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February 9, 2017

Mend, Don't End, the H1B Visa Program

 

In this corner: A number of employers, particularly tech companies, who claim they have a large number of unfilled positions and can’t find enough skilled American workers to fill all of their needs, and thus need to attract skilled foreign workers through an expanded H1B visa program. 

In the opposite corner: Immigration skeptics who think tech companies simply prefer to hire cheaper imported labor rather than more expensive American workers. From this perspective, even one unemployed American tech worker is proof that the H1B program undermines citizen employment. 

How shall we break this impasse? Right now, the inclination of the Trump administration would seem to be to suspend or even terminate the H1B program, which might earn kudos from many Trump supporters but harm many of the companies he’s counting on to drive increased economic growth and exports. 

The good news is there is a way to mend the H1B system that solves the problem, answers the questions and actually generates new revenue for the federal government. 

Right now, H1B visas are issued on a first come, first served basis, for a flat fee, and the number is arbitrarily capped. Such a system tells us nothing about how much an H1B visa (and thus a skilled immigrant worker) is actually worth to an employer. And because the number is capped and the fee low, the system actually encourages a lottery or jackpot approach—in other words, employers or intermediaries apply for as many visas as possible, hoping to get enough. This is an irrational system. 

It would make much more sense to allocate H1B visas via an auction process. If H1B visas were auctioned to employers each year in a sealed bid process, with the bids allocated from highest to lowest until the available permits were exhausted, supply and demand would establish the market-clearing price for the right to hire a skilled immigrant worker. Because of the likely higher fees resulting from the auction mechanism, employers would have no incentive to hire an immigrant worker if an equivalent American worker were available. 

Additionally, it has been estimated that such a process could raise significant revenue, perhaps as much as $1 billion annually, which could be directed toward funding improvements in border control, a biometric entry and exit system, and other features of a modernized immigration system. 

Further, these new, market-determined H1B visas should be transferrable between employers, which would allow for further gathering of value information and market efficiency through a dynamic allocation of skilled immigrant workers. 

Such a system would effectively price the value of skilled immigrant workers to the U.S. economy, informing immigration policy decisions, providing tech employers with more certainty, and could help determine how many H1B visas are made available based on market forces rather than the arbitrary fiat dictates of bureaucrats. 

Of all the controversial elements of proposed immigration reform plans, the H1B visa impasse should be the easiest to fix. Moving the allocation decision from an arbitrary process to a market-clearing auction should settle the debate over our economy’s demand for skilled immigrant labor, add to economic growth, and provide a revenue source to fund further immigration reform.


 

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