America's H-1B policy signals an ideology-versus-market battle

Its $100,000 fee for new H-IB visas is driven by ideology and likely to hurt innovation and entrepreneurship in the long run

- SANJOY CHAKRAVORTY

(BLOOMBERG)

Late last month, the Trump administration in the US announced that new applications for the H-1B visa would require a fee of $100,000. This is extraordinary.

The H-IB instantly became by far the most expensive employment visa in the world, about 15 times dearer than the next most expensive work visa (the UK’s), and 50 times dearer than it was just weeks ago in the US. The reason for this, according to the White House website, is because the H-1B visa “has been deliberately exploited to replace, rather than supplement, American workers with lower-paid, lower-skilled labor. The large-scale replacement of American workers through systemic abuse of the program has undermined both our economic and national security.”

To understand whether these claims are plausible, let's begin with a reminder that the H-1B is a non-immigrant visa used to temporarily employ foreign workers in “specialty occupations” in fields like technology, science and medicine. There are roughly 700,000 H-1B visa holders in the US. Over 60% of these are in computer-related fields and the remainder is split mostly between engineering, science and healthcare workers. About 70% of all H-1B visas go to Indians. This visa has been crucial to the growth of the IT industry both in India and the US. Gaurav Khanna and Nicolas Morales show that “high-skill migration raised the average welfare of workers in each country.” We could go further and argue that because IT is embedded in every industry, skilled immigrants in America’s IT industry have helped raise productivity and accelerated trade around the world. This is a classic 'spillover' situation in which positive developments in one domain generate increasing returns in nearby or related domains.