I’m sure that lots of things happened in 2004. For instance, the productivity surge that began in the 1990s ended about 2004.
Here’s something else that happened (from an NBER study):
In response to concerns that foreign workers were taking jobs from Americans, especially in high-technology fields, Congress cut the annual quota on new H-1B visas from 195,000 to 65,000, beginning with fiscal year 2004. A study by Anna Maria Mayda, Francesc Ortega, Giovanni Peri, Kevin Shih, and Chad Sparber, based on data for the fiscal years 2002-09, finds that the reduced cap did not increase the hiring of U.S. workers.
Could this have contributed to the productivity slowdown? Hard to say, but it certainly did not have the impact that Congress expected:
Since the cap was tightened in 2004, firms hired between 20 and 50 percent fewer new H-1B workers than they might have hired had it remained at 195,000 visas per year. The researchers find, however, that the reduced pool of foreign workers did not lead firms to hire more Americans, and conclude that this suggests “low substitutability between native-born and H-1B workers in the same skill groups.”
And here are some other side effects:
The cap led to an increased concentration of India-born workers in computer-related fields. The paper posits that Indians had a leg up on other foreign workers because of long-established labor networks in the software and semiconductor industries.
On the employer side, the lower cap favored larger firms with greater experience navigating the bureaucracy of the visa program and with in-house legal teams that could handle the paperwork.
We keep shooting ourselves in the foot.
READER COMMENTS
mbka
Apr 5 2018 at 6:17am
While I agree on this, the total numbers are so laughably low, that it may not have mattered either way. Consider this:
USA, pop 300 Mio citizens, H1-B allowance at previous high limit: 195,000.
Singapore, pop 3,4 Mio citizens, workers on employment pass (must be highly paid and qualified for this category – similar to H1-B): 187,000 (2017).
Oh yeah. Total foreign workforce in Singapore, including the lower paid construction and domestic workers: 1.37 Mio. This does NOT yet include the half a million-odd permanent residents = green card holders.
Unemployment rate:
US 4.4%
Singapore 2.2%
The whole immigration debate in the US is ludicrous. Immigration is presented as an economics issue when it is clearly all about cultural resentment. The economics of immigration are just fine.
Marcus Nunes
Apr 5 2018 at 6:18am
Trump has “innovated”, deciding to aim for the “balls”!
john80224
Apr 5 2018 at 9:15am
There’s a lot of supposition and a bit of fact-clearing to be done.
First off, congress didn’t lower the limit. The raise was temporary. So it expired, it was not cut.
Second, Peri writes studies with a predetermined goal in mind. Do you not find it odd that all of his studies reach the same conclusion? He once even produced a study that counted the number of studies that agreed with him and number that didn’t. His studies were the highest population and unsurprisingly the overwhelming result was he was “right”. One key thing he didn’t include was who funds such studies and what the overwhelming source of funds is seeking to have them supposedly prove.
As to substitutability, this is another matter where suggestions need to be left as suggestions. Virtually every study I’ve seen on this topic draws conclusions based on association over causation. There’s as much reason to believe that the cuts didn’t lead to domestic hiring because the main users of the system were using it to substitute skills they didn’t value at a lower cost. At going rate, the skills were not valued.
Scott Sumner
Apr 5 2018 at 9:46am
mbka, Good points.
John, I fail to see the distinction between lowering the limit and not extending the previous increase. Can you explain the difference?
Hazel Meade
Apr 5 2018 at 10:57am
Immigrants are classic scapegoats.
As other people have noted, the population of illegal immigrants leveled off 10 years ago. Immigration to the US has never been more difficult, not just for unskilled labor (virtually impossible), but even for skilled workers – cutting the H1-B program which is already a lottery only a few can win.
And yet immigrants are still being blamed for the problem of working class Americans. Trade, automation, and the normal churn of a dynamic economy always produces losers, and immigrants make an easy, and powerless, target for the anger of those losers. Why pursue the difficult work of adapting to economic change, when you can just punish an innocent DACA recipient to take out your anger? Classic, classic scapegoating.
