Washington, D.C., January 14, 2020: Do domestic U.S. start-up businesses benefit from hiring foreign skilled workers? The answer is “yes”, according to recent research.

H-1B Visas Help Start-Ups to Grow

A team of researchers comprised of Stephen Dimmock, Jiekun Huang and Scott Weisbenner, recently published these novel findings at the National Bureau of Economic Research (Working Paper 26392). Their study surveyed over 1,900 start-ups during 2008-2009, and 2014-2015. The start-ups were growing businesses, but had not yet raised capital through public stock markets. The companies forming part of the survey operated primarily in high-technology industries.

According to the researchers, most of these types of start-ups filed just one visa petition for one foreign worker, and were generally facing an approximately 50-50 chance of obtaining approval of that H-1B visa.

The study found that companies that were successful in obtaining that one H-1B visa experienced increased success in the likelihood of raising capital from private third-party investors, and were also more likely to attract investors from high-reputation venture capital firms.

Broader Policy Implications

The Dimmock et al. study provides strong support for more appreciation of the impact of the H-1B skilled worker visa program on smaller companies – particularly start-ups that can grow.

First, small start-up companies appear to choose carefully before sponsoring a foreign worker for an H-1B skilled worker visa. They do not rely massively on the H-1B visa program. Rather, it appears to be a tool to resolve a precisely needed skill.

Second, start-up companies as a whole benefit from a successful H-1B visa petition because it improves the likelihood of their growth. This means that, indirectly, H-1B visas can help start-up domestic companies to expand – including by hiring more local workers.

These practical features of the H-1B skilled worker visa program help paint a more robust and complex landscape for the impact of this visa in the U.S. economy.

Traditionally, labor policy has considered immigration to be a a zero-sum game, where foreign workers take jobs, or reduce salaries, of local workers. George Borjas of Harvard University is – rightly or wrongly – usually credited with this vision of immigration.

Unfortunately, the zero-sum vision of immigration is an extraordinarily effective tool in the hands of protectionists who seek to reduce immigration to the U.S.

The work of later researchers that found no such zero-sum impact on unemployment or wages, such as David Card’s ground-breaking 1990 study on Miami’s labor market after the Mariel boatlift, have been largely brushed aside by protectionist voices.

The H-1B visa program has been singled out for criticism because large established technology firms – frequently technology consulting firms – seek large numbers of H-1B skilled worker visas to bring foreign skilled workers into the technology industry.

Yet, today, with approximately 85,000 new H-1B skilled worker visa issued each year, and almost 20 years after the dot.com bubble burst in 2000, the unemployment rate in high technology industries is at an all-time low (1.3 percent, as recorded by the U.S. Bureau of Labor Statistics in May 2019).

A Way Forward

The new research by Dimmock et al. points towards a narrative about skilled immigration that not only challenges the conventional wisdom that all immigration is a zero-sum for local workers, it also points towards adjustments to the H-1B skilled worker visa system that could benefit the U.S. economy.

For example, creating different tracks that open pathways for start-ups to access skilled worker visas more predictably appear to be perfectly justifiable based on the Dimmock et al. study.

Donoso & Associates, a leading immigration law firm based in Washington, D.C., will continue to report on developments regarding the immigration law and policy through our news section of donosolaw.com.