There is a growing outcry that foreign workers with H-1B visa are replacing American-born workers in technology companies. The view has been exacerbated by recent scandals involving Disney, IT outsourcing, Indian IT companies and claims of H1-B irregularities. But a study conducted by Enrico Moretti for his award-winning book “The New Geography of Jobs” found that five new jobs are created for every tech job filled in US metropolitan areas. According to a recent survey conducted by Chicago-based VISANOW, hiring foreign nationals for tech-related jobs is ‘critical’ for nearly a quarter of US companies.
Behind the Data
The US government issues 85,000 visas for foreign workers, particularly specialized in STEM skills. Over the past three years, applications seeking H-1B visas have far exceeded the visa cap, forcing the authorities to use a lottery system to decide the fate of applicants.
VisaNow surveyed 100 US companies. Fifty percent of 100 companies surveyed consider hiring foreign nationals for U.S. job openings “Important or Very Important” with another 23 percent of them calling it “Critical” for their company’s success in 2015.
In this context, Moretti’s study is crucial. Enrico Moretti is a Professor of Economics at the University of California, Berkeley. His book, according to Immigration Policy Center, was written after analyzing 11 million American workers in 320 metropolitan areas.
Moreover, the book was awarded the William Bowen Prize by Princeton University for the contribution toward understanding public policy and the labor market.
What It Means
As Moretti noted in a Wall Street Journal article, “The most important effect of high-tech companies on the local economy is outside high-tech.” The five new jobs created for each new high-tech job benefit a diverse group of workers: two new jobs for professional workers such as attorneys and doctors, and three new positions in nonprofessional occupations such as service industry jobs.
While the H-1B visa scandal is not directly referenced in this study, the research points to some interesting potential correlations. While an IT job outsourced to a foreign national such as those implicated in the Disney case may result in a US national missing out on that particular job, the multiplier effect works regardless. It is also useful to consider that skilled IT workers may not always be available in the highly competitive US tech job market.
In the VisaNow survey, 83 percent of respondents said they would have hired a U.S. citizen if available. A 2013 study from the Brookings Institution shows that 43 percent of new vacancies in STEM occupations for which there are H-1B requests go unfilled after one month. In the 100 largest metropolitan areas in the United States, 46 percent of job openings requiring significant STEM knowledge go unfilled for one month or longer, and STEM employers report thousands of unfilled positions.
H-1B visas are critical for American tech companies to sustain growth and remain competitive. It is abundantly clear that there is a shortage in STEM skills in the country. There is agreement that government needs to streamline the system of issuing H-1B visas and keep track of the employers to make sure that they use foreign workers to fill up openings rather than displace the existing American employee.
As Moretti noted: “Most industries have a multiplier effect. But none has a bigger one than the innovation sector: about three times as large as that of extractive industries or traditional manufacturing. Clearly, the best way for a city or state to generate jobs for everyone is to attract innovative companies that hire highly educated workers.”
Tech jobs — regardless of whether they are filled by local or immigrant workers — create jobs in the area and this multiplier effect needs to be better understand in order to really unpack the issues of outsourcing and its impact on US jobs.