A couple of people have brought to my attention a new research paper on H-1B by Kirk Doran (Notre Dame), Alexander Gelber (UCB) and Adam Isen (U.S. Treasury). Its findings are certainly provocative, as they directly contradict most (or all) of the recent major work that is positive on H-1B.
Though some might expect me to automatically endorse every paper with findings on H-1B similar to mine, on the contrary, I tend to be rather critical of such work. For example, Georgetown’s Tony Carnevale found that a sizable number of Computer Science graduates are not finding work in their field. This would seem to starkly contradict the industry PR line that there is a dire shortage of CS grads, but I’ve pointed out that (a) a large number of CS grads are simply not sharp enough to do software development and (b) many aren’t suitable for the CS “talking jobs” (say, customer support) either, as they are not the outgoing articulate types that are needed.
In the case of this paper, though, it is one of the most careful, insightful works I’ve seen on either side of the H-1B field. No, not perfect by any means, as I will discuss below, but a fine job at the end of the day.
Contrary to the results — real or misinterpreted — of previous work on whether H-1B increases patenting, the authors here do not find such an effect. Similarly, they find that H-1B does NOT increase employment, and in fact the arrival of new H-1Bs causes some displacement of existing workers, both American and foreign — quite contrary to the obligatory statement in every pro-industry press release, editorial and research paper that “each H-1B creates 2.62 new jobs.”
But mark my words — you won’t be hearing much about this paper. I doubt that it will be highlighted in the press, or even mentioned as counterpoint in articles that bring up the claimed 2.62 figure. The problem is that these authors don’t have the massive PR machine that the pro-H-1B researchers have, in which journalists, editorial boards and above all, offices on Capitol Hill are constantly bombarded with “educational” material featuring H-1B poster boys (rarely girls), tales of woe that “Johnny Can’t Do Math,” and of course the ubiquitous 2.62 figure. I make this point here specifically for the activist programmers and engineers hoping for reduction of H-1B, who often don’t realize that, sadly, facts are not enough in politics.
Well, what does the paper do specifically, and what are its weaknesses as I see them? First, what are its main findings?
- “Winning additional H-1B visas has an insignificant effect on patenting within eight years…”
- “H-1Bs substantially crowd out employment of other workers.”
- “We find some evidence that additional H-1Bs lead to lower average employee wages while raising firm profits….and rules out the scenario in which H-1Bs replace natives one-for-one.”
One disappointment I have with the paper is that it doesn’t sufficiently treat the question of the variability of the quality of the H-1Bs, and of corresponding variability of the firms that hire them. The authors do perform some separate analyses in which they omit the large IT services firms, but they do so only because such firms don’t do much patenting. That is true, but it ignores the point that the quality of the H-1Bs hired by those firms is low. Why didn’t the authors do separate analyses in which they kept only the mainstream firms that are most vocal in pushing Congress to expand H-1B, such as Google, Facebook, Intel, IBM, Oracle, Cisco and Texas Instruments? Conceivably they might find a salutatory effect of H-1B on patenting in those firms. For that matter, assuming the authors’ data separated visa counts for the main 65,000 cap and the 20,000 supplementary cap for foreign MS/PhD grads of U.S. universities, they should have done separate analyses here too. This is the industry lobbyists’ favorite group, so it would have been useful to see if H-1B had a postive effect on patenting in those firms.
There is also no recognition in the paper about the role of the OPT extension to the F-1 student visa, which serves as a buffer to a “shortage” of H-1B visas. If there were a positive effect of H-1B/foreign workers on patenting, it might be missed if the OPTs are being granted a lot of patents. The time period for OPTs was extended during the George W. Bush administration, and now the Obama people want to lengthen it even further. So, this is a very important factor policywise.
Mind you, my own position is that the H-1Bs who were formerly foreign students are actually WEAKER than their American peers, thus causing a net LOSS in patenting for the nation, due to the displacement effects (the latter of which, I hope you recall, even Giovanni’s research has shown). This was the subject of my EPI paper, and of work by John Bound, who ironically is prominently acknowledged by the authors as being helpful to them. So, I believe H-1B should be curtailed, not expanded, and I feel the same about OPT. But though confirming this with the data of the present paper may have been difficult, if they had at least found that H-1Bs don’t increase patenting even at firms like Google, this would have been very significant.
I was also disappointed at the authors’ weak understanding of H-1B wage law and the manner in which H-1B displacement of Americans works. The authors remark that the wage laws “may not be effective,” but they seem to have no inkling of the central role of age in the use of H-1Bs as cheap labor, in which young H-1Bs are hired in lieu of older (35+) Americans, in full compliance with the law. And while the authors seem surprised that new H-1Bs often displace earlier-hired ones, it is probably due to the same problem; those earlier H-1Bs may have gotten enough raises in the last couple of years to make them likely targets for dismissal too.
The phrase “hired in lieu of” above is quite different from the “replace Americans by H-1Bs one-for-one” model the authors seem to have in mind. This model of course likely stems from the huge publicity given to cases like SCE, in which that phenomenon does indeed occur, but the much more common use of the H-1B program is at the hiring stage. This is something the authors should have pursued, though again it’s not clear that their data would have been sufficient for this kind of analysis.
The authors use the word causal, something I’ve taken my colleague Giovanni Peri to task for. The authors seem to believe that this is justified by the “random treatment assignment” nature of the data, in which visas were awarded by USCIS by random lottery, but I still consider use of the word to be reckless.
Consider for instance a point I’ve made before on Giovanni’s “lottery” analysis. (By the way, the authors of the present paper don’t consider his paper to be truly based on randomization.) He found that the cities that “won” the H-1B lottery saw the wages of Americans in IT rise. But consider a scenario in which a firm fires most of its American IT workers except for the managers, and hires a number of H-1Bs to replace them. (Again, it does occur sometimes, as we’ve seen.) Then, since the managers tend to make more money than the programmers, the wages of Americans at that firm — those Americans who REMAIN — does rise, even though none of the retained Americans got a nickel in raises. In such a scenario, the claim that the H-1Bs “caused” the American salaries to rise might be technically correct, but certainly not in the sense people assume upon hearing the claim.
Bottom line, though, this paper is generally done extremely carefully and its results are highly remarkable. It flatly contradicts the work by Peri and Zavodny (“2.62”!), and for that matter, contradicts the inaccurate interpretation by the industry of Bill Kerr’s paper on patenting. Too bad no one will notice.
