Would Fewer High-skill Visas Really Mean More Jobs for Americans? Hmm…

 

As I write this, President Trump still hasn’t selected someone to chair his Council of Economic Advisers, much less filled all the CEA slots. That, even though Gary Cohn, head of Trump’s National Economic Council, recently said his boss has “every intention” of appointing a CEA chair. (Actually, it’s the law. The CEA was created by the Employment Act of 1946.) What’s more, the CEA chair apparently will not be cabinet-level in the Trump White House. Still, maybe now that Steven Mnuchin is on the job as Treasury secretary, a CEA pick will be forthcoming. Who knows?

But why does Trump even need a CEA? Some have suggested all the billionaire smarties in the Trump cabinet will supply all the economic wisdom Trump needs. I disagree, and outlined my counter argument recently in The Week. For more evidence, check out the recent IGM Forum survey question asked of top economists: “If the US significantly lowers the number of H-1B visas now, employment for American workers will rise materially over the next four years.”

This is exactly the kind of relevant policy question a CEA, as an in-house think tank, could explore for an administration. Now, as you can see in the above graphic, economists overwhelmingly disagree with the question’s stance. Among their reasons:

  • “H1Bs may slightly depress wages for high-skill workers. But they don’t lower total jobs and they likely raise total profits and wages.” – David Autor
  • “Immigrants have founded so many start-up companies, including Google, Tesla, …” – Markus Brunnermeier
  • “Direct effect, may hire some U.S. employees. But will push other operations overseas, reducing U.S. activity. Net effect is uncertain.” – Steven Kaplan
  • “Eventually perhaps some americans get hired, but seems more likely that there are shortages and activity moves in the short run.” – Anil Kashyap

For more on this, check out my recent post, “The costs and benefits of high-skill immigration.”

There are 32 comments.

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  1. Marion Evans Inactive
    Marion Evans
    @MarionEvans

    I doubt that there is any American with similar qualifications who is unemployed because his job was occupied by an H-1B holder. Americans don’t pursue the same fields of study any more. Why suffer in a graduate program of engineering or computer science when you can make so much more money in sales on Wall Street or elsewhere? At MIT, Cal Tech and others, there is a high percentage of foreign students especially at the Master’s and PhD levels. Their education is their ticket to a better life. Americans have had an easier route.

    • #1
  2. David Knights Member
    David Knights
    @DavidKnights

    Experts can  be wrong, especially economists.  Let’s try it for a couple of years and see.  Isn’t that how science should be done?  Experiment and then see if the results match the theories?  Given the disasters that experts have inflicted on us in the past, I am all for trying the opposite of whatever their pet theory of the day is.

    • #2
  3. Old Bathos Moderator
    Old Bathos
    @OldBathos

    The problem is that foreign programmers and engineers are effectively indentured servants whose continued stay is heavily conditioned by the whims of their employers.  They cannot easily go to a competitor.  Normal labor market forces are excluded from their slots in the job market.  That also makes it hard for experts to evaluate the true level of need for H-1B visas.

    Make it easier for the foreign talent to stay in the country if such workers switch employers in the same industry such that they can command higher pay and thus reduce the advantage to employers who hire foreigners and qualified Americans can compete on a more level ground.

     

    • #3
  4. captainpower Member
    captainpower
    @captainpower

    @marionevans

    Industry loves to complain about a shortage of workers, but when the workers graduate from college there is a glut.

    Seems like they want to keep wages low by increasing supply of workers (via dishonesty).

    http://spectrum.ieee.org/static/the-stem-crisis-is-a-myth-an-ongoing-discussion

    (found via googling: shortage of stem, and then googling: glut of stem)

    To quote Dennis Prager, “First tell the truth, then give your opinion.” Too often the simple truths here are obscured.

    The H1-B visa program is sold as if we want to attract the best talent in the world, geniuses and PhDs in niche fields. If that were what we were talking about, then I would be more prepared to agree with the idea that America might not have the identical talent that is being recruited from abroad.

    However, the H1B program seems to be used a lot for normal talent willing to work for less than an American counterpart.

    e.g. Disney laid off American workers and had them train their H1-B visa replacements.

    https://www.nytimes.com/2016/10/14/us/judge-says-disney-didnt-violate-visa-laws-in-layoffs.html

    The whole H1B program is also structured in a perverse way that doesn’t fast track to citizenship to encourage these ostensible geniuses to become American citizens, but instead creates a class of workers that are open to exploitation since they are unable to switch employers while in the US and have to leave the country if fired.

