With one declaration, President Donald Trump upended an aspect of our immigration system.
Last week, Trump announced that the US would begin imposing a $100,000 fee for all new H-1B visa applications — that is, the visa that high-skill foreign professionals use to work in the US. By hiking the fee to such an exorbitant sum, Trump hopes to compel companies to turn to high-skill American workers instead – not to mention bring in revenue.
“We’re going to take that money and we’re going to reduce taxes, we’re going to reduce debt,” he said. Workers in tech, finance, medicine, and science make up the majority of the 85,000 people awarded H-1B visas each year.
It’s the latest plank in the administration’s restrictive immigration policy, one that the administration argues will benefit Americans.
But Britta Glennon, an economist at the Wharton School at the University of Pennsylvania, sees it differently. “We actually have a lot of evidence showing the positive benefits that H-1B workers and skilled immigrants more generally have brought to the US,” Glennon told the Today, Explained podcast. She worries that Trump’s new policy will erode America’s innovative capacity and dim its future prospects.Below is an excerpt of Glennon’s conversation with host Sean Rameswaram, edited for length and clarity. There’s much more in the full podcast, so listen to Today, Explained wherever you get podcasts, including Apple Podcasts, Pandora, and Spotify.
President Trump signed this new decree that says it’ll cost $100,000 for an H-1B visa. This is something that you specialize in; I wonder what you think of this decision.
The short answer is: I don’t think it’s a good idea.
The fee before this was somewhere between $2,000 and $10,000, depending on the type of company and a variety of other things. As a result, I think it’s going to really constrain the use of the H-1B program, which is going to hurt the US economy and the American worker. We actually have a lot of evidence showing the positive benefits that H-1B workers and skilled immigrants more generally have brought to the US.
Just to lay out some of them, so that we kind of understand what’s at stake here: Immigrants are extremely innovative. There’s one paper that found that even though they account for about 14 percent of the US population, they’re responsible for 36 percent of aggregate innovation. Some of that is because they actually make Americans more innovative. So it’s sort of the combination of a diversity of ideas and perspectives.
Actually when we restricted immigrants in the 1920s with the National Origins Act, the US experienced a 68 percent decline in patenting. And part of that was because Americans actually became less innovative without immigrants around.
Immigrants are also highly entrepreneurial, so they’re 80 percent more likely to start companies than Americans are, and that of course means more jobs as well.
We also know from research what happens when it’s restricted. I have a paper that shows that when the cap fell — there’s a cap, a limit on the number of H-1B visas that can be issued in any given year — when that was reduced, US companies actually responded by offshoring.
So there’s a lot of research to draw on here that really actually tells us a lot about what happens when you make these H-1B visas harder to get, and of course more expensive is another version of harder to get.
Help us understand why he would make this move that, in your estimation, will hurt the US economy and hurt US workers.
There’s two general arguments that I’ve heard that could be driving this.
One is this belief that H-1B visas are actually not about skilled labor. They’re about cheap workers who can undercut US labor. This is not really born out in the literature. For example, I talked about how lots of big firms are offshoring or even acquiring other firms in response to H-1B restrictions. That’s a lot more costly than hiring an American. Right? Even at higher wages. So that kind of response doesn’t seem likely if that’s true.
“The top people in the world are going to be a lot less interested in coming to the US if they see an environment where there’s going to be far fewer companies that are willing to pay this.”
But I think actually there’s sort of a more important underlying issue here, which is that it relies on this belief that there’s a fixed number of jobs in the US economy. People think there are a hundred jobs, and if an immigrant comes and they take one of those jobs, there’s only 99 left for everyone else.
That’s not actually true. When an immigrant comes and takes one of those jobs, they’re also consuming goods and services. So they’re creating demand for more goods, which companies have to then provide. So they have to increase production, which often means hiring more people, more demand for services, right? So maybe they have kids and they need to hire child care, so more demand for child care workers. They are increasing demand for other jobs, so they’re likely to create jobs that way.
The second motivation is, in my view, a bit more valid, and that is to deal with some of the abuses in the H-1B program. There are some companies that don’t use the visa in the way that it’s intended. There are some companies, often outsourcing companies, that are flooding the H-1B lottery with applications to try to ensure that they’re getting some H-1B holders. And a lot of those companies are relying on cheaper foreign labor. So this is a legitimate concern. There are companies that are abusing the program — but that’s not because we offer H-1B visas.
First of all, that has to do with how it’s allocated. There’ve been a lot of reforms proposed for how to change the system to try to deal with these kinds of abuses. None of those are proposing a $100,000 fee. The problem with the $100,000 fee is that it’s not targeted in any way, so it’s going to disproportionately hurt those startups who definitely can’t pay that fee. It’s going to hurt entry-level positions. It’s going to hurt universities who rely on H-1B visas.
It’s also making the country a lot less attractive for foreign talent. So the top people in the world are going to be a lot less interested in coming to the US if they see an environment where there’s going to be far fewer companies that are willing to pay this.
Well, it sounds like the administration hasn’t fully made up their mind about how they’re going to roll this change out. What do you think a better way to reform would be?
One big reform that’s necessary is just to raise the cap. It is way too low. I mean, I think it hasn’t changed since the ’90s with a little bit of a blip around 2000, but once you’ve increased the cap, then I think you have to do away with the current lottery system.
The two most common reforms that I’ve seen that both I think are reasonable: One would be an auction where you actually auction off petitions, and the other would be a lottery that’s basically weighted by salary or something like that. Now, in both of those cases, you would just have to be careful to make sure that there’s sort of some separate mechanism for startups and entry-level positions, because of course they’re going to be at a disadvantage in a system like that.
But I think that would get rid of this abuse issue and it would still allow skilled immigrant workers to come into the country and create all those benefits I talked about.
