Research Shows H1-B Visas Lead To The Offshore Outsourcing Of Advanced Technology Jobs
A recent study from the Center for Global Development shows that H1-B visas often eventually result in offshore outsourcing—despite the fact that their purpose is to ensure advanced industries remain in America by providing access to artificially cheap labor.
Unfortunately, the study also showed that the only groups benefiting from the H1-B visa program were major corporations, particularly those in Silicon Valley, and the visa-holders themselves—American workers, and America as a whole is losing out.
Some context: H1-B visas are the “high-skilled” immigrant visas that are granted to foreigners with advanced knowledge or skills—usually reserved for those in STEM fields. H1-B visas allow foreigners to work for up to six years in America, with a potential for extension if the worker has applied for a green card during the period.
While the number of H1-B visas is supposedly limited to roughly 100,000 a year, in reality the number is much higher, due to exemptions to the government-imposed quota for both non-profits and universities.
The study explored the impact H1-B visas had on the Indian Information Technology (IT) industry, since in 2014 70% of the visas were granted to Indians. The researchers concluded that:
Indian workers and students responded to these booms and migration opportunities by accumulating computer science skills valuable both at home and abroad. While a fraction of these workers entered the US labor market via the restricted supply of H-1B visas, many joined the rapidly growing IT sector in India.
They continued (emphasis added):
Given that 70% of H-1B visas went to Indian workers by 2014, our results indicate that the H-1B program and the tech boom had a powerful impact on IT sectors in both countries. By the early-2000s, many workers returned to India once their visas expired with newly acquired knowhow and connections. This additionally facilitated the US-led boom to spread to India, and by the mid-2000s India surpassed the US as the major exporter of software. Despite various distributional effects, our results indicate that the average worker in each country is better off due to immigration.
This is an deviously misleading. By looking at microcosms of the overall economy, or certain factions that contribute, over limited time periods, things may look better than they actually are. In reality, America will undoubtedly get the short end of the stick in this deal.
And the study actually proves this to be the case. The researchers go on to admit: [t]he migration and rise in Indian exports induced a small number of US workers to switch to non-CS occupations, with distributional impacts. These distributional impacts are not minor.
Not only this, but IT exports in the US have steadily declined since 1995, the opposite trend of India. Whereas America gets short term labor, India gets valuable skills int he long run.
How H1-B Visas Hurt America’s Economy in the Long Run
So what are the long run affects of H1-B visas? Essentially, over the course of decades, we train our direct competitors to provide good services for cheap, and this forces our industries out of the global market—we break our own monopolies.
Let’s run through the causal mechanisms.
American employers use the H1-B visa program to hire temporary foreign workers. These visa-holders then work for us (increasing our output in the short run), while greatly increasing the labor-skills and education systems of foreign countries. Many visa holders then return to their country of origin, and reinforce the cycle. In the end, foreign countries develop competency in industries which were hitherto dominated by America.
The problem for Americans is that oftentimes the host country has cheaper labor costs, as well as cheaper overall operating costs. This makes it lucrative for American companies to no longer do their own IT servicing, and this ships thousands of jobs oversees. This is offshore outsourcing.
In the end, much of the offshoring was a result of the implementation of H1-B visas in the first place. The hope is to increase our output in the short term. The unforeseen cost, however, is stronger competition in the future.
Ironically, the so-called free traders usually claim that our manufacturing industries moving oversees is okay because that means American workers can upgrade to high tech jobs, such as, wait for it, Information Technology.
My question is: what happens when the advanced technology jobs are gone too?
As alluded to earlier, this process applies to a multiplicity of industries. For example, this sort of immigration has made American’s healthcare system dependent on immigration.
For a comprehensive take, I recommend checking out Spencer P Morrison’s article on how offshore outsourcing hurts America—it’s a good introduction to the topic.