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Background on the H-1B Visa and immigration debate
During the holidays, there was a little tiff between Tesla CEO Elon Musk and some of the most prominent MAGA faithful over guest worker visas. With immigration expected to be a contentious issue between the incoming administration and Congress, Musk’s break with MAGA over this particular aspect of immigration policy is a moment to try to separate policy issues with the United States’ border with Mexico and the broader need for workers in sectors of our economy that are experiencing labor shortages.
While Musk defended the H-1B visa program, which he uses in his business ventures, other elements of MAGA criticized the H-1B program, claiming that it takes jobs away from Americans. Unfortunately, some resorted to nativist and racist rhetoric in their opposition to the visa program. Opponents of even legal immigration insist that there isn’t a labor shortage for high-skilled jobs.
Generalizations can’t be used in policymaking because there are fields where there are shortages of high-skilled workers that Americans can’t fill. These high-skilled fields include semiconductors, renewable energy, and emerging technologies. These and others are vital emerging fields that are crucial to the economy of the United States.
The issue of H-1B visas is separate from the broader discussion about legal immigration and the integrity of the Southern border of the United States. Still, it’s difficult to separate H-1B visas from the broader debate over legal immigration because of the aging population of the United States and the gaps in the workforce that were clearly present before the pandemic.
In this post, we’ll go over the H-1B visa–what the visa is and the requirements to obtain it–and the benefits of the visa program to the United States. We’ll also dive into the broader discussion of age demographics in the United States due to existing employment gaps and the need for immigration to continue to grow America’s economy.
What is the H-1B Visa? Is There Really a Skills Gap?
The H-1B visa is available to employers and workers in high-skill, specialty occupations and is usually valid for three years, but it can be renewed for another three years. Tech employers aren’t the only ones who hire workers on an H-1B visa. These high-skill, specialty occupations include science, technology, engineering, and mathematics (STEM) fields, and the United States is experiencing a skills gap for STEM jobs. It’s not only this author saying that; a majority of businesses have reported shortages in skilled labor at a time when the availability of these jobs is growing. Jobs in STEM fields are projected to grow nearly three times faster than non-STEM jobs, comprising about 12 million people employed by 2033.
Today, STEM is particularly important to the United States economy because of our increasing reliance on semiconductors, research and development, and artificial intelligence to keep pace with China and other international competitors. Congress has recognized this and passed the CHIPS and Science Act in 2022. Although some criticized the CHIPS and Science Act as too government-driven, the legislation found bipartisan support in both chambers of Congress.
Looking at post-secondary education statistics in the United States, most degrees in STEM fields are bachelor’s degrees. Around a quarter are less than bachelor’s degrees–certificates and associate’s degrees–while the rest, roughly 20 percent, are doctorate degrees.
Part of the problem with education in the United States is that policymakers at the federal, state, and local levels aren’t prioritizