In late June, President Trump signed an executive order eliminating any new H-1B visas through the end of the year. The administration’s rationale for temporarily ending the visa program for high-skilled immigrants was that doing so supposedly puts “America first.”
According to the order, the restrictions are meant to “protect unemployed Americans from the threat of competition for scarce jobs” during the recovery from the COVID-19 economic crisis, but Trump’s suspension of the H-1B program was always on a weak footing. The weight of economic evidence shows that immigration is a boon to the economy, not a blight on it.
Now, new research reiterates that limiting high-skilled immigration actually promotes offshoring jobs to competitors like China and India, one of the very trends Trump promised to combat as president. A working paper recently published by the National Bureau of Economic Research examines past H-1B restrictions and has found that they promoted offshoring. It compares businesses that are highly dependent on H-1B visas to those that are less dependent on them and modeled how they responded to the slash in visas.
The research, conducted by Britta Glennon of Wharton Business School, shows H-1B-dependent companies were more likely to increase their employment at foreign affiliates and to open new foreign affiliates entirely. “When H-1B visas were capped in 2004, firms that were dependent on high-skilled foreign workers increased employment at foreign affiliates 27 percent more than less-dependent firms,” the research summary reads.
Glennon found that foreign jobs were largely flowing to China, India, and Canada. As our neighbor has much more hospitable immigration laws, Canada has drawn an increasing amount of economic activity away from the United States, such as Microsoft shifting more operations over the border in recent years.
Consider the following graph that was included in the paper. The graph clearly shows that following the 2004 cut in the H-1B visa cap, we saw a huge spike in offshoring by U.S.-based businesses that previously relied on skilled immigration. This directly undercuts the president’s policy rationale.
Even from the “America first” perspective, surely it’s better to have U.S.-based companies bring in some foreign talent if it means keeping the businesses stateside. That way, they still employ many people domestically alongside H-1B visa holders. And more importantly, the spending, productivity, and human capital associated with the enterprise all stay here, even if not every single job goes to a U.S. citizen.
This latest research is not an outlier. A 2014 analysis by the research firm New American Economy found that historical slashes in H-1B visas “didn’t help the economies of America’s cities or their U.S.-born workers.” The report found that instead, H-1B reduction “cost their tech sectors hundreds of thousands of jobs and billions in missed wages.”
Another study published NBER has shown that, more generally, adding one immigrant to the U.S. economy creates 1.2 additional jobs due to the boost in economic activity. This further undermines the labor-based case against immigration.
Of course, the president’s desire to put America first amid an economic crisis is completely understandable, but the evidence shows that rather than protecting jobs, Trump’s H-1B visa cuts may actually help China and our other top competitors.
Brad Polumbo (@Brad_Polumbo) is the Eugene S. Thorpe fellow at the Foundation for Economic Education and a Washington Examiner contributor.
