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Are H1B Workers Taking Jobs from U.S. Workers?

Updated: Apr 29

The Immigration Act of 1990 created the H1B visa program, authorizing employers to hire foreign employees for up to 6 years. The job opportunities supported by the program are those that require highly specialized knowledge and a Bachelor’s degree or higher. In order to participate in the program, employers must submit applications to the U.S. Department of Labor attesting that no U.S. citizen worker would be displaced by the prospective foreign worker. The application must then be reviewed by the USCIS before the State Department can interview the foreign worker and issue the H1B visa.


The H1B program faces some controversy, mainly due to concerns of employers undercutting salaries by hiring cheaper foreign labor. Supporters of the program argue that H1Bs are necessary for industry growth due to a lack of local talent, especially in the high tech industry.


Since 1998, roughly 120,000 visas have been issued annually up until 2017, representing a small fraction of the overall US workforce of approximately 160 million, with more added each year. The H1B annual cap is 85,000 visas awarded via lottery but the number of actual visas issued regularly exceeds this due to various circumstances such as renewals and cap-exempt organizations. [1]


On April 18, 2017, President Trump signed the Buy American and Hire American executive order [2], which stipulated that H1B visas should only be granted to the most skilled and highly paid applicants. The order resulted in a significant drop in H1B approvals. The new executive order has caused foreign applicants for the IT sector to seek work elsewhere while also discouraging companies from filing costly applications due to the high rate of rejection. Job seekers instead showed increasing interest in Canadian employers.


Some of the contention lies in the pay level for H1B employees. Over the past ten years, H1B median pay has increased faster than the US average. One of explanations for this disparity is that H1B positions tend to hire for harder to fill positions which are rare or require high level skills, such as university professors, project managers, and the like. Such positions have always been paid higher than average jobs, so it’s a matter of correlation, not causation. In more popular and common jobs, the H1B pay trend can swing the opposite direction, earning less than the US average in fields such as data science, financial analysis, and software engineering. The overall statistics may be pulled higher by the rare, niche positions, giving the impression that H1B is paid higher across the board.


A significant shift for IT industry hiring in particular occurred in the 90’s when companies began to utilize cost-cutting outsourcing services. The Global Delivery Model is a globally distributed hybrid onsite-offshore model in which the provider has offshore development centers spread out worldwide. Multinational companies began reducing total onsite employment, or their local employees, in order to take advantage of cheaper labor available remotely.


One effect of reducing H1B, in an effort to improve the salaries of American employees, might be a resulting increase in outsourcing to reduce costs by companies. Additionally, the largest corporations have the most freedom to operate across countries, meaning it is easiest for them to transition to a remote foreign labor force. Critics of H1B tend to be equally against the model of outsourcing, arguing that both harm the American worker.

Despite the controversy surrounding it and its side effects, the H1B program plays a crucial role for US companies seeking to fill roles which may require skills that are hard to find locally.

Sources:

  1. USCIS, Report on H-1B Petitions (2017). https://www.uscis.gov/sites/default/files/reports-studies/FY-2017-Annual-Report-H-1B-Petitions.pdf

  2. Thrush, Glenn, et al. “Trump Signs Order That Could Lead to Curbs on Foreign Workers.” The New York Times, The New York Times, 18 Apr. 2017, www.nytimes.com/2017/04/18/us/politics/executive-order-hire-buy-american-h1b-visa-trump.html

  3. Torres, Nicole. “The H-1B Visa Debate, Explained.” Harvard Business Review, 4 May 2017, www.hbr.org/2017/05/the-h-1b-visa-debate-explained

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