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The H-1B worker visa as a strategic immigration policy in the USA: possible implications in a scenario of global competition for talents

Data collection by FGV/DAPP shows that admissions through this mechanism in the United States increased together with the proportion of patents registered by foreigners

1 month ago by Wagner Oliveira, Tatiana Accioly, Ana Lucia Guedes

It is not an exaggeration to say that there is a consensus about the importance of technological innovation for the socioeconomic development of a country and its impact on productivity and efficiency gains. As a part of this, the adoption of a policy for attracting skilled immigrants can play a key role in encouraging innovation in the host countries, increasing competitiveness.

This perception of the relationship between skilled labor and economic development has been generating, since the mid-1990s, a “global competition for talents”, a fact highlighted as one of the main trends in a recent report on global human resources [1]. The Information and Communications Technology (ICT) sectors are marked by a large demand for professionals, something that can also be seen in other branches of the economy, considering the need for creating a “critical mass” to provide a dynamic environment for innovation.

The case of the United States is emblematic in that regard. According to data from the Organisation for Economic Co-operation and Development (OECD), the country is the main host for highly qualified migrants in the world: out of the entire stock of migrants with higher education living outside their home countries in 2010/2011, more than 30% were in the USA, a total of more than 11 million people. A very important portion of this population comes from developing countries, as can be seen from their places of origin: India, China, Philippines, Mexico and South Korea.

Strategic policy for attracting talents

If on one hand this is a sign of the existence of an influx of people seeking better professional opportunities, on the other hand it is an evidence of a deliberate effort of the country in attracting talents to encourage its development. An example of migratory political action focused on attracting new minds is the H-1B visa program of the USA, intended for “temporary workers in specialty occupations” [2]. To apply for the visa, candidates must have completed a higher education course of at least four years, or have 12 years of professional experience. The job must be related to the candidate’s field of study and/or experience. The H-1B visa is temporary, can be renewed for up to 6 years and must be tied to an employment contract.

The relevance of the migratory policy for innovation in the USA

Theoretical physicist Michio Kaku, co-creator of the string field theory, sparked controversy after stating during a public debate that the H-1B visa is the big “secret weapon” of the American educational system, without which the economy of the USA would risk collapsing, and that the scientific production carried out by foreign-born researchers should be understood as the “engine of prosperity”:

How come the scientific establishment of the United States doesn’t collapse? Let me tell you something, some of you may not know this. America has a secret weapon, that secret weapon is the H1-B. Without the H1-B, the scientific establishment of this country would collapse. Forget about Google! Forget about Silicon Valley! There would be no Silicon Valley without the H1-B. And do you know what the H1-B is? It’s the genius visa, OK? [Do] you realize that, in the United States, 50% of all the PhD candidates are foreign-born? At my system, one of the biggest in the United States, 100% of the PhD candidates are foreign-born.  The United States is the magnet sucking up all the brains of the world, but now the brains are going back (KAKU, 2011).

Graph 1 shows the number of H-1B visa admissions between 1989 and 2014. In 1989, 89,856 visas were granted for highly skilled temporary workers. After the Immigration Act of 1990, the number increased to around 100 thousand. With the American Competitiveness and Workforce Improvement Act of 1998, the number rose to 240,947 visas. Since then, there has been a trend of increase, despite a few fluctuations around the time of the financial crisis of 2008, reaching more than 500 thousand visas granted in 2015. This demonstrates that, during this period, the policy was an ongoing strategy for attracting talents.

H-1B visas granted by the USA, 1989-2015

Source: US/DHS (2015, 2004). Elaborated by: FGV/DAPP
Note: *There is no data available for 1997. The value was estimated in the graph as the average between 1996 and 1998.

 

Kaku’s statement can be illustrated by the correlation between the trend of H-1B visa admissions and the proportion of patents registered by foreigners in the United States. Graph 2 shows information on the amount of patent registrations in the country by Americans and foreigners since 1994, revealing an inflection at the end of the last decade, when citizens from other countries became responsible for most of the patents granted in the country. It is important to remark that the number of patents signed by foreigners is probably underreported, since in cases where there is a foreign employee working for a company in the USA, American legislation registers the patent as American.

In addition, the Pearson correlation coefficient [3] between the proportion of patents issued by foreigners and the number of H-1B visa admissions weighted by the population of the country is considerably high (0.74) and significant [4].

Number of patents granted in the USA by origin of the applicant, 1980-2015

Source: WIPO, 2017. Elaborated by: FGV/DAPP.

This increase in the proportion of foreigners is strongly explained by the presence of Asians, especially South Koreans, Chinese and Indians, who surpass immigrants of European origin in terms of relative frequency of patent generation. The South Koreans represent the second group of foreigners who signed the most patents in the USA, behind only the Japanese. Graph 3 identifies the three main nationalities in 1994 and 2014, revealing more clearly the changes that happened throughout the period.

Number of patents granted in the USA by origin of the applicant, 1994 and 2015

Source: WIPO, 2017. Elaborated by: FGV/DAPP.
Note: The choice of 1994 as the first year is because it is the first year available in the database with information on the nationality of the applicants.

 

It is possible to go beyond the analysis of correlation between these two phenomena, since there are grounds for the existence of causality between the attraction of talents through the H-1B and the technological development of the United States. Even disregarding general effects of the economic growth experienced by the country in the period, it is still possible to find evidence of this relationship, as can be seen below.

Several studies compose a body of empirical evidence for this causality. Kerr and Lincoln (2008) concluded that the amount of inventions (measured by the generation of patents) increases together with a higher level of admissions through the direct contributions of the immigrants, with little effect over the generation of patents by natives. Hunt and Gauthier-Loiselle (2009) found evidence about the positive effect of the presence of immigrants on innovation, remarking that the higher proportion of engineers and scientists in this population is crucial for explaining this result:

The 1.3 percentage point increase in the share of the population composed of immigrant college graduates and the 0.7 percentage point increase in the share of post–college immigrants both increased patenting per capita byabout 12% based on least squares and 21% based on instrumental variables. The 0.45 percentage point increase in immigrant scientists and engineers increased patenting per capita by about 13% based on least squares and 32% based on instrumental variables. These impacts include the positive spill–overs of skilled immigrants, which are a substantial share of the total impact: calculations based on individual–level data of the impacts without spill–overs suggest impacts of about 8–9% for all three skill groups. (HUNT & GAUTHIER-LOISELLE, 2009, p.20).

Possible implications

The physicist Michio Kaku remarks on the other side of the strategic importance of the visa for the United States, issuing an alert about the risk related to the global competition for talents, in case these immigrants were to choose other countries to establish temporary residence. However, he was not counting on the possibility of a real change in the orientation of the American migratory policy itself.

In addition to the various initiatives by president Donald Trump to restrict immigration to the United States – not all of them put into effect -, the country is, at this moment, going through the discussion of a new bill by republican senators (EBC, 2017), the so-called RAISE – “Reforming American Immigration for Strong Employment”, which received support in the White House because it is consistent with the electoral campaign promise of adopting restrictive measures for immigration in the USA.

According to this proposal, the worker visa applications can be requested with the intermediation of the companies with headquarters and/or subsidiaries in the USA, but the qualifications must be verified in order to justify the need for foreign labor. By imposing new requirements, especially restrictions for family reunion, the approval of the bill could make the job market less attractive for highly skilled professionals. In the case of the H-1B visa, which was specifically designed for attracting highly skilled professionals, there is the possibility that it will be reformed and, eventually, become more restrictive (THE GUARDIAN, 2017), when it is, in fact, the main strategic instrument of the American migratory policy focusing on skilled immigrants.

Therefore, the migratory restrictions could actually generate negative effects for the American development, especially from the point of view of technology production. We also remark that, with doors closing for immigration, it is possible that a portion of the population will seek new destinations, which could increase migratory pressure in other countries. On one hand, this brings challenges for the migratory management in these countries, but on the other hand, it could be an opportunity to attract professionals, as would be the case of Canada, a country that historically competes with the USA for attracting skilled labor.

How Brazil can play a role

A possible ramification could be an increase in the number of Brazilians returning to Brazil due to the difficulties in meeting the requirements, and especially due to the difficulties for family reunion. Additionally, it is important to remember that Brazil is going through a crucial moment of regulation of the new Immigration Law.

