Foreign workers, who mostly come on H-1B visas, fetch more profits to the US IT firms by keeping wages low and consumption high.
Highly skilled H-1B workers bring more innovations to the United States. However, foreign workers and highly skilled immigrants eventually push natives to non-computer science work avenues.
“These numbers imply that for every 100 foreign CS workers that enter the US, between 33 to 61 native CS workers are crowded out from computer science to other college graduate occupations,” the National Bureau of Economic Research (NBER) reports. Researchers John Bound, Gaurav Khanna and Nicholas Morales in their paper Understanding the Economic Impact of the H-1B Program on the U.S. have gauged the impact of skilled foreign workers by analyzing data from the year 1994 to 2001.
Shift in career, but it helps increase wages of non-computer science graduates.
The trio further concluded that this switch of career, however, helped to increase the productivity and wages of the non-computer science graduates. “The Influx of skilled immigrants induces some college graduates to leave CS [Computer Science] and raises the productivity of non-CS college graduates,” the research paper added.
“This increases the demand for non-CS workers, and tends to increase their wage making the net effect positive (Figure 5c) [illustrated below]. Overall, Table 5 [Illustrated below] shows an increase in the non-CS wage due to immigration, of about 0.04%-0.28% in 2001.”
Foreigners bring computer science wages down, but ensure better profits and productivity.
The research acknowledged, as H-1B critiques often point-out, that the H-1B program brings down the wages of computer science graduates. In the absence of H-1Bs, who can also avail immigration option, the computer science workers would earn 2.6 percent to 5.1 percent higher.
“Over the period of study [1994-2001], wages grew for computer science workers, but this growth would have been higher if immigration was restricted (Figure 5b) [illustrated below]. An influx of foreign CS [Computer Science] workers depresses the CS wage . . . At the end of the decade, our model implies wages for CS workers would have been between 2.6%-5.1% lower under the open economy (Table 5) [illustrated below],” the research revealed.
On the other hand, these IT firms reap higher profits with reduced wages and better productivity, owing to the H-1B workers. “While the magnitude of these gains depends on the markup in the IT sector, as long as there is a markup, which we consider safe to assume, high-skill immigrant labor raises IT sector profits,” the study elaborates. “It is then no surprise that Bill Gates and other IT executives lobby in favor of increasing quotas for high-skill immigrants.”
Immigrant workers bring more IT firms, ensure better welfare benefits.
In addition, the increase in the number of immigrants expands the IT sector and leads to welfare benefits. “An increase in the CS [Computer Science] work force due to immigration leads to more innovation and has an additional impact on overall production, lowering prices and increasing welfare for consumers,” the report read.
In recent months US lawmakers have vehemently proposed several bills to curb the H-1B program and make it tougher for skilled foreign workers. Proponents argue that the current H-1B program has become a trajectory for cheap labor, which was not the real intent.
Such proposals directly impact India’s IT workforce. With Indians receiving more than 70 percent of H-1B visas, they are the largest beneficiaries of the program. The Government of India has raised concerns regarding the proposed, unfavorable changes to the H-1B program. India’s External Affairs Minister Sushma Swaraj on Thursday assured H-1B aspirants from India to shun all anxieties on proposed changes, at least for now.
H-1B visa applicants should not worry: Indian Minister Sushma Swaraj (March 23, 2017)
New H-1B visa reform of Trump might take longer for implementation (March 13, 2017)