Policy Research

Firms and the Economics of Skilled Immigration

Sari Kerr, William Kerr, William Lincoln

Summary

The article compares existing literature, including those written by the authors, on the effects of skilled immigrants in the United States, specifically those with H-1B visas. The study finds that immigrants with a bachelor’s degree or higher do not appear to have a displacement effect on U.S. jobs. Additionally, an increase in skilled immigrants was linked to significant positive effects on U.S. company innovation and connections to other countries. Connections to other countries included contracts with countries and foreign direct investment. The overall wage rates of immigrant workers on H-1B visas tended to be smaller than their native counterparts despite immigration regulation attempting to prevent such wage discrimination. The study also noted that the visa causes an imbalanced relationship between employer and employee; this is because immigrants on H-1B visas are bound to their employer for the duration of their stay, thus removing significant bargaining power. Ultimately the study called for increased research on the effects firms have on skilled immigration.

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Policy Implications

This article can be used in attempting to develop efficient immigration policy. The study notes that current U.S. policy includes a binding cap on the number of immigrants that can be allowed in on H-1B visas. Further, the study notes that visas are dispensed on a first come, first serve basis. This method potentially leads to market inefficiencies that could be inhibiting economic growth. Potential solutions include increasing or removing the cap on immigration or creating a cap and trade system to allow companies who have the highest use for immigrant workers to receive them based on willingness to pay.