    • #4
  5. CM Member
    CM
    @CM

    Marion Evans (View Comment):
    Why suffer in a graduate program of engineering or computer science when you can make so much more money in sales on Wall Street or elsewhere? At MIT, Cal Tech and others, there is a high percentage of foreign students especially at the Master’s and PhD levels. Their education is their ticket to a better life. Americans have had an easier route.

    What?!?

    Maybe because your skills go in one direction or another? I don’t know… I hate finances and have a degree in math and csc. Of course I’m a woman so I don’t have the same problems getting in the door as a white man would.

    But you know? Your right. Men aren’t going to college anymore. I wonder why that is?

    • #5
  6. Kozak Member
    Kozak
    @Kozak

     

    • #6
  7. Vectorman Member
    Vectorman
    @Vectorman

    Marion Evans (View Comment):
    I doubt that there is any American with similar qualifications who is unemployed because his job was occupied by an H-1B holder. Americans don’t pursue the same fields of study any more. Why suffer in a graduate program of engineering or computer science when you can make so much more money in sales on Wall Street or elsewhere?

    Anybody that works on Wall Street or elsewhere can risk their entire future/fortune on one bad decision. And good Engineers, who are typically risk averse, can see that. It takes a couple of years to develop a good engineering mindset, and it helps to have “old grey beards” to review your work. H1-B’s are sometimes hired to do relatively “mindless” coding work, much as using a cheap Harbor Freight tool that you throw away when done. There is no craftsmanship or growth there.

    At MIT, Cal Tech and others, there is a high percentage of foreign students especially at the Master’s and PhD levels. Their education is their ticket to a better life.

    As discussed various times on Ricochet, the main reason these schools have foreign students is “because they can,” and pay full tuition. It seldom pays a for a working US engineer to get advanced degrees vs. more experience . Most PhD engineers I’ve met are good engineers, but are usually not at the top of their profession, especially in creativity.

    Americans have had an easier route.

    Really? Unless you count startup companies (which I have participated in) and make it “big,” if you can stay in the engineering business, you’ll have a good middle to upper-middle class life. Making it big at Wall Street companies is like high school basketball players making the NBA – it rarely happens.

    • #7
  8. Arjay Member
    Arjay
    @

    Marion Evans (View Comment):
    I doubt that there is any American with similar qualifications who is unemployed because his job was occupied by an H-1B holder.

    Ask the I.T. people the Disney corporation fired en masse.

    http://www.mercurynews.com/2016/09/06/emmons-when-walt-disney-co-replaces-americans-with-h1b-workers-its-a-small-world-for-sure/

    • #8
  9. Fake John/Jane Galt Coolidge
    Fake John/Jane Galt
    @FakeJohnJaneGalt

    Marion Evans (View Comment):
    I doubt that there is any American with similar qualifications who is unemployed because his job was occupied by an H-1B holder. Americans don’t pursue the same fields of study any more. Why suffer in a graduate program of engineering or computer science when you can make so much more money in sales on Wall Street or elsewhere? At MIT, Cal Tech and others, there is a high percentage of foreign students especially at the Master’s and PhD levels. Their education is their ticket to a better life. Americans have had an easier route.

    Other than the 5 or so IT people that I know that have been removed and replaced by H-1B you may be right.  Or the dozen or so times I have seen managers threaten to replace people with H-1B employees just to make a point.  Should I believe my 35 years of IT experience or economists cooked numbers and your disdain for your fellow citizens? I think I will go with my experience.

    • #9
  10. JLocked Inactive
    JLocked
    @CrazyHorse

    I wish I could agree with y’all and tell Mr. Pethokoukis to buzz off. Because the H1B program should not have the economic importance it does right now in our Country. Our scientific, and subsequently, engineering literacy has plummeted since the 70s. Now, I absolutely believe that Universities are at fault for opting for the profit of a foreign student — our engineering educational hubs should be chartering direct path programs for students who place well in science and mathematics early on. Similarly, out-of-state tuition shouldn’t be just as expensive as out-of-country tuition costs.

    Ultimately, we need to stop defunding education at every turn. It has proven disastrous — that the H1B visa is vital for our economy is the shameful evidence.

    • #10
  11. profdlp Inactive
    profdlp
    @profdlp

    I am 57 years old.  I have worked in IT since the mid 90s.  I started in computer repair, a field which dried up when computers became so inexpensive that replacement became a better option.  So I went back to school, got a Bachelors degree (graduating Magna Cum Laude three years ago), then re-entered the job market.  At that point I found myself considered “entry-level” and have had to start all over.  I have been competing with cheap indentured labor (like Old Bathos mentioned) and have at times faced the same threats of being outsourced mentioned by the Galts.  Now my company is planning to turn our overnight and weekend coverage over to a third party.  How much do you want to bet those jobs are overseas or are filled by H-1B?

