On April 1, 2014, the H-1B visa application process for fiscal year 2015 opened. Hundreds of  U.S. companies submitted applications to bring in high-skilled individuals from all around the world. And thousands of individuals were ready to bring their talents to the United States within months of approval. Five days later, the pool was exhausted and the application closed, leaving tens of thousands of aspiring innovators unable to work in America. Meanwhile, companies like Intel and Microsoft struggle to fill the specific jobs that they need to grow and prosper in a global marketplace.

In two years, we can look at the numbers and see just how much growth we missed out on, and how many jobs we could have created, were our government not drawing names out of a hat for an insufficient number of slots.

- Giovanni Peri

The H-1B visa allows talented foreign-born, high-skilled individuals in fields like technology, engineering, and medicine to work here. But our current immigration system dictates an 85,000-visa cap and if that cap is reached within the first week of applications, a lottery is held to determine who gets to work here and who does not. This has happened in 4 of the last 7 years. In other words, which companies – and the communities they support – get to expand and thrive depends on luck of the draw.

In order to analyze the effects of this policy, I – along with Kevin Shih at the University of California, Davis, and Chad Sparber at Colgate University – conducted a new study for the Partnership for a New American Economy looking at visa denials in the 2007 and 2008 lotteries for workers in computer-related occupations. In fact, the randomized nature of the lottery creates a genuine “experiment”, one that a social scientist can use to determine the consequences of denying H1B visas in a way that has not been done before on this topic.

By looking at computer-sector employment and wages in metropolitan areas with higher or lower denials of H1Bs,we found that when we deny these individuals the ability to come and work in the U.S., the whole sector in the metro area suffers. Denying high-skilled immigrants the ability to come results in slower growth for the American tech industry and therefore fewer jobs and lower wages for all U.S.-born individuals working in computer-related fields.

There is a common myth that high-skilled immigrants take jobs from American workers. We can say that the U.S. government ran an experiment to help us determine if this is the case. By randomizing the H1B visa lottery it allowed us to learn about its consequences, independently of all the other confounding economic factors. In our study, we show that immigrant workers actually complement American workers, helping to create new jobs for them and stimulating firms’ productivity and wage growth.

Without  the visa limits of 2007 and 2008, our tech sector could have grown 3-times faster between 2005-2006 and 2009-2010 in terms of jobs created for American workers!. We could have had 221,000 more jobs for U.S.-born tech workers, and those workers could have made $3 billion more in wages per year. What’s more, 188,000 of those jobs that never were would have gone to less-skilled U.S.-born workers, technicians and staff support in America’s high tech firms, a group hit hard by the recession.

As we compared cities in which employers fared well in the lottery and those that were not so lucky, we can also identify the city-specific effects of the H1-B rationing. For example, the computer-related sector in the New York-New Jersey metropolitan area,  which is heavily dependent on H1-B workers and was heavily hit by the 2007-2008 visa lotteries, could have had more than 28,000 additional jobs for U.S.-born tech workers by 2010, and $470.5 million more in wages. In the Washington DC metro-area (including parts of Maryland and Virginia), the tech community could have had more than 30,000 additional jobs for U.S.-born tech workers, and $519.5 million more in wages. Even those cities that did well did so only in relative terms. Boulder, Colorado, one of the “luckier” cities, still missed out on as many as 583 jobs for U.S.-born tech workers, and as much as $7.8 million in additional wages.

The consequence of denying 178,000 H1-B visas, as done in 2007-08, was slower job and productivity growth for the IT sector.  The majority of those jobs were done away with or remained unfilled for a long time, slowing job creation in other parts of the sector and proving that companies could not find some types of specific talent in the U.S. This bottleneck hurt their overall growth. Instead, giving H-1Bworkers jobs would have expanded and strengthened tech companies, boosting their productivity and the wages of American workers with jobs there.

This analysis is for the 2007 and 2008 lotteries, but this year, the story was the same, and the effects will be just as bad. In two years, we can look at the numbers and see just how much growth we missed out on, and how many jobs we could have created, were our government not drawing names out of a hat for an insufficient number of slots. Or we can tell Congress to make our immigration system one that responds to the needs of our companies and our high tech sector and watch our economy grow.  

Giovanni Peri is Professor of Economics at UC Davis and Research Associate at the National Bureau of Economic Research, in Cambridge, Mass.

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