Will America lose its technological edge without H1-B workers?

Scrutinising a much-debated immigration program.

Written by Lipton Matthews.

The debate over America’s reliance on immigration resurfaced a few weeks ago, with Vivek Ramaswamy claiming that companies hire foreign-born workers because “American culture has venerated mediocrity over excellence for way too long”. At the center of this discussion lies the H-1B visa program, lauded by tech entrepreneurs as vital for maintaining America’s technological edge. However, the program is built on questionable assumptions—chiefly that there is a massive STEM labor shortage. A little digging reveals not only that the STEM labour shortage is a myth, but that the H-1B program restricts labor mobility, undermines wages and overstates the importance of foreign talent.

A key justification for the H-1B visa program is that the US faces a STEM labor shortage. Yet this narrative crumbles upon closer introspection.

During the 1980s, the National Science Foundation published a study claiming that there was a talent shortage in the STEM sector (which was heavily criticised by some). Relying on demographic trends, NSF analysts predictedt there would be a decline in the supply of STEM professionals. As a remedy, they proposed recruiting foreign students. These analysts reasoned that completing a doctorate was not the best use of time for domestic students – whose skills could be put to better use elsewhere, such as in industry. And although an influx of foreigners would probably lower wages, they felt that this was an acceptable price to pay to ensure America got the talent it needed.

The myth of the STEM labor shortage soon became engrained in the American imagination. This is despite many having argued that the supply of STEM graduates is quite sufficient to meet the needs of the economy. Thanks to the growing supply of STEM workers, fuelled in large part by immigration, there has been no upward trend in their wage compensation since the early 2000s – as Steven Camarota and Jason Richwine have shown.

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Immigration advocates, such as Vivek Wadhwa, claim that the absence of upward trends in compensation for STEM worker is entirely consistent with shortages because the dynamism of the tech sector means that skills quickly become redundant and therefore less well-compensated. (Others insist that evidence of healthy labor supply is purely “anecdotal”.)

However, Wadhwa’s reasoning must surely apply to many sectors of the economy. Advancements in manufacturing reward the most talented workers, while displacing those who are less capable. The banking sector, too, has experienced changes that disproportionately benefit the most talented workers. In short, there is no reason to assume that disruptions of this kind are unique to the tech sector.

Research indicates that the academic sector does have a surplus of STEM professionals, even if some government agencies and private businesses face shortages in certain areas. What’s more, we shouldn’t just assume that a “shortage” implies a paucity of skilled professionals. In some cases, it simply means a small percentage of people with a particular advanced degree. (We know there are many highly skilled professionals who chose not to obtain such degrees.)

Turning to the H-1B program itself, the first issue is that it actually underpays foreign workers. According to Norman Matloff, the lower wages of H-1B workers are symptomatic of an exploitative system that ties visa holders to their sponsoring employers. In his article ‘Immigration and the Tech Industry’, he explains how this system benefits employers by reducing labor costs and restricting worker mobility. H-1B workers are effectively locked into their contracts, unable to negotiate better terms or seek alternative employment without jeopardising their legal status. This situation, which resembles indentureship, creates a power imbalance that stifles competition among employers.

A study by Thomas Bourveau and colleagues, which analysed payroll data from Deloitte, a “Big Four” accounting firm, found that H-1B visa holders are indeed paid less than their domestic counterparts. However, the study was unable to pinpoint the source of this wage differential. A 2017 study on the H-1B program also yielded mixed results. Although the program lowered prices and made firms in the tech sector more profitable, it also lowered wages and unemployment for domestic workers. American computer scientists would have earned up to 5.1% more and would have enjoyed up to 10.8% higher employment. These findings complicate the “consensus” that skilled immigration is an unalloyed good for American workers.

Proponents of the H-1B program maintain that it attracts the “best and brightest” STEM talent from around the world, thereby boosting American innovation. But this assertion can be challenged. Evidence suggests that H-1B visa holders do not significantly outperform domestic workers on measures like attendance at elite schools, patent production, and entrepreneurial success.

