Last December’s social-media spat over high-skilled employment visas highlighted a stark division within the new Republican coalition. Bridging this gap will be the first test for the new marriage between techno-libertarian futurists like Elon Musk and more MAGA-inclined conservatives.
According to both groups, the question of whether to invite more engineers, programmers, or doctors into the country hinges on whether we have a “shortage” of such high-skilled workers. The techies are usually sympathetic to these claims, the MAGA types more skeptical. But shortages are not the right frame for this debate.
In fact, the centrality of “labor shortages” to immigration policy may be the primary reason why these debates prove so intractable, and why our high-skilled immigration system is so dysfunctional. Labor shortages are not a useful way to think about whether we need more high-skilled immigration, let alone the only way. A better approach would focus on the positive spillovers such immigrants create for those around.
As the Institute for Progress points out, different parties often mean different things when they refer to a labor shortage. A government may measure employment growth according to some social goal. Policymakers may want more marine engineers than the free market provides, for example, if they view maintaining domestic shipbuilding capacity as a national-security priority.
Businesses, meantime, may argue that a labor shortage exists when the wage they offer for a job no longer attracts as many applicants. A stubbornly high number of job openings within a specific economic sector, coupled with fast wage growth, may be symptoms of a shortage. But it could also indicate exploding demand for workers enabled by a technological breakthrough—hardly a problem crying out for a policy solution.
These shifting definitions can make a shortage-focused immigration system feel unfair to many American workers. After all, one company’s labor shortage is another worker’s chance to earn a raise. Responding to such situations with immigration doesn’t sit well with workers who face additional competition just as they were about to get a pay bump.
Even if we could agree on how to define labor shortages, they still wouldn’t be the right target for high-skilled immigration policy, since the benefits skilled workers provide mostly do not come from filling shortages but from the beneficial spillovers they provide to the rest of economy: innovation, entrepreneurship, industry growth, and positive fiscal contributions. Each of these effects yields more and better-paying jobs for Americans.
Even under the current system, the spillover benefits of high-skilled immigration are huge. Immigrants make up about 15 percent of the population, but they are nearly twice as likely to start a business as native-born Americans, accounting for 25 percent of new firms each year. Immigrants author 30 percent of patents, represent 34 percent of U.S.-based Nobel Prize winners, and have founded or co-founded a majority of “unicorn” high-growth startups.
High-skilled immigrants also make American workers more productive. One study finds that immigration boosted American innovation—measured by patents, patent quality, and patents’ economic value—by 36 percent from 1990 through 2016, with 23 percent resulting from the direct contributions of immigrant inventors themselves, and the rest coming from making native-born inventors more productive.
Contrasting with other innovation-boosting policy levers, high-skilled immigration also saves taxpayers’ money. We estimate that a typical H-1B holder generates $40,000 more in tax revenue for the federal government each year than he or she uses in public benefits.
Productivity, innovation, and growth are the economic benefits of high-skilled immigration that we should seek to maximize. While we have no perfect way to measure these spillovers, wages are the best approximation, and are hard to game or manipulate. Immigration policy should therefore largely emphasize the selecting of immigrants with the highest-paying job offers.
A more effective immigration system would prioritize attracting the highest-paid workers rather than worrying about which occupations they fill. This shift would make the system clearer and eliminate the need for complex formulas to determine labor shortages. Instead, visa eligibility would be straightforward, ensuring that admitted workers bring valuable, in-demand skills.
Policymakers should start by allocating existing high-skilled visas, like the H-1B, based on salary. This would dramatically boost the program’s economic value and prevent outsourcing firms from exploiting it. One estimate from the Institute for Progress suggests that a simple salary ranking would raise median pay for first-time H-1B recipients by 41 percent, from $97,000 to $137,000. At the same time, the number of H-1Bs awarded to firms particularly reliant on the program — often outsourcing companies — would be cut in half.
But we should go further. In a recent paper, we proposed an “EB-X” green card to provide a path to permanent residency for highly skilled, law-abiding immigrants with proven high earnings in the U.S. labor market. Any merit-based immigration reform that ranks immigration applicants by assigning points for different characteristics, like the RAISE Act introduced first introduced in 2017, should also prioritize earnings over educational credentials or attempts to fill shortages.
If high-skilled immigration advocates want to win public support, they must move beyond the labor-shortage narrative. Fortunately, labor markets already offer a clear, objective measure of value: wages.
Photo by Mayra Beltran/Houston Chronicle via Getty Images