What do we see in the bustling corridors of Silicon Valley, the research labs of Boston, and the biotech hubs of San Diego? Skilled immigrants do not just fill jobs; they create them. They launch startups, file patents and drive innovation, expanding the very foundation of American employment.
However, to understand this, we need to challenge our most basic assumptions about how labour markets work in knowledge economies.
The debate over H-1B visas in the United States seems to hinge on a seemingly very intuitive argument: that restricting skilled immigration will translate into more jobs for native workers. On the contrary, extensive research has shown that this approach is flawed and, in fact, counterproductive to innovation and job creation.
Impact on jobs
A study by Britta Glennon found that in response to increasing H-1B visa restrictions, American companies do not typically hire more U.S. workers. Instead, they just accelerate foreign hiring. This might seem like an unforeseen consequence, but faced with visa restrictions, it is not entirely unthinkable that they will turn to countries with large pools of skilled workers (India and China).
The numbers are very significant. A decrease of 1% in initial employment from the H-1B supply could have an impact in terms of the foreign affiliate growth rate of between 10 and 20%. And it is not just replacement hires. Entire teams and operations could move overseas. For every 10 H-1B positions denied, U.S. multinational firms hire an average of eight foreign workers abroad. Other research shows that each H-1B visa holder creates 1.83 additional jobs for native-born American workers over the next seven years. Immigrant-founded companies in the U.S. have, historically, attracted significant investment, creating jobs at higher rates than native-founded firms. Research by the National Foundation for American Policy shows that more than half of America’s billion-dollar startups have been started by immigrants.
The argument that H-1B workers suppress wages also does not hold up to scrutiny. Research by Giovanni Peri and colleagues has shown that native wages actually rise when foreign science, technology, engineering and mathematics (STEM) workers are hired, by increasing productivity and innovation, particularly in technical fields. Aggregating at the national level, foreign STEM workers flowing in may account for 30% to 50% of the aggregate productivity growth and 4% to 8% of the skill-biased productivity growth. Another report by the American Immigration Council challenges the widespread idea that H-1B workers earn lower wages than their U.S. counterparts, and, therefore, negatively affect wage growth. For instance, it shows that the median wage for H-1B workers was more than double that for the general U.S. workforce in 2021. And between 2003 and 2021, it rose by 52%, while wages for all U.S. workers grew by 39%. Recent studies have shown that knowledge spillovers and productivity gains from high-skilled immigration actually increase native wages. When companies do not face hurdles in hiring the talent they need, they expand operations domestically, which in turn, creates more opportunities for everyone.
A study in the Journal of Labor Economics found that a 10% increase in foreign STEM workers leads to a 0.5% to 0.6% rise in native wages and a 0.3% to 0.7% increase in patents per capita. Research by Jennifer Hunt shows that a 1% increase in immigrant college graduates in the population causes patents per capita to increase by 9% to 18%. Cities with higher concentrations of H-1B workers, such as Silicon Valley, have become global innovation hubs. Up to 71% of tech workers in Silicon Valley are foreign-born, says a report. Restricting this talent flow risks undermining the very foundation of America’s technological leadership.
‘Brain circulation’, India’s experience
By some estimates, Indians receive around 70% of H-1B visas annually. This phenomenon, earlier considered to be “brain-drain”, is now being looked at as “brain circulation”, since the experience these Indians receive abroad has significantly bolstered India’s tech sector and innovation ecosystem. Skilled migration benefits both the sending and receiving countries.
Today’s world is highly interconnected. Competition is for both global talent and future innovation hubs. Canada’s success in attracting tech companies through its liberal immigration policies offers a stark warning: when the U.S. restricts skilled immigration, it does not protect jobs. It exports them.
What is the solution? Blanket restrictions will not work. We need nuanced immigration policies that emphasise the complementary relationship between foreign talent and domestic job creation, while also protecting against abuse.
The H-1B visa regime, therefore, needs more, not less, flexibility. Visa caps should be adjusted to reflect market demands. Current fixed caps create artificial scarcity. This restricts the ability of American companies to scale, and, thereby, reduces potential job creation.
Recognising the importance of skilled immigration, fast-track processing mechanisms should be put in place for critical skills, providing dedicated pathways for entrepreneurs who can drive innovation and job creation. Opportunities for permanent residency for STEM graduates which allow for seamless transitions for foreign students trained in US universities will help in this endeavour.
And, finally, labour market modernisation is the need of the hour: transparent wage determinations and real-time analytics to match skills with opportunities will go a long way in matching demand with supply seamlessly.
A talent flywheel
While the H-1B debate in America unfolds, India needs to be ready to transform its relationship with skilled migration — not merely as a talent exporter, but as a dynamic participant in global innovation networks, where outward mobility generates inward flows of knowledge, capital, and innovation.
This transformation will ultimately rest on three pillars. First, talent is not about building walls, but about creating magnetic poles of innovation. India needs more specialised innovation clusters with global standards, tax incentives, and research grants. Second, India needs to switch gears from playing catch-up to setting new paradigms and creating new global standards. IndiaStack and UPI stand out as shining examples.
Third is the cultivation of a true innovation ecosystem that supports risk-taking and experimentation. A startup visa programme, for instance, could attract global entrepreneurs to build in India.
Implementation requires maintaining a delicate balance between short-term wins, like streamlined OCI processes and pension portability agreements, and long-term transformation, such as automated talent mobility systems, joint research funding, shared patent applications and technology transfer agreements.
The core principle to remember is that talent mobility is not a zero-sum game.
Arindam Goswami is a Research Analyst in the High-Tech Geopolitics Programme at The Takshashila Institution
Published – January 29, 2025 12:16 am IST
