Economist: H-1Bs Are Important to the Economy

One phrase that’s almost always injected into discussions of H1-Bs is “supply and demand.” But how is that measured when it comes to tech workers? For some insight, I spoke with Ashok Bardhan, a senior economist at the University of California at Berkeley and author of Globalization and a High Tech Economy: California, the U.S. and Beyond.

Ashok BardhanWhat impact do H-1B workers have on the American economy?

Because of the fact that H-1B visas are by and large issued to professionals in well-paid occupations with fast-rising demand — and thus low unemployment rates — the impact of this increased supply on wages is moderate. Having said that, there is some adverse impact on older American workers, since most H-1B applicants are young.

How big a chunk of the tech workforce are H-1Bs?

This is a difficult question to answer. In many years, the approvals are rarely more than a couple of percentage points of those employed in a given occupation. But in some years the number has reached double digits, and over time the share can be considerable. In some of the computer software area’s specialty occupations it can probably constitute a majority.

The Special Report:

Are H-1Bs particularly important to the economy?

The need is expressed by firms, mostly large corporations, who have to justify it in terms of a shortage of expertise and undertake to pay prevailing wages, so as not to undercut resident workers’ pay. In the absence of H-1B workers, it’s true that wages of residents may rise faster. But in an expanding sector that has many spillover effects, the long-term growth prospects of both the high-tech sector and the economy at large would be negatively affected in a serious manner [without the guest workers].

How many STEM graduates do you think American colleges will produce over the next 10 years?

Probably between 2.5 million to 2.75 million, depending on how much expansion takes place in enrollments made available over the next decade, as well as the desire of young high school grads in pursuing these careers.

The BLS estimates 1.8 million computer-related jobs to be created between 2010 and 2020. If you expect there to be 2 million or 2.5 million new STEM graduates entering the market, won’t there be excess supply for those 1.8 million jobs?

The thing to keep in mind is that not all STEM grads work in computer-related jobs. You’ll see that many go into “Life, Physical” science occupations, many into what is classified as “architecture and engineering occupations,” and others into education, healthcare, business, etc.

Technology companies say the H-1B cap prevents them from filling their job openings, so they may have to send the work offshore.  

Companies that say that are being somewhat disingenuous. Cap or no cap, they’d still move offshore. The motivations for onshore foreign hiring versus offshoring involve many calculations, including unit labor costs, the need for physical presence, market access, internal firm coordination issues, consumer feedback, and the like. It’s not so cut-and-dried.

23 Responses to “Economist: H-1Bs Are Important to the Economy”

  1. Ken Rahmes

    The calculation we don’t often hear about is the cost of retraining obsolete American workers. Yes, the “new” buzz-phrase is: Take ownership of . . . .. . But in the case of technical skills this can be an expensive and time-consuming proposition! Money individuals may not have and time they can’t afford. Meanwhile, there is the issue of what to take ownership of? Do I study Dot Net? Android? HTML5 or Linux? If I spend a year learning and empty my bank account, am I going to be competitive with the recent college graduates? With the H1B candidate? If I choose wrong, do I become a greeter at WalMart? The real problem with high tech labor today is the tremendous degree of uncertainty concerning the payoff. Skills that take years to develop become obsolete virtually over night!

    • Actually, send an old dude to a week of training and he’ll be more productive than anybody else on your team. What junior managers do not realize is the problems are the same although the languages and frameworks keep changing. The HTML5’ers and all the other buzzword folks are rediscovering computer science and reinventing the wheel.

      With H1 workers making $145K at one major company where I worked, you can easily hire Americans with more experience, send them to a one-week course, and have someone twice to ten times better. Simple fact.

      Of course, L1 workers only were making $70K; so, that’s the range where it starts to require good recruiting. In fact, you can hire equivalent entry level people in the USA for $45K; but don’t tell that to them.

      • Ken Rahmes


        However, I’d give the “experienced” workers more like 3-6 months to really become productive. It’s like the old story of the Mainframe Batch programmer who just couldn’t make the transition to real-time programming. Sometimes it does take a while to get your head around a new way of thinking. In fact, that’s exactly where retraining comes in. Rather than having to figure it out on your own, getting a leg up on the new “thought processes” allows the (re)-trainee to integrate, say, HTML and CSS with the familiar PHP and JavaScript. (Familiar because they are programming languages rather than layout.)

      • That’s exactly right.

        If your a decent engineer you stop being a complete religious zealot about C or Erlang or whatever, it’s just all abstractions to solve problems anyway and it switching stacks is something just about every engineer does on a regular basis over their careers anyway.

        I don’t know about a week, but certainly faster than a newbie out of college.

        The real issue for me is that the H1B program should be strongly tilted towards American citizens looking for work vs. cheap malleable labor from overseas.

        Ageism is definitely a factor as well, I have a heck of a hard time getting any of the my thirty something managers to hire anyone older than they are and it has nothing to do with skillsets.

  2. Cicuta

    One thing I must say: before we did not have H1-B visas and we were at the top of the world…”The Baby Boomers Era”. What companies did for employees and vice versa? That was an era that the US will never have again but instead we will continue to slide down the drain thanks to our own politicians and companies grid.

    Everything must be on the international level now but we cannot compete…why? Economists have been misleading people all the time and the proof to that is why we are “truly” in debt with more than 20 trillion (I say more than 40 trillion) US dollars and a balance of trade which tilt to the ground and in favor of other countries?

    The company HP have laid off about 30,000 employees last year in the US and zero in India…Why? What our government will do about those practices…zero I say.

    Why college and universities are so expensive to US citizens and granted for free to foreign students? Again …our laws and stupidity.

    Till we go back to the old values and practices the US will continue on the slide own till she hits bottom.

    • Who told you that education is free for foreign students?? Foreign students have to pay out of state/international tuition fee, which is lost higher than what Americans would pay. There is no need to spreed lies here.

      • memotech

        No one has touched this subject, but another reality is that majority of the faculty members in top institutions are either from India or China. Every year, they just call their colleagues in their countries for them to send them “the next batch.” Because of this “relationship,” the foreign grad students get an edge in the admission process and come with guaranteed graduate research/teaching assistantships; hence, the MS or PhD is more than free: no tuition and monthly pay. To confirm this, you can research the Indian Times, and you’ll find one article where they even said something like “…and of course for free…”

        • Ken Rahmes

          Remember, guys, it’s not about the PhD’s. It’s about the everyday programmers and analysts who in fact don’t have superior knowledge or education. Someone who took a course in skill X and gets imported to do a job requiring that skill X, while a local who might be able to acquire skill X in 3-6 months is left standing on the street. And, it’s never the immigrant who’s at fault in these things. It’s always your elected representatives who aren’t requiring employers to train 1-2 locals first, and have them fail, before looking outside the country for talent.

        • Culture is the missing bit, it’s getting to the point where the young won’t hire the old, and the foreigner prefers people from his own country.

          Sad really.

  3. No doubt before H1-B visas, things were better here in America, and It is a hard fact, but Americans have to realize it before it is too late. The question is China, India, Russia, Brazil and so on … don’t hire Americans even if they are best and brightest,
    So, it appears that everyone hires own citizens which is logical, but question is why we are struggling to get hired here in our land regardless of specialty we have? It is unfortunate that our Politicians are easily bought by a greedy Corporate who care
    Less and this pattern will continue Till we get up and unite!

  4. Fact: Wages in the Hi-Tech sector have grown SLOWER over the last decade then wages in other fields

    IF there is such a shortage of skilled workers in the Computer Field, the law of supply and demand would force wages to raise at a HIGHER rate then wages in other fields

    Short answer: Industry lobbyists have once again “bought” Congress and spun the tale of the shortage …. bottom line, Industry is putting the squeeze on the workers in order to maximize short term profits.

    The is no need for importing foreign workers … we have plenty of our own out of work or underemployed. The H1-Visa program needs to be eliminated.

    • I agree with Jeff and Zal. I am a systems consultant and am making substantially LESS than I did ten years ago. Even less than five years ago. And it keeps sliding down and it is a fact it is due to H1-B workers being willing to accept a much lower wage per hour. My experience is they rent a studio or 1 bedroom apartment and share it amongst four people and send their money back to their home country or save to move back to their home country and live like kings.
      Meanwhile, I am willing to take a large paycut to work overseas in Asia or Europe or South America to travel more and I need an intervention from God to get a work visa. Ironic since the U.S. is much more open to handing these out to foreigners.

  5. American IT professionals need to unite and create a petition on white house dot org website and get 100 000 signatures to get it in front of congress. Economists do not know the real picture, only the assumptions. We, the IT professional who lost jobs numerous times in the last few years just to retrain H1B successors, we know the real picture and we have to take action to protect our jobs and our families.

    • Martin

      Consider joining The Programmer’s Guild. They seem to be the only professional organization that is voicing the concerns of the American IT professional. I belong to the Computer Society of the Institute of Electrical and Electronic Engineers (IEEE), but the IEEE mostly represents the concerns of the manufacturers and of the academics who control that organization. IEEE supported the increase in H1-B visas; the Programmers Guild wants the H1-B program to be reformed in order to protect the employment of the American worker.

  6. Sven Gerhard

    that is with out a question the dumbest thing I have read in a long time. over 80 % of the H1B visas go to Indians. mostly for jobs in the consulting industry. those consultants are used by the big five Consulting companies to undercut the price of consultant already living in the USA.
    That way they can low ball bids.
    from my fast experience over the last 25 years in this industry the H1B consultants coming from India are mostly unqualified and a large number of the resumes that I have seen or friends have seen over the specially last 10 years are mostly made up and outright lies.

  7. Angel

    So this “professor” who has never worked in IT and has no actual experience is an expert?

    Agree with others – abolish the H1B program. Do the same as other countries – hire people born in the US for US jobs. And if the skills wanted are not available — offer training to US workers.

    ALL (yes all) the jobs ‘not being filled’ could be easily filled if the bozos sitting in the middle (recruiters and HR) would get out of the way and stop demanding purple squirrels.

  8. We need foreigners to do the work Americans don’t want to do. Or so we are told.
    And we need foreigners to do the work Americans do want to do. So we are told again.
    We need foreigners for low wage/manual labor jobs. And we need foreigners for high wage/high tech jobs. blah blah blah. Essentially, as we are told, we need foreigners for every job. But we don’t need Americans. Especially here in America. Why? Industry gets workers they can control and who are disposable. Politicians get voters who sympathize with the foreigners and even illegal workers, even though those voters are legal/Americans they may have been illegal and/or foreign themselves or have family that are illegal/foreign. So agribusiness/industry/politicians get what they want. But American workers get nothing…here in America. What a country! Thank your leaders… and reconsider who you are voting for.

    • bluemountain184

      Mark, well said.
      Sometimes, I see people that go into racism territory, but you didn’t do that.
      I feel like both political parties have sold out American citizens (GOP is terrible, but Democrats are only marginally better to say charitably. Both parties get an F on this issue as far as I am concerned.).
      Corporate Top 1% only cares about having a disposable workforce so that they can collect fatter bonus.
      Since they have so much money, they can spread out the money to politicians, lobbyists, and people in the media to write stories favorable towards the view of having a mostly foreign workforce that is disposable.
      To me, this so called “economist” interviewed isn’t too different than a prostitute.
      I wonder who pays for his research grants.
      The contempt the elites have against the ordinary American citizen is amazing.

  9. Dude…

    How many H1-B Economists are there?

    If there were an “unemployed Economist”, then how much LESS would they look forward to in a Job….??? If an Engineer… then about 1/2…

    How is that important to our country?

  10. Hmmm. A lot of pent up anger out there . . . The thing that always bothered me about the battle between the unions and corporate management was that literally thousands of “little” people needed to band together to confront a small number of senior executives! Unfortunately, it remains the same today. As long as the “system” (economic, political, educational, etc.) is overwhelmed by the money and power of the few at the top, it will take thousands of us to turn it around. What’s the chance of that happening?

  11. Not surprising that an indian would have this attitude…I’m 61 years old, worked for my company for 10 years, nights, weekends, holidays…whatever was required to keep the operations going…I was the go to person for almost every major system in the place…I was the world wide expert in certain areas…and was replaced with an h1b when the company switched over to oracle…

    I was the last american in a 10 person group that is now comprised by ONLY h1b’s…

    The company offered no training in the new system…just replaced those that worked on the old one…

    For those who tried to train themselves, there was limited access to the needed information and the new people would not assist the old ones…even if you asked via the management…

    US Politicians are selling our jobs to the highest bidder and no one is doing anything about it…

    The companies employing these h1b’s are doing so for one reason only…to lower their costs so more money can flow to the executives via salary and bonuses…there is no shortage of americans to do the job…that is a fantasy put forth by those bribing our politicians to put us out of work !!!