Immigrants and US Businesses
By Franny Lin and William F. Lincoln
Immigration in the US has long been a contentious issue and in recent years it has become particularly important. In this article we will discuss issues on this topic that are relevant for both US and international students. In particular, we will highlight some recent research on the effects of high skilled immigration and discuss its relevance for students.
The H-1B visa is a visa for entry into the US for high-skilled foreign nationals. It is one of the primary visas that international students acquire in order to work in the US after college. Policy on this visa has encountered heavy controversy, with debates centering around the impact of high-skilled immigration on the domestic job market. The conventional argument against larger admissions under the visa is that it will have negative effects for domestic workers. While there exists a large amount of research on immigration generally, two recent studies in particular shed light on these issues specifically. Kerr, Kerr, and Lincoln (2015) and Kerr and Lincoln (2010) find evidence that high-skilled immigration can positively affect job creation for citizens and total innovation.
Kerr, Kerr, and Lincoln (2015) investigated the impact of skilled immigrants brought through the H-1B visa program by looking at the hiring patterns of 319 major US employer and patenting firms. Since economic activity is highly skewed across businesses, these firms account for a significant share of US sales and employment. This was one of the first studies to consider the effects of immigration using detailed linked information on firm operations and individual worker characteristics. The research was conducted by following these businesses over time, as firms are the ones who actively apply for visas for their foreign-born workers. The study found evidence that a firm’s increased employment of young skilled immigrants is causally tied to an increase of its total skilled labor force. Evidence suggests that this effect is in particular positive for domestic workers. Addressing a popular critique of the H-1B visa, higher employment of immigrants is associated with larger employment gains for younger natives than for older, although both effects are positive. This tends to shift the age composition of the workforce in a firm towards younger workers, while still having overall positive effects for older US workers.
In related research, Kerr and Lincoln (2010) examines the link between increased H-1B admissions and the rate of domestic innovation. This presents some of the first empirical evidence for the impact of skilled immigration on the host-country’s innovation by analyzing patent records. The results show that fluctuations in H-1B admissions have a significantly positive impact on the amount of patenting in various areas and firms. As in Kerr, Kerr, and Lincoln (2015), to identify a causal effect as opposed to a simple correlation the authors use the fact that, statistically speaking, immigrants tend to move to areas of the US where relatively larger numbers of people from their home countries already reside. This can be due to family, linguistic, or other ties. The paper concludes that the increase in innovation due to higher skilled immigrant admissions can be primarily attributed to the increase in patenting by immigrant inventors rather than either a positive or negative effect on innovation by US citizens.
These findings have significant implications for both current international and domestic students. The evidence in these papers suggests that high skilled foreign students can act as complements to domestic students once out in the job market. They may also help develop new products and start new companies that improve the lives of US consumers. Indeed, almost half of the US Fortune 500 companies were founded by immigrants or their children.
For students looking to become entrepreneurs, thinking globally when putting together a team could be advantageous. Hiring an H-1B applicant can often be valuable, as they bring a global perspective, networking opportunities, and exposure to different ideas. Additionally, when thinking globally during the hiring process, the employer’s potential workforce expands, providing more opportunities for the right fit. As for international students who are looking to develop a career in the US, it can be helpful to have a good understanding of the skills and advantages that they can bring to the table. Citing the findings of these studies may also help these students justify the substantial extra H-1B fees associated with hiring them while trying to find a job in the US. Ultimately, for both domestic and international students, understanding the real effects of immigration in the job market can provide a more informed context in searching for a job.
Note: Figure above plots the cap on the number of H-1B visas that can be issued by fiscal year. The cap was reached in every fiscal year since 1997 except 2002 and 2003.