H-1B visas called ‘net positive’ for U.S economy

Gaurav Khanna, a post-doctoral fellow at the center, and Nicolas Morales of the University of Michigan.

WASHINGTON, D.C — The H-1B visa program has been a net positive for the U.S. economy according to a sweeping report released by the Center for Global Development, a policy and research institute in Washington, D.C.

According to the 80-page report by Gaurav Khanna, a post-doctoral fellow at the center, and Nicolas Morales of the University of Michigan, American workers gained more than $431 million in one year because of the visa program. The report, “The IT Boom and Other Unintended Consequences of Chasing the American Dream,” was more than three years in the making.

The H-1B visa program allows U.S.-based companies to employ foreign workers in specialty occupations, especially associated with computer science occupations and high-tech industries. But this program has landed in the political crosshairs as lawmakers seek to overhaul U.S. immigration policy.

The research by Khanna and Morales examines the relationship between migration and the outsourcing of IT production to India since the early 2000s, and has found that:

U.S. workers were on average, better off by about $431 million (or $1,345 per additional migrant) in 2010 because of the H-1B program.

The study incorporates mechanisms like innovation by businesses, trade with other countries, and the choices made by students and workers to become computer scientists.

While there are some negative impacts for a subset of U.S. workers, the overall gains outweigh the losses as the combined incomes of the U.S. and India both rise under the H-1B program by about $17.3 billion or 0.36 percent. And total IT output from both nations rose steadily under the H-1B regime by about 0.45 percent in 2010.

Better technology as a byproduct of this immigration of tech workers increased the overall productivity of other sectors as well, and consumers of computer-related goods enjoyed better software and lower prices. The study found a 1 percent decrease in price for U.S. IT products and a 7.4 percent fall in Indian IT products.

“The average worker in each country is better off because of immigration, and U.S. native workers have made big gains because of the H-1B visa program,” said Khanna.

Acknowledging that things can be done to “blunt distributional impacts that affect a subset of workers,” he said “overall, this policy has been a net positive for the U.S. economy and workers.”

The report also looks at the effects of the H-1B visa program on India’s economy, and finds that this program was a net positive there as well.

In sharp contrast to critics who worry about India’s “brain drain” when highly-skilled Indian workers migrate to the U.S. for job opportunities, the study found that the visa program has been catalytic in the expansion of India’s own hi-tech industry and contributed to a growing tech-workforce in India.

The report said further:

The prospect of migrating to the U.S. and earning a higher wage induced many students and workers to switch to computer science and engineering fields. Those who could not join the U.S. workforce, due to a cap on the number of H-1B visas, remained in India, enabling the growth of the Indian IT sector.

Those who migrated to the U.S. acquired skills, technical know-how, and established networks with U.S. companies. As their visas expired, they returned with this acquired human capital and technology and contributed to the growing tech-workforce in India. Thus, together, the “brain-gain” to India under the H-1B program outweighs any “brain-drain.”

The increase in IT sector productivity, because of the additional knowledge and skilled workers spurred by the H-1B visa program, allowed India to eventually surpass the U.S. in software exports.

Over time, some IT production begins to be outsourced from the U.S. to India.

“India experienced a dramatic expansion in IT employment and output in the 1990s and early 2000s,” Khanna said. “Many factors contributed to this boom but our work suggests that, surprisingly, policies from halfway around the world played a critical role.”

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