Startups That Hire H-1B Workers Might Actually Do Better: Study

Can hiring H-1B workers make a startup more successful? That’s a conclusion reached in a paper by researchers from the University of Illinois at Urbana-Champaign and Nanyang Technological University in Singapore. (Hat tip to Quartz for the link to the paper.)

The researchers concluded that, relative to other companies that applied for H-1B visas, “firms with higher lottery win rates are more likely to receive additional venture capital funding and to have a successful exit via an IPO or acquisition.” Startups with more H-1B workers also scored more patents, and were referenced more often in patent citations.

The researchers’ sample pool included 1,866 for-profit startups that had undergone at least one round of external financing. Clearly, the paper’s authors equate H-1B workers with the sort of “high-skill labor” that means the difference between success and failure for a new, hungry startup.  

“These cohorts of random winners and losers provided the researchers a straightforward way to examine how winning a visa in the H-1B lottery affects a startup’s success irrespective of its business characteristics or the quality of its potential hires,” is how Quartz summarized the researchers’ approach to ensuring other factors aren’t necessarily responsible for the higher rates of success or patents.

Any startup that wants to bring H-1B workers aboard, however, must face a rising rate of application rejections by U.S. Citizenship and Immigration Services (USCIS).

“In the first three quarters of FY 2019, USCIS adjudicators denied 24 percent of H-1B petitions for ‘initial’ employment and 12 percent of H-1B petitions for ‘continuing’ employment,” read a recent report (PDF) by the National Foundation for American Policy (NFAP). “The 12 percent denial rate for continuing employment is also historically high—4 times higher than the denial rate of only 3 percent for H-1B petitions for continuing employment as recently as FY 2015.” (A brief note: ‘initial employment’ means H-1B petitions for new employment, whereas ‘continuing employment’ is typically an extension for an existing employee.)

Denial rates have also spiked at contractor and services firms that provide professional and IT services to other U.S. companies, including Accenture and Capgemini. In a statement to Mother Jones, a USCIS spokesman framed the agency’s reforms as “designed to protect U.S. workers, cut down on frivolous petitions, strengthen the transparency of employment-based visa programs, and improve the integrity of the immigration petition process.” Just check out this chart of overall tech firms, contractor firms, and rejections:

In other words, any startup that wants to land some specialized talent from overseas might have a harder time doing so. Fortunately, the domestic pipeline for highly specialized tech skills such as artificial intelligence (A.I.) and machine learning seems to be expanding a bit, as students realize that pursuing these specializations can prove quite lucrative.

18 Responses to “Startups That Hire H-1B Workers Might Actually Do Better: Study”

    • Absolutely. I agree.

      In addition with such a headline, I can do a healthy guess as to who commissioned this article. I was a principal/investor to 2 start-ups and hiring H1B was never a factor. If I want to develop an idea and my start-up does not have a lot of money, I can just outsource it to either companies in Eastern Europe or India; with the latter being my last choice.

      For the GAFA and big companies that are making loads of profit, shame on them for claiming that they can’t find american workers as their excuse to hire H1B.

    • Aleph Nought

      An Indian H-1B will add risk to any project. The skill level of an H-1B is on average not going to be as good as the American. The English level of the H-1B is going to be worse. So an H-1B is going to produce inferior documentation (what’s that you say?) as a result. Verbal communication suffers similarly. Sub-par code, with sub-par documentation, is the long term cost to a project resulting from the use of Indian H-1B dependency injection.

  1. Controlling population growth like China (used to have 1 kid, not sure if continuing) is required in the World which may minimizes immigration to other countries, also it saves the environment, no destruction of trees to build apts, crazy LCD bill boards and shopping centers etc. Halt Immigration of all types for certain time and give life to US born Citizens.

    • Paul Bev.

      And yet, professionals have been leaving China in record numbers. As far as saving the environment, China’s air pollution was so extreme that in 2015, independent research group Berkeley Earth estimated it contributed to 1.6 million deaths per year in the country. Back in 2017, it topped the world (not sure if that is still the top dog today) in terms of air pollution. various parts of China were enveloped in thick white fog due to pollution. Your point?

    • Jenny White

      I wish people would not discriminate so much. Otherwise so much history of evolution of human rights would be completely undermined. I understand both sides of the stories and was curious as a lawyer about this. I feel comments on this page are too biased, there is no balance at all. News are supposed to be news, it’s usually not the norm.

      • Not discrimination. Simple economics – supply and demand. Offer lots of apples for a nickel and the guy who sells apples for a quarter has to drop his Apple prices. We have been living this for 25 years. AMERICAN Recent grads are taking it in the shorts – they should be making 120k out of school, instead somewhere in the 60k range.

    • This site seems to consistently peddle this sort of propaganda. H1bs are basically folks from India. It’s a country whose colleges barely rank in the top 500 globally, a third world country where 300+ million people don’t even have access to a proper toilet, yet we’re expected to believe that they have this magical supply of talent. What they have is cheap labor.

      Worked in tech for over 25 years and I’ve never come across someone from India that was high-skilled.

      • Each year, roughly four million young Americans join the workforce after graduating from high school or a university. This total includes about 800,000 Americans who graduate with skilled degrees in business or health care, engineering or science, software, or statistics.

        But the federal government then imports about 1.1 million legal immigrants. It also adds replacement workers to a resident population of more than 1.5 million white-collar visa workers — including approximately one million H-1B workers and about 500,000 blue-collar H-2B, H-2A, and J-1 visa workers. The government also prints more than one million work permits for new foreigners, and it rarely punishes companies for employing illegal migrants.

        This policy of inflating the labor supply boosts economic growth and stock values for investors. The stimulus happens because the extra labor ensures that employers do not have to compete for American workers by offering higher wages and better working conditions.

        The federal policy of flooding the market with cheap, foreign white-collar graduates and blue-collar labor shifts wealth from young employees toward older investors. It also widens wealth gaps, reduces high-tech investment, increases state and local tax burdens, reduces marriage rates, and hurts children’s schools and college educations.

        The cheap-labor economic strategy also pushes Americans away from high-tech careers, and it sidelines millions of marginalized Americans, including many who are now struggling with drug addictions.

        The labor policy also moves business investment and wealth from the Heartland to the coastal cities, explodes rents and housing costs, undermines suburbia, shrivels real estate values in the Midwest, and rewards investors for creating low-tech, labor-intensive workplaces.

        But President Donald Trump’s “Hire American” policy is boosting wages by capping immigration within a growing economy.

        The Census Bureau said September 10 that men who work full-time and year-round got an earnings boost of 3.4 percent in 2018, pushing their median salaries up to $55,291. Women gained 3.3 percent in wages, bringing their median salaries to $45,097 for full-time, year-round work

        • Thank you could not have said the reality of the situation better
          No country is obligated to add foreign workers to their work pools, especially when they already have a viable work pool
          The only reason is to make rich people richer
          It was always the fundamental design of NAFTA

  2. Of course paying slave wages are going to help a startup control costs. Why not offer internships to american college grads instead. Stupid article probably written by an H1-B. Build the wall!

  3. EatTheDuckyMoss

    The meat of the article is here: “The researchers concluded that, relative to other companies that applied for H-1B visas, “firms with higher lottery win rates are more likely to receive additional venture capital funding and to have a successful exit via an IPO or acquisition.” Startups with more H-1B workers also scored more patents, and were referenced more often in patent citations.”.
    My sense is that this could easily be read as: Venture Capitalists like H1B workers because they view them as cheap expendable labor that won’t ask for stock options. When they like something they fund it more. With more funding, it’s more likely to IPO. More funding correlates to more patents. If you have more patents they’re referenced in patent citations more.
    The article doesn’t cite any statistical correlation between *more* H1B visa per headcount and more likely IPO or more patents.

  4. David Sonz

    Also just in – Startups that have a BJ’s discount shopping card outperform those that do not. This sort of illusory correlation is better stated at “those that work the system succeed more often.”

    If you work the edge of the system in 8-10 different areas (including H-1B) of course your business gains an edge. The catastrophic damage you left behind to our American social fabric will only become evident when you stop and think about something bigger than yourself.

  5. Practical

    For those complaining here, in globalized market there is no stopping competition. Already many startups moved to Asia and Immigration friendly countries. With more H1B laws – you will speed up the process of outsourcing.