For people the world over, the United States remains the target destination. People flock to the U.S. because it has offered freedom, stable institutions, and property rights, with few barriers to individual achievement. In turn, high-skilled immigration has strengthened economic and social development in the U.S. But now the Department of Homeland Security proposes fee increases for visas, especially O-1B visas, reserved for artists, athletes, and performers of extraordinary ability. DHS’s move is misguided.
Recent research by the University of Pennsylvania’s Britta Glennon demonstrates that U.S. restrictions on H-1B visas (for foreign workers in specialty occupations) have caused multinational firms to increase their employment of these skilled workers at their foreign affiliates and to open new establishments to employ them, instead of deploying them in the American market. The U.S. has experienced so much offshoring partly because of such restrictions.
No data are publicly available on O-1B visas, but we do know a few things. First, arts institutions will struggle to pay fee increases. Though philanthropic donations in general continue to grow, the arts and humanities make up one of the smallest categories of giving, according to the Arts Consulting Group. The mandated closure of theaters for two years during Covid-19 devastated the performing arts, and nearly all institutions are still trying to recover. A fee hike now would further stifle these efforts.
Second, even when arts institutions get funding, that money rarely flows to individual artists. Using millions of observations from the American Community Survey between 2006 and 2021, my research shows that real wages among artists, relative to non-artists, have been declining since 2006. Controlling for factors including age, race, gender, and education, the chart below shows that artists earned nearly 30 percent less than their non-artist peers in 2021. Arts institutions are likely to pass on the costs of higher visa fees to artists in the form of lower wages.
Third, the vast majority of talented performing artists are located in Europe, because that is where demand for their services is greatest. Raising application fees for O-1B visas would further reduce the probability that U.S. theaters will attract the top talent. The effects will accrue over time and degrade the American cultural environment.
True, the U.S. Citizenship and Immigration Services (USCIS) needs additional funding. Currently, nearly all its revenue comes from application fees. But it isn’t clear why that should be the case. If USCIS truly is the first line of defense for the nation when it comes to immigration, then the federal government should find another way to fund it. The easiest option would be through the National Defense Authorization Act (NDAA), followed by further appropriations through the homeland security subcommittee. After all, the aims of USCIS are intimately tied with national security: deciding who gets into the United States constitutes our first line of defense.
The current dependence on application fees for revenue creates several major challenges. The USCIS has appeared underfunded even in the best of times, and if anything, the agency is struggling even more now. As the Manhattan Institute’s Daniel Di Martino has suggested, providing expanded premium processing options for applicants in exchange for higher fees would boost revenues and expedite visa processing—at least in the short term. But as long as USCIS funding is fee-based, the agency will have less accountability to Congress and taxpayers. Lawmakers should be asking hard questions about how the agency can improve its operations.
USCIS’s reliance on application fees also creates perverse incentives. Bureaucratic rules force businesses to apply for H-1B visas rather than visas they would prefer to sponsor, such as green cards. The process for receiving a permanent-residence visa usually takes two years, and few applicants make it to the end. Thus businesses opt for temporary work visas, such as H-1Bs. Few candidates or businesses can wait two years or more to migrate and begin working in the U.S.
And since the H-1B lottery is random, many large firms sponsor more migrants than they need in hopes of gaming the system. These factors have the unintended consequence of causing the H-1B visa program to subsidize other areas of the immigration process. Since USCIS is chronically underfunded, this distortion is tolerated.
Putting the USCIS budget under the purview of the NDAA and providing further appropriations through the homeland security subcommittee would constitute a more sustainable strategy than another increase in visa fees.