    And a pox on all these industry experts who moan and groan that they can’t make it without foreign labor.  Only a sap would believe that.  Here’s a daring proposal for you:

    1. Shut down the H-1B program and watch those jobs get rapidly filled by Americans with high-tech skills
    2. Build that daggone wall, deport the illegals, curtail welfare benefits for the young and healthy, then watch low-tech jobs like housekeeping and landscaping become rapidly filled by Americans we now have sitting around making a living doing nothing but smoking weed and making the next generation of welfare recipients.

    In four years the true unemployment rate would be a lot lower.

     

    • #11
  12. captainpower Member
    captainpower
    @captainpower

    JLocked (View Comment):
    we need to stop defunding education at every turn.

    I think we can all agree there is a problem with education in America.

    I don’t think we can all agree that the problem is that we aren’t spending enough overall.

    From https://www.google.com/search?q=who+spends+the+most+on+education

    From https://www.google.com/search?q=us+spending+on+education

    Is there a target amount that we need to reach?

    Maybe we can reallocate some of the existing expenditure rather than calling for more of it?

    • #12
  13. JLocked Inactive
    JLocked
    @CrazyHorse

    Yeah kinda just threw that part of funding in there. Not the thrust of my argument which was  more that we need to use our existing resources better through experimentation and making universities not always opt for maximum profit.

    As someone who works with veteran populations, I would like to see tech companies increase their Military hiring quota significantly. These are not only the best employees in terms of diligence and commitment — they are gifted in adapting to needs of a changing environment which is quintessential in the tech-sector.

    • #13
  14. profdlp Inactive
    profdlp
    @profdlp

    • #14
  15. CM Member
    CM
    @CM

    profdlp (View Comment):

    So depressing… I hope my son excels in these areas. He is an excellent reader, but other than throwing books at him, I’m at a loss on how to help him grow. He loves math.

    • #15
  16. KingOfSwaziland Inactive
    KingOfSwaziland
    @KingOfSwaziland

    I’m tired of the “libertarian” economists who are willful colluders or useful idiots to the dissolve-the-people-and-elect-a-new-one left. If these fools got their way we would be living in Venezuela, or maybe Argentina if we got lucky (after importing their socialist voters here), not the libertarian paradise they imagine.

    If eliminating the H1-B visa program wouldn’t increase employment in these sectors among Americans, why not just let these jobs go? Why import a bunch of third-worlders to do jobs that are clearly not necessary here? The only benefit we get are more welfare expenditures and more lefty voters.

    Stop importing poor socialist voters, start importing companies and slash the corporate income tax rate.

    All Mr. Pethokoukis seems to do on here is argue that this country desperately needs more left-wing voters.

    • #16
  17. captainpower Member
    captainpower
    @captainpower

    profdlp (View Comment):

    Sourced via google image reverse search (to the best of my ability):

    with an updated chart through 2012 (it didn’t get better) here:

    • #17
  18. Vectorman Member
    Vectorman
    @Vectorman

    CM (View Comment):

    profdlp (View Comment):

    So depressing… I hope my son excels in these areas. He is an excellent reader, but other than throwing books at him, I’m at a loss on how to help him grow. He loves math.

    Your son could get a 2 year degree and start as a technician in a field that really interests him. Work a couple of years and save enough money to either finish up at a local 4 year school or maybe get a scholarship for a big one. And consider taking one course while being a tech to keep the “study” habit.

    In college, at the end of my sophomore year I had enough credits to qualify as a senior. I was not ready to graduate in 3 years, so I took off a semester and worked as a technician. That experience was helpful on my resume, and I wish I would have done technician work during all of my summers.

    I’ve been an Engineering Manager and hired both engineers and technicians. Many techs think they can do engineering work, but it takes a different mind set, and few can make the transition without further study. I have met some that did, but don’t suggest that your son spend many years as a tech vs. finish college. There are some upper level courses that challenge even smart kids. The old British prep school training in Latin, Greek, and the Classics is somewhat overrated, but the discipline is valid.

     

    • #18
  19. Vectorman Member
    Vectorman
    @Vectorman

    KingOfSwaziland (View Comment):
    I’m tired of the “libertarian” economists who are willful colluders or useful idiots to the dissolve-the-people-and-elect-a-new-one left. If these fools got their way we would be living in Venezuela, or maybe Argentina if we got lucky (after importing their socialist voters here), not the libertarian paradise they imagine.

