialty occupations or as fashion models of distinguished merit and ability. A specialty occupation is one that requires the application of a body of highly specialized knowledge and the attainment of at least a bachelor’s degree or its equivalent.”
A firm that wishes to hire a foreign worker in a specialty occupation must apply for the visa. The number of these visas has been limited, and demand for them typically exceeds the supply. In 2007, due to a policy change, the visas were allocated by lottery. Randomly determining which firms win the visas is the gold standard for what economists call a “natural experiment” on the impact of H1-B visas on economic outcomes.
The team of economic researchers identified the 20,000-plus firms that applied for H1-B visas in 2007. They also had access to the same firms’ payroll, employment and revenue data from 2002-2011. They constructed a measure of each firm’s “success” in winning the H1-B lottery. For example, if two firms applied for four visas and the first firm obtained three while the second firm obtained one, the firm that won three visas had a higher success rate than the firm that won one.
There was no significant difference between the pre-2007 revenue, employment and payroll trends of firms that won the 2007 H1-B lottery and those that didn’t. However, after the 2007 lottery, the firms that were “luckier” in getting the visas performed better than those that did not. Moreover, with some exceptions, H1-B “winning” firms also hired more native workers, and those native workers had higher wage gains than non-winning firms. Though H1-B visas are for limited labor market segments, learning that native workers’ wages and job opportunities increased is valuable information.•
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Bohanon and Horowitz are professors of economics at Ball State University. Send comments to ibjedit@ibj.com.
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