Breaking News: the Obvious

As should come as a surprise to practically no one, the evidence that H-1B visas push wages in technology down is mounting, as reported by John Simon at the Wall Street Journal:

A new research paper on the effects of the H-1B visa program on workers suggests the influx of skilled foreign workers has historically led to lower wages and employment for American tech workers. Such findings could further inflame debate around immigration of high-skilled workers, but some economists caution against making too much of the result.

Economists from the University of Michigan and the University of California, San Diego, analyzed employment, wages and other factors over an eight-year period ending in 2001. They found that, while the visa program bolstered the U.S. economy and corporate profits, tech-industry wages would have been as much as 5.1% higher in the absence of the H-1B visa program and employment of U.S. workers in the field would have been as much as 10.8% higher in 2001.

Giovanni Peri, an economics professor at the University of California, Davis, said the new research is noteworthy, but would like to see more studies on the issue. Mr. Peri’s own research on immigration of highly skilled workers—not solely H-1B holders—found overall positive effects on wages across a variety of job sectors.

John Bound, a professor at the University of Michigan and one of the authors of the new study, said he and his fellow researchers focused their paper on the 1994 to 2001 period because it was the longest stretch of time when employers claimed all available H-1B visas. However, in an earlier paper, they found that a similar model did “a good job capturing the movement of wages and employment in the 2001 to 2011 period,” Mr. Bound said.

“There is little reason to believe the overall impact of high-skilled immigrants on the U.S. economy has changed dramatically since 2001,” he said.

There’s more than one issue at stake here. The obvious one is that importing workers pushes wages down among the workers already here with whom they compete. It remains puzzling that importing foreign CEOs doesn’t seem to push down wages among the highest paid. Apparently, there are some things that human beings were not meant to know.

However, another issue is that incentives matter. Hypothetically, let’s say that there’s one sector (technology) in which wages are demonstrably being held down by importing foreign workers and another (health care) in which the number of foreign workers being imported is small enough not to have wage effects and is highly subsidized to boot?

Assuming that the ability to master complex scientific and technical concepts is limited in the population, it seems obvious enough to me that more young people will find themselves pursuing careers in the second field while avoiding the first than would otherwise have been the case.

Also notable: when you reduce the compensation in technology and taking into consideration that most start-ups are self-financed, it seems inevitable that you’ll have fewer start-ups than would otherwise have been the case.

5 comments… add one
  • steve

    H-1Bs may push salaries down in medicine, but I have never seen a paper on it and not sure how they would measure it. H-1Bs often get hired at the places where no one else wants to work, often at lower paying jobs at smaller hospitals in rural areas, or in the cities in less desirable areas. Absent their availability you would probably need to offer a lot more money to get people to take those jobs.

    Steve

  • steve

    On tech start ups what I hear from my son is that they are getting cagey about what they offer new hires. Fewer are offering a percentage, so you don’t have as much of a chance at hiding the pot of gold if you sin up with one.

  • Guarneri

    Point of order. I’m not sure what you were driving at in your last paragraph. If by startup you mean small storefront style retailers they are almost exclusively self financed or by passing the hat to the family. But real live companies, once past the gleam in the eye/prototype on paper etc stage are institutionally financed.

  • Steves Jobs and Wozniak were funded by themselves and their parents. Apple was well-established before it reached out to financial institutions. Bill Hewlett and Dave Packard were initially self-financed and HP didn’t reach out to financial institutions for support for decades. I personally have known dozens of companies that are now of some size that have never turns to banks or venture capitalists for funding.

    I believe we’ve seen new business models emerge. Entrepeneurs are now able to raise tens of millions of dollars without going through traditional channels by turning to crowdfunding organizations like Kickstarter.

    I think that’s the norm now. Companies don’t start turning to financial institutions until they’re very well established. Everybody else uses self-funding or crowdfunding.

  • Guarneri

    Thanks. That’s interesting. I understand no banks. They are not bankable yet. That said, can’t imagine many businesses self financed except those growing body by body and generating ICF.

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