During last week’s debate, Marco Rubio was asked about the fired Disney employees who were required to train their foreign replacements as a condition of their severance pay. “You support increasing the H-1B visa program that made it possible to bring in these foreign workers,” said journalist Stephen Dinan. “Doesn’t this program take jobs away from Americans?” In response, Rubio described the Disney case as an “abuse” of the program, claiming companies are not allowed to use H-1Bs to replace American workers.
Where are the fact checkers when we need them? Mark Krikorian already noted here that undercutting American workers is actually the norm for the H-1B program, not the exception that Rubio might have us believe. To bolster Mark’s point, I want to highlight the best evidence I have seen on how H-1Bs affect employment and wages. A recent paper by economists Kirk Doran, Alexander Gelber, and Adam Isen takes advantage of the fact that H-1Bs are distributed by a random lottery on the day the number of applications exceeds the cap. The researchers were able to isolate the effect of H-1B workers by comparing companies that applied for a visa and won the lottery with companies that applied and lost.
If H-1B workers are truly exceptional talents for whom there are few American substitutes, then we would expect to see that lottery-winning companies increase their employment relative to the lottery losers by roughly the number of H-1B workers they receive. (In fact, if the more grandiose claims about immigrant productivity are true, then we would expect the lottery-winning companies to generate even more jobs beyond the ones that go to the H-1Bs.) Instead, both lottery-winning and lottery-losing firms ended up with employment levels that were statistically indistinguishable. Presumably, the losing companies just went ahead and hired someone who was not an H-1B.
Although the evidence is less robust, it also appears that lottery-winning companies lowered median wages and increased their profits relative to the lottery losers. So the lottery data are more consistent with the view that firms use the H-1B program to hire cheaper substitute workers from abroad, not to bring in the next Einstein.
Reducing labor costs is not an inherently bad thing, of course, since the efficiency gains may lead to lower prices for consumers. Nevertheless, Senator Rubio and other H-1B supporters need to stop pretending the program is merely being “abused” by a few bad apples. Trading wages for efficiency is the H-1B’s raison d’être.