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H-1B visa employees are crowding out other workers says new study
18/May/2015
According to a new study published by researchers from the University of California, Notre Dame University and the US Department of Treasury, H-1B employees are crowding out other workers and new H-1B hires did not lead to an increase in patent applications.

The study, titled 'The Effects of High-Skilled Immigration on Firms: Evidence from H-1B Visa Lotteries,' says that companies gaining additional H-1B visas 'has an insignificant effect on patenting' and 'H-1B employees crowd out the employment of other workers quite substantially.'

Government data used for H-1B Visa Study

The three economists who wrote the paper, Alexander Gelber [University of California], Kirk Doran [Notre Dame University] and Adam Isen [Office of Tax Analysis at the US Department of Treasury], took a new approach to government data in order to reach their conclusions.

Each year at the beginning of April 85,000 H-1B visas become available. When the combined H-1B visa cap of 85,000 is reached, the US immigration service assigns visas using a computer-generated lottery system.

To get an understanding of what happens at firms hiring H-1B personnel, the authors of the paper analysed data from the H-1B lottery, plus data from the Internal Revenue Service (IRS) which shows overall employment at a particular company.

According to the study, those companies obtaining visas in the lottery don't have a higher employment rate than those firms losing out on the lottery. At most, there are minimal job gains which, according to Alexander Gelber, means firms are employing H-1B workers as opposed to employing somebody else.

Kirk Doran, an economist at Notre Dame University, said: "The study is a solid conclusion that H-1B workers are crowding out other workers."

Way that Data was used for study criticised

However, Giovanni Peri - also of the University of California – was critical of Gelber's, Doran's and Isen's use of the lottery data as a source. In particular, Peri said that the three of them had only viewed data for H-1B holders employed 'late in the season'.

Peri mentioned that for each company winning the lottery, they only received around two H-1B workers from the process. Peri says that this makes it difficult to judge the impact they have on a company.

Kevin Shih, co-author of a paper written with Peri, offered a view on why Gelber, Doran and Isen did not discover a positive impact from H-1B on patenting. Shih suggested that this was because pioneering organisations tended to lodge their H-1B applications 'earlier in the season.'

However, Gelber, Doran and Isen were able to counteract Shih's suggestion, saying that their study had discovered that late applicants were actually 'more prone to patenting.'

In an exchange between Peri, Gelber, Doran and Isen, Peri said: "Your paper consists of nothing but 0s [i.e. findings that the effect size is 0, e.g. 0 gain in employment]! That can't be true!"

Gelber, Doran and Isen said: "We did find some non-zero results! We found a triple-star effect [i.e. very highly significant in statistical language] of reduced payroll! [An indication that the H-1Bs may be hired as cheap labour]."

Responding to this statement, Peri said: "Yes, but only in some cases."

Other workers "crowded out" unknown

Although the study identifies that other workers are being crowded out, the research is unable to identify exactly who the 'other' workers are. It's unknown whether they're permanent residents, US citizens or another category of worker.

The study also examined the wages of H-1B employees. Although researchers did not know the specific wages of H-1B workers, they were able to establish that employing H-1B personnel did increase the average profit, while lowering the overall wage bill at companies hiring H-1B workers.
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