Headlines that say H-1B visas drive down US tech wages don’t tell the full story

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It’s a tough time for foreign workers aiming to live in the US.

With the raging rhetoric about immigrants stealing American jobs, the current political climate is ripe for a clampdown on the coveted H-1B visa. The Donald Trump administration has already stalled premium processing for this visa, which allows holders to work in the US for up to six years.

Detractors have blamed the H-1B for ramping up competition for jobs, particularly in the technology sector, and for allegedly driving down wages by enabling a supply of cheap labour. A February 2017 study (pdf) by researchers from the University of Michigan and the University of California-San Diego found that in the absence of work immigration from 1994 to 2001, wages for US computer scientists would have been between 2.6% and 5.1% higher by the end of the time period, with employment of US workers in the sector also up by 6.1%-10.8%.

But while it is true that companies such as Cisco and Dell have laid off many US employees to increase their foreign worker uptake—sometimes even forcing them to train their foreign replacements—restricting the H-1B program won’t automatically lead to improvements in wages and employment for American workers.

Skills shortage

In theory, discontinuing the intake of foreign workers should create more jobs for their American counterparts. But as things stand today, there simply aren’t enough qualified people to fill all the positions.

More than 64% of the H-1B visas allocated in 2014 went to people in computer-related occupations because the tech sector is in dire need of foreign talent. IT leaders argue that there is a severe skills shortage (pdf) in the US, making it impossible to replace foreign workers with Americans. In 2015, there were nearly 10 times more US computing jobs open than there were students equipped with computer science degrees.

So, foreign talent is fixing the shortfall, and that’s proving to be lucrative for the industry. The joint study by the University of Michigan and the University of California-San Diego conceded that importing foreign workers has “brought gains to both US consumers and IT sector entrepreneurs,” with the authors adding that “immigration also raises profits in the IT sector.”

Moreover, in anticipation of a visa regime change, some of the biggest H-1B applicants, notably the Indian companies Infosys and Tata Consultancy Services, have been reducing their reliance on labour-intensive projects in the US in the first place, switching over to remote services like cloud computing or automation over the past few years. They’ve also ramped up efforts to set up near-shore centers outside North America.

With this strategy, companies can still serve US clients in the wake of serious visa reforms, but there are no net gains for US employees in terms of jobs or wages.

Innovative immigrants

The other risk of squeezing the H-1B program is that it would block innovative foreign talent from bringing their great ideas to America. People born outside the US have founded more than half of the country’s unicorns—private startups valued more than $1 billion—according to the non-partisan think tank National Foundation for American Policy (NFAP) (pdf). And, Indians, who are the largest beneficiaries of the H-1B, rank as the most entrepreneurial population among immigrants in the US.

Tightening the cap on H-1B visas would result in more entrepreneurs setting up shop outside of America. For proof, the US should look at H-1B reject and Snapdeal founder Kunal Bahl, whose company now locks horns with Amazon in India.

And that matters because the benefits of innovation aren’t limited to just software services.

“IT is the major driver behind the emergence of many new industries, such as fintech, edu-tech, health-tech etc,” Ashok Soota, the executive chairman at Bengaluru-based Happiest Minds Technologies, told Quartz in an e-mail.

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