H-1B Visas May Help Tech Firms Innovate. But at What Cost?

Earlier this month, two researchers at the University of California, San Diego (UCSD) issued a research paper suggesting that increasing a company’s proportion of H-1B visa-holders translates into measurable gains in innovation.

Specifically, boosting the ranks of H-1B workers by 10 percent equates with a two percent gain in product reallocation rates, or the speed at which new products replace old ones, according to Gaurav Khanna and Munseob Lee, both assistant professors of economics at UCSD’s School of Global Policy and Strategy.

“There’s been a lot of work by economists on the impacts of the H-1B program mostly focused on the wages and employment of native born workers, but little is known about how immigration affects production at the firm level,” Lee wrote in a press release posted on UCSD’s website. “We find that hiring more immigrant workers is associated with firms introducing new products on the market.”

Product reallocation is an interesting metric to use, because it can represent a company’s incremental progress toward new products and services; other H-1B studies have focused on immigrant workers’ impact on a company’s patent portfolio, which doesn’t always offer insight into corporate productivity.

Whether or not H-1Bs translate into boosted productivity, the federal government’s efforts to restrict the visa seem to be succeeding. H-1B denials and Requests for Evidence (RFEs) rose in the fourth quarter of fiscal year 2017, according to the National Foundation for American Policy (PDF): Rates of outright denials rose from 15.9 percent in the third quarter to 22.4 percent in the fourth, while there were nearly as many RFEs in the fourth quarter as the first three quarters of that year combined.

“The significant increase in denials and Requests for Evidence in the 4thquarter of 2017, which started July 1, 2017, came shortly after Donald Trump issued his restrictive ‘Buy American and Hire American’ executive order on April 18, 2017,” the National Foundation for American Policy added in its report. “The data indicate the new administration needed time to get in place its new political appointees—considered by observers to be a who’s who of opponents of all forms of immigration—and to exert their will on USCIS career adjudicators, who were not considered favorably inclined in the first place toward businesses or high-skilled foreign nationals.”

The Foundation claims that, based on its conversations with companies and attorneys, this elevated rate of denials and RFEs has continued into 2018.

Updated guidance for U.S. Citizenship and Immigration Services (USCIS) will allow the federal government to reject visa applications and petitions without asking for any RFE or Notice of Intent to Deny (NOID). “This policy is intended to discourage frivolous or substantially incomplete filings used as ‘placeholder’ filings and encourage applicants, petitioners, and requestors to be diligent in collecting and submitting required evidence,” the agency wrote in a statement when it announced the changes, which are slated to take effect on September 11.

Critics of the H-1B visa suggest that companies exploit the system in order to import lower-paid workers. While data from USCIS suggests that H-1B holders at the nation’s top tech firms (such as Apple and Google) make six figures per year, and often work extremely specialized jobs, H-1B holders at consultancy firms (which represented eight of the top ten companies petitioning for the visa) are often paid less.

And there is widespread acknowledgment that some entities abuse the system. “Big household-name American companies are just as culpable as the outsourcing companies of abusing the program,” Norman Matloff, a professor at the University of California, Davis,told The New York Times last year. Therein lies the cost: layoffs, potential salary discrepancies, and nasty lawsuits.

So while the research by UCSD suggests that H-1B visa use can have a positive effect on company productivity, it’s clear that the system underlying it is in the midst of some changes with big potential repercussions. How it will all work out is anyone’s guess.

20 Responses to “H-1B Visas May Help Tech Firms Innovate. But at What Cost?”

  1. No matter how much Americans have screamed at the top of their lungs, nothing is being done to stop either the H1b or L1 visas!!! Companies will find as many excuses as needed to keep it going. American companies are rolling over US citizens left and right with no mercy. It is absolutely pathetic!!!

  2. Anything an H1b visa worker can do there’s an American who can do better and they’re citizens. Companies that hire and use H1b visa need to have there products/service’s taxed so it’s not so profitable to hire them.

  3. jake leone

    The problem is that we give H-1b visas to Offshore Outsourcing companies, which then bring in liaison trainees. Basically, freshers who are trained by better qualified, more experienced U.S. workers as a prelude to moving the entire department, overseas.

    Stop that insane waste of jobs and H-1b visas. Keep the H-1b visas reasonably limited. Ideally we would give the H-1b visas to companies paying the top 1/3 of salary. Just doing that would kick the Offshore Outsourcing companies right out of the program, they couldn’t afford paying people the highest wages.

    But companies that truly have found foreign applicants, that will add to the company, will pay the highest salary for those H-1b workers.

    But that will never happen. Because companies like Apple, Google, Amazon are using those Offshore Outsourcing companies as a source of cheap labor and as a way to move jobs out of the United States.

    The Political Machine money will never be used to persuade Congress to do the right thing. Only the quick thing that can affect next quarters earnings.

  4. If we go to war do h-1b get drafted to defend America or they high tail it back to thier home country?

    H-1b is used when no American can be found. How come the vast majority of petition by Indian it firm are for entry level position?????

  5. So, the backslap of this article is that Americans can’t innovate so companies need offshore workers for that. BS. The offshore resource has been recently trained on the latest tech so that does make them more employable but that doesn’t mean that their code will be better. In my experience, many do not fully understand the requirements so rework is the end result. So, is that really faster?

  6. Ken Dawson

    We. It comes to ‘Shortage of skilled workers’ I never hear specifics. Which It platforms are they taking about? Java? The dot net platform?Open source? php,…..

  7. America has thousands of undergrad and graduate programs in computer science. Why do we need any of these H1 programs? I was so hopeful Trump would end these programs, but he’s a business man at heart: make money and screw the American tech worker. He fights for coal workers. A dying industry. But the future: technology is being given away to Asia.

    • Martin

      Totally agree. In NYS an agency called HBITS (Hourly Based Information Technology Services) was created in 2012 to regulate IT Contractors. They get $55-60/hour. Recent local Computer Science graduates can’t even get an interview. The HBITS Contractors prefer H1B Visa holders who can be locked into the typical 3 year Project contract unless they find another Visa sponsorship. Management likes having the Visa holders because they don’t have to train staff in new technology. They just replace them with the skills in demand. The lie is that H1B Visa holders all have degrees. In Information Technology Services that is not the case. If you read the H1B Visa requirements, an applicant can have the equivalent of a High School diploma and gets points for experience. 12 points are required. They get 4 pts for a Diploma and 3 pts for each year of experience. That experience is certified by the same company trying to place the H1B applicant. Just level the playing field and let students compete. In 1979 all I had was a degree. I got lucky and got into a IBM Mainframe training program. It only paid 14,000. Took 3 years to get $18,000. By 1982 the hourly Contractor Business was taking off and no one wanted to do the entry level stuff anymore. No one bothers to learn how software works anymore. Just the point and click and drag and drop stuff

  8. Eland Kumar

    The quality of H-1B is nowhere near the best and brightest – in fact, it is often either average or below average. I always wonder how the people from IT companies are considered the best and brightest when they cannot even invent one new technology! I send my son to a top-notch STEM school in US and they charge extremely high. The competition is fierce in all the reasonable STEM schools and yet these rich corrupt tech claim there is a STEM crisis and America cannot produce STEM grads. If so, close down these high-cost STEM colleges or cut down our fees to 0! Or how is that India students paying a fraction of the cost produce better STEM grads? Its all baloney since India itself accepts that 93% of their graduates are unemployable! Rich tech has become too greedy. In their endless greed, they have removed American tech and created this FAKE “STEM crisis” with help from politicians like Orrin Hatch (luckily he is done at the end of this term!).

  9. Lee Ville

    Stop talking about Google and Facebook when talking about H 1-B visa workers already! What percentage of H-1 B visa workers (numerical count) in IT work at those huge companies? It is about cost and NOT innovation.

    The “shortage” that is often cited is caused by inadequate recruiting efforts which depend heavily on keyword scanning of resumes.

  10. Standing on the corner

    I know many Americans change their Computer Science major on account of H1-B. How can you compete in a world where H1-Bs rule? The issue is H1-B was designed for special advanced scientists. Computer programmers are not in that category, but the scrupulous greedy multinationals in collusion with Congress have abused the system. A vicious cycle has started. The more Americans drop out from IT the more these multinationals scream they need more H1Bs. India has built farms for these computer programmers to specially serve the US unscrupulous companies. Smart of them.

    My solution to wind back this disaster, is to offer to these greedy unscrupulous companies large tax breaks when they hire American programmers. Otherwise this nation will be a slave to Indian nationals. Universe forbid Congress does the right thing and fixes this problem.

    • Eland Kumar

      I think high-class programmers are an asset, but the quality of H-1B is often not that – many are QA on H-1B or low-quality people who learn on the job… And yet because of pay they replace Americans! Quality should be of foremost concern and obviously high-quality tech would be paid highly too! So putting a wage limit for H-1B is of prime importance. Well, our useless politicians never do anything worthwhile instead they are working on making it even worse for local tech – like HR 392 which will make hordes more compete for the same jobs,. Trump has failed in what he set out or at least said he will do.

    • John O'Colmain

      Reparations for the American tech worker, compensation to be paid by the psychopaths that have seen their compensation skyrocket from 22X to 400X that of the median worker in just a few presidential terms.

      Charges of treason, price fixing and perjury for the executives. Now, about those pampered overpaid government swamp denizens who colluded in this act of occupational genocide…

      Nothing like this would ever have been done to public school teachers, cops, DMV workers, but we are getting SCREWED and our own government is in on it!

  11. Let me tell you a well kept secret. American Politicians are idiots and can be easily hoodwinked and bought. Think about it, if they had skills, they would have real jobs in industry instead of ivy league lawyers that can’t hack it slugging in law firms. Throw them a dime, give them junkets and they are happy to sell America. From Kissinger to Clinton who in name of free trade have screwed American manufacturing by sucking up to China . And screwing the services sector by outsourcing to India & Phillipines you know what.
    Let me tell you another secret.
    American companies aren’t really saving much importing IT labor. Average American in middle America would kill to get a $80K-$180 tech jobs if only shown the path. But guess what? There are no entry level IT or training jobs in Corporate America for white boys. So the Indian recruiting companies and or body shops make lot of money charging American companies $120-$150 hourly billable rate and paying their Indian H1 indian slave labors half. And most of tech jobs go to Andhra people from India with fake resumes and Indian recruiting firms happy to collude with them. All of them go to bank laughing at American stupid policies.

  12. sam francis

    The H-1B Genocide continues year after years, destroying American engineer wages, throwing americans into the streets and kicking them in the teeth.

    Over 4.5 MILLION Indians with fake degrees have taken the jobs from Americas best and Brightest. This is America? For shame For Shame.

    Read the 20 articles on PatriotMouse.com for the truth about this horrific anti-american practice

  13. This is nonsense. Tell me who really wrote that report and what they got paid or what personal benefit it was to them. The huge amount of self-interest is appalling! I have had to deal with H1b workers from ever major ‘body shop’ and they are NOT the best and brightest and are easily replaceable with American workers who would need less training and are easier to work with. We need to develop our own – not foreign workers.

  14. I think until and unless H4 EAD and H1B restrictions really applied I feel Trump is just making hype to control it, similar like the earlier president. There is 2+2 summit coming up between US and India where both will agree to resolve their issues and F1/H1/L1/GC/Family chain Citizenship will be free from any obstacles.
    Not sure who will take care of current and future generations of US Citizens.

  15. Deepish

    There are many non-immigrants who are taking the “student visa” route just to get the EAD and SSN which is supposed to be for “training” or on the job training. Most of these are Indian nationals who are applying for OPT/F1 visas claiming that they will be under training by they are actually working on a “client” location taking full salary as W2 employees as if they were authorized to work under those conditions. There is a BIG loophole that these people are taking advantage which the USCIS or DHS needs to look into.

  16. I can’t speak for others, but out of 15 people in my small group (my company is one of the most well known Silicon Valley firm), I am the only non-Indian. Often my referrals of non-Indian to job openings, they won’t even get a phone interview. “Best and brightest” is just an excuse by big-tech(which is already saturated with H-1B in not only engineering but executives too) to fuel the nepotism. There’s no Whites, other Asians or other races that’s smart enough to ‘innovate’? Highly unlikely. Indians only hire indians, that’s an open secret.