Warren Platts
Apr 5 2018 at 8:00pm
@Hazel: How about this for a compromise: we allow 2 million people per year into this country–only one condition: that they have an advanced degree from an accredited university. It would be great: the elites in this country could then see for themselves whether labor demand curves slope downwards….
john80224
Apr 6 2018 at 12:25am
@Scott It’s a fairly subtle matter of intent and the part where I was meaning literally a “bit”. The phrasing can build a tone of active choices that led to a conclusion vs. having been part of the plan all along.
In a vacuum, it could lead one to conclude things like congress was being protectionist, when at the time they were being tacit in this regard.
I wouldn’t lump your post in with them, but I’ve seen many articles that combine a number of similar subtleties to skew the interpretation of the facts.
john80224
Apr 6 2018 at 12:33am
@mbka
There’d be essentially no notice of the H-1B were it spread evenly. However, it has been very densely populated in a few fields. When you compare the roughly half million H-1Bs in IT with the total IT job counts in the seven figure range, you’re now looking at as much as a quarter of the workforce in some arenas being guest workers.
There are definitely some suppositions and theory in that number and I doubt the total impact is quite that high, but it’s very much a large enough population to skew the dynamics of some fields.
john80224
Apr 6 2018 at 12:38am
Sorry to flood, but there are many nuances in this discussion.
Caution also is advised in taking the pace at which the quota was met as a solid indicator of demand. A fairly small number of companies use the lion’s share of the visas. As they grew more dependent, they grew more savvy. Many of them began oversubscribing once the lottery was instituted. Knowing they would only land a third of their applications, they tripled the number of requests.
john hare
Apr 6 2018 at 5:09am
@Warren: Or the condition is that they have no degrees at all and are willing to work for a living. Construction is suffering for lack of a quality work force. I’m willing to train people willing to work, and non-skilled citizens are overwhelmingly not. The non-skilled citizens in my experience have chosen that through lack of drive. A high percentage of the immigrants I know develop a better paying skill as soon as they can.
Carpentry, roofing, drywall, and such may seem low end to people on this board, but it pays double or more than the jobs held by the “fight for $15.00” crowd, if they are employed of course.
ChrisA
Apr 6 2018 at 6:14am
Warren – why not? Better though would be to allow pretty much free immigration, but charge companies cost of $20k (say) per year of immigrant. Then any local competitors for a job would have an automatic advantage of $20k per year. If the immigrant could overcome that barrier then they are certainly going to add value to the US economy.
Jon Murphy
Apr 6 2018 at 7:52am
@ChrisA:
Why do that? All you’ll do is exclude a multitude of productive workers. There mere fact that someone is willing to hire them indicates they’re adding value. There’s no need to a minimum wage of sorts.
ChrisA
Apr 6 2018 at 11:22am
Jon – totally agree, just remember, politics is the art of the possible though.
Hazel Meade
Apr 6 2018 at 12:25pm
Also going to say “sure, why not?”
If all those people with advanced degrees can get jobs, I fail to see how they wouldn’t help the US economy and be a boon to Americans in general.
If salaries for PhDs fall, then so will the cost of higher education, and the pace of development in America’s research labs will increase.
mbka
Apr 6 2018 at 10:20pm
john80224,
agreed that there is a concentration of H1Bs to some extent, but note also that not all H1Bs go to tech. A lot go to universities too. Not everything “skilled” means IT in silicon valley. I was in the US on an H1B in the 90s as a postdoc in oceanography. Postdocs are hard to find in the US population because it’s usually long hours and bad pay – the opposite of the H1B cliche.
I had another comment in reply to Warren, now stuck in moderation, where I calculate that if the US had as many H1B holders in the workforce as Singapore has in its equivalent visa category, adjusted for population, it would have about 18 million of them. To rephrase, Singapore has a skilled foreign workforce numbering the adjusted equivalent of 18 million workes if this had been the US population size. And yet, Singapore high end wages are fine, and total unemployment rate is half of the US. If that’s not a natural experiment then I don’t know what is.
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