    If eliminating the H1-B visa program wouldn’t increase employment in these sectors among Americans, why not just let these jobs go? Why import a bunch of third-worlders to do jobs that are clearly not necessary here? The only benefit we get are more welfare expenditures and more lefty voters.

    Stop importing poor socialist voters, start importing companies and slash the corporate income tax rate.

    All Mr. Pethokoukis seems to do on here is argue that this country desperately needs more left-wing voters.

    I regret I have only one Like to give to this comment!

    • #19
  20. Lily Bart Inactive
    Lily Bart
    @LilyBart

    captainpower (View Comment):
    I think we can all agree there is a problem with education in America.

    I don’t think we can all agree that the problem is that we aren’t spending enough overall.

    Yep

    • #20
  21. Duane Oyen Member
    Duane Oyen
    @DuaneOyen

    The question is answered right, but they asked the wrong question.  Their answer is absolutely true in the long run, but of course, as Keynes said in the one instance where he was really correct, “in the long run, we’re all dead.”  The right question is “Who would benefit the most if the US significantly raised the number of H1B visas at this point?”

    The answer is probably that US workers would not benefit at all, the US economy would not benefit in any visiblew way, but Mark Zuckerberg, Apple, Google,  and the other Silicon Valley behemoths would continue their business as they do now but with lower labor costs (and, of course larger profits, not that there is anything wrong with that- the principle of large profits, fairly earned).

    It is all to uncomfortably true that those Silicon Valley plutocrats, all non-US-oriented, internationalist Davos mavens, behave more like John D. Rockefeller at his most abusive, than like Sam Walton.   And the reality is that these people have behaved like compassionate, left-wing Disney when it decided to replace its IYT staff with cheaper labor, or have set up indentured servitude with their sleep camps and buses to take the H1B guest programmers out to the Silicon Valley campuses.  They operate more like Foxconn in Shenjen than plucky entrepreneurs in the 1970’s Apple garage.

    We know that the goal is cheap labor- why?  Because they admitted it in their restraint of trade consent decree. (con’t)

     

    • #21
  22. Duane Oyen Member
    Duane Oyen
    @DuaneOyen

    (con’t)
    Of course, we need to be sure that these people are able to hire the help that they need.  The question is whether they really try to hire US tech workers at prevailing wages (remember, the rapid declines in US defense spending, followed by the tech bubble bursting freed up a lot of talent; it is true that there is not a real STEM shortage any more than there is an attorney shortage); the answer is “Probably not”, because they are human, arrogant, self-serving, and the incentives lead them in the wrong direction.

    The answer is probably to provide significant tax incentives to locate some engineering campuses in less expensive parts of the country (e.g., Kansas, Texas, Mississippi, Kentucky) and to hire and train available US STEM employees in the specific disciplines they need.

    Leave the H1B program alone for now, and only after going for the US residents first consider increases.  If there is an emergency need, they can apply for a specific  waiver- and learn along with the rest of us how much fun it is to push something through the bureaucracy.

    • #22
  23. JimGoneWild Coolidge
    JimGoneWild
    @JimGoneWild

    As a software engineer and programmer for 30 years, I can tell you how H-1B are abused by American companies. They hire them so they can treat them as slave labor, pay them really low salaries and blackmail them into submission. The prime leverage is send them back to whatever country they came from, if they don’t behave, i.e. ask for more money.

    What the employers do to get them is also dishonest. They create a job requirement that is impossible to fill. For example, they’ll list all kinds of computer software skills required that should never go together. Then when the job isn’t filled, they request a H-1B because Americans “just don’t have the skills we need.”

    Lake Tahoe restaurants and seasonal businesses also hire the low skill equivalent of H-1B (sorry, I don’t remember the name of the program). I’ve talked with a couple of restaurant owners and they say the same thing. We like hiring them because they can’t quit. If they do they have to go back home. Where as American kids can quit and go work somewhere else.

    These visa programs are simply blackmail schemes.

    • #23
  24. Ulysses768 Inactive
    Ulysses768
    @Ulysses768

    This seems to be an incredibly complex topic.  My impression of the overall labor market is that there is a shortage of people in blue collar technical fields, such as machinists, boiler makers, welders.  A quick googling finds some evidence for this notion.

    Demand for STEM skills also exists below the bachelor’s level. A 2011 survey of manufacturers found that as many as 600,000 jobs remain unfilled because there is a lack of qualified candidates for technical positions requiring STEM skills—primarily production positions (e.g., machinists, operators, craftworkers, distributors, and technicians).44

    For the traditional engineering fields such as mechanical, electrical, and civil there is an oversupply.  Coming out of the Navy I took a $30,000 a year pay cut for a lower level nuclear/mechanical engineering position.  It seemed that the pay scale did not rise significantly from there.  Therefore many engineers pursue advanced degrees to differentiate themselves.

    In computer engineering, there is definitely a shortage of talent if not entry level applicants.  This may have more to do with the nature of the work than anything else.  Computer science readily lends itself to self-learning and experimentation, rather than research and acquired knowledge which are so much a part of other engineering fields.  Many people I work with do not have degrees in computer science and few have advanced degrees.  Conversely just because someone has a CS degree does not mean they will be an even remotely competent worker.

     

    • #24
  25. CM Member
    CM
    @CM

    Ulysses768 (View Comment):
    This seems to be an incredibly complex topic. My impression of the overall labor market is that there is a shortage of people in blue collar technical fields, such as machinists, boiler makers, welders. A quick googling finds some evidence for this notion.

    This is a lower education problem where university education is pushed ad nauseum. There needs to be vocational and professional tracts.

    • #25
  26. profdlp Inactive
    profdlp
    @profdlp

    JimGoneWild (View Comment):
    …These visa programs are simply blackmail schemes.

    That, in a nutshell, is it.  The foreign employees are getting blackmailed exactly as you describe.  The US government is getting blackmailed into granting visa for people who aren’t needed.  US citizens in those fields are getting blackmailed by the threat of seeing their jobs lost to low-cost outsiders.  Hey, lefties, want to stick it to big corporations and stand up for the common man?  Here’s a good place to start.

    • #26
  27. JLocked Inactive
    JLocked
    @CrazyHorse

    JimGoneWild (View Comment):
    As a software engineer and programmer for 30 years, I can tell you how H-1B are abused by American companies. They hire them so they can treat them as slave labor, pay them really low salaries and blackmail them into submission. The prime leverage is send them back to whatever country they came from, if they don’t behave, i.e. ask for more money.

    What the employers do to get them is also dishonest. They create a job requirement that is impossible to fill. For example, they’ll list all kinds of computer software skills required that should never go together. Then when the job isn’t filled, they request a H-1B because Americans “just don’t have the skills we need.”

    Lake Tahoe restaurants and seasonal businesses also hire the low skill equivalent of H-1B (sorry, I don’t remember the name of the program). I’ve talked with a couple of restaurant owners and they say the same thing. We like hiring them because they can’t quit. If they do they have to go back home. Where as American kids can quit and go work somewhere else.

    These visa programs are simply blackmail schemes.

    This argument is the one to make. Simple truths, unvarnished by attack, have the volume to reach everyone.

    • #27
  28. Chuckles Thatcher
    Chuckles
    @Chuckles

    Old Bathos (View Comment):
    The problem is that foreign programmers and engineers are effectively indentured servants whose continued stay is heavily conditioned by the whims of their employers. They cannot easily go to a competitor. Normal labor market forces are excluded from their slots in the job market. That also makes it hard for experts to evaluate the true level of need for H-1B visas.

    Make it easier for the foreign talent to stay in the country if such workers switch employers in the same industry such that they can command higher pay and thus reduce the advantage to employers who hire foreigners and qualified Americans can compete on a more level ground.

    I have known and worked with such folk, and the ones I knew were underpaid and over worked.

    • #28
  29. Chuckles Thatcher
    Chuckles
    @Chuckles

    I expect there is a lag much longer than the four years of the questioners between limiting the availability of available visas and any corresponding increase in American workers.

    Cut the supply, in a couple of years salaries increase as demand outpaces supply.  Then, in a few more years – assuming nothing else changes – young people begin to see that there is a better place to make money than basketweaving.  So they go to college. Then five years later they finally enter the workforce at the higher salary.  If nothing else has changed in the meantime:  Like @ulysses768 said, this is an incredibly complex subject.  Surveys won’t give you the right answer.

     

    • #29
  30. Matt White Member
    Matt White
    @

    James Pethokoukis: “H1Bs may slightly depress wages for high-skill workers. But they don’t lower total jobs and they likely raise total profits and wages.” – David Autor

    This shows that the question is loaded. Engineers will find work, but H1Bs depress salaries just like illegal immigration does for lower skilled work.

    • #30

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