While H-1B visa holders are overrepresented in certain subjects, their academic performance is far from exemplary – as Matloff notes in his paper ‘Are Foreign Students the Best and the Brightest? Foreign computer science PhD students are more likely to be enrolled at below average schools. And they do not generate patents at higher rates than their domestic counterparts. In fact, American computer scientists generate more commercialised patents than foreign computer scientists of the same age and academic level. Matloff also challenges the assertion that foreign workers are unusually innovative, noting that comparatively few Indian and Chinese entrepreneurs are involved with novel businesses that require sophisticated IT skills.

While several studies have argued that foreign workers are more innovative, they do not always disaggregate immigrants by their region or country of origin, or identify H1-B visa holders in particular. We know that European immigrants who arrived between 1880 and 1920 were unusually innovative. And we know that their contributions to American technological development have diminished in large part due to the increase in immigration from China and India beginning in the late 1970s. Interestingly, the Indian contribution began declining after 2000, reflecting shifts in the computer industry and challenges in maintaining talent quality (though the Chinese contribution continued).

This decline is compounded by alarming statistics about the qualifications of Indian engineers. In a 2020 study, Aspiring Minds found that 80% of Indian engineering graduates are unfit for jobs in the knowledge economy, which raises critical questions about the caliber of those entering the US through the H-1B program. It appears that many H-1B workers fall short of the standards expected in a competitive global economy.

Jennifer Hunt did find qualified support for immigrant exceptionalism in her paper ‘Are Immigrants the Best and Brightest U.S. Engineers?’ A closer look reveals that not all immigrants are equal. Western Europeans and anglophone immigrants are disproportionately represented in the upper tail of the income distribution. And when controlling for education and field of study, these immigrants enjoy a wage advantage over Indians – which could reflect differences in talent.

Hunt attributes the advantage to differences in English language skills. However, verbal dexterity is rarely the deciding factor in quantitative professions, and other research suggests that English languages skills are not an impediment to the professional advancement of Asian engineers. (Wim Naude and colleagues have shown that in Europe, evidence for the “migrant as super-entrepreneur” is rather weak.)

Despite claims of America’s declining innovation edge, the country remains a global leader in technological development. According to INSEAD’s Intelligence Capital Index, the US ranks first in scaling talent and in fostering innovative research. Moreover, American computer science students consistently outperform their international peers, including those from India and China. America also retains its position as the global leader in value added manufacturing per worker, demonstrating its adaptability in the face of global competition.

These achievements undermine the argument that America is already falling behind for want of more H-1B workers. And note that Western countries are still at the frontier of technology: of the top ten most innovative countries globally, eight are Western nations, with Singapore and South Korea the only exceptions. This dominance attests to the enduring strength of Western human capital and institutions in nurturing innovation.

The H-1B visa program, while marketed as a tool for attracting top talent, has become a mechanism for wage suppression and, in some cases, labor exploitation. The myth of a STEM labor shortage, perpetuated by industry lobbyists, obscures the reality that the US has a deep pool of domestic talent to draw from. America’s status as a global innovation leader is secure, bolstered by its first-rate educational institutions, research infrastructure, and talent pipelines. Rather than relying on flawed assumptions about labour shortages, the country should focus on curating its domestic workforce.

With AI poised to replace the “mid-level engineer” as soon as 2025, according to the Meta CEO Mark Zuckerberg, it is unclear why the US needs even more such workers than it already has. And although several studies suggest that AI has not yet radically altered the labour market, other companies have already implemented policies to minimise human labour. At Google, 25 percent of new code is written by AI, with humans only playing a review role. Importing vast numbers of foreign workers in this context seems short-sighted, to say the least.

Lipton Matthews is a research professional and YouTuber. His work has been featured by the Mises Institute, The Epoch Times, Chronicles, Intellectual Takeout, American Thinker and other publications. His email address is: lo_matthews@yahoo.com

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