The new legislation has concrete instruments that can act in this regard. For example, in its article 14, paragraph 5, the law says that the immigrant who verifies having completed higher education will not need to be previously hired by a company in Brazil to obtain a temporary visa:

Observing the hypotheses predicted by the regulation, the temporary worker visa may be granted to the immigrant who comes to perform a labor activity, with or without employment contract in Brazil, provided that a formal job offer can be verified by an active legal entity in the Country, exempting this requirement if the immigrant verifies having completed higher education or equivalent. (BRASIL, 2017).

In addition, we emphasize the change created by paragraph 8 of the same article, since until now the skilled worker who entered the country due to a demand from companies in the country could not change their employer: “it is conceded to the immigrant who was granted a temporary worker visa the possibility to change the location of exercise of their labor activity” (BRASIL, 2017).

The new legislation could be an instrument to facilitate the entry of migrants in Brazil and, consequently, it could put the country on the radar of potential emigrants from the United States. That is, this moment can be seen as an opportunity and not necessarily as a threat for the country. For this, it will be necessary to organize efforts to overcome a few obstacles, such as the revalidation and recognition of diplomas, a theme previously approached by DAPP in a recently published post.


Notes

[1] According to the Deloitte report Global Human Capital Trends from 2017, “Talent acquisition is now the third-most-important challenge companies face, with 81 percent of respondents calling it important or very important” (DELOITTE, 2015, p.6).
[2] The occupations are related to engineering, physics, biology, social sciences, mathematics and business administration. More details in http://internationaloffice.berkeley.edu/h-1b_faqs
[3] A measure of correlation between variables that varies from -1 to 1. The closer to the extremes, the higher the correlation (negative values mean inverse correlation, while positive values mean direct relationship) and the closer to 0, the lower is the correlation between the variables.
[4] The null hypothesis that there is no correlation between the two variables is rejected for a significance level of 99%.
[5] Tradução nossa de Hunt e Gauthier-Loiselle (2009, p.20).


References

BRASIL. Law No. 13,445 of May 25, 2017: Institutes the Migration Law. Available at: <http://www.planalto.gov.br/ccivil_03/_ato2015-2018/2017/lei/L13445.htm>. Accessed on August 21, 2017.

DELOITTE (2017). Rewriting the rules for the digital age. 2017 Deloitte Global Human Capital Trends. Available at: https://www2.deloitte.com/content/dam/Deloitte/us/Documents/human-capital/hc-2017-global-human-capital-trends-us.pdf. Accessed on August 31, 2017

EBC Agência Brasil (2017). Trump anuncia projeto para reduzir à metade a imigração legal aos EUA. Available at: http://agenciabrasil.ebc.com.br/internacional/noticia/2017-08/trump-anuncia-projeto-para-reduzir-metade-imigracao-legal-aos-eua. Accessed on September 1st, 2017.

HUNT, Jennifer; GAUTHIER-LOISELLE, Marjolaine (2009). How Much Does Immigration Boost Innovation? IZA Discussion Paper Nº.3921.

KAKU, Michio (2011). Dr. Michio Kaku America Has A Secret Weapon. Youtube, August 22, 2011. Available at: http://www.youtube.com/watch?v=NK0Y9j_CGgM. Accessed on August 8, 2017.

KERR, William R.; LINCOLN, William F. (2008). The Supply Side of Innovation: H-1B Visa Reforms and US Ethnic Invention. Harvard Business School Working Paper 09-005.

OCDE – Organização para Cooperação e Desenvolvimento Econômico (2017). Database on Immigrants in OECD and non-OECD Countries. Available at: http://www.oecd.org/els/mig/dioc.htm. Accessed on August 8, 2017.

THE GUARDIAN (2017). Donald Trump to overhaul H-1B visa program that admits foreign workers. Available at: https://www.theguardian.com/us-news/2017/apr/17/donald-trump-temporary-worker-h1b-visa-executive-order, Accessed on August 24, 2017.

US/DHS – United States Department of Homeland Security (2015). U.S. non-immigrant admissions 2015. Available at https://www.dhs.gov/immigration-statistics/nonimmigrant. Accessed on August 8, 2017

______ (2004). U.S. non-immigrant admissions 2004. Available at https://www.dhs.gov/immigration-statistics/nonimmigrant. Accessed on August 8, 2017.

WIPO – World Intellectual Property Organization (2017). WIPO IP Statistics Data Center. Available at: https://www3.wipo.int/ipstats/index.htm. Accessed on August 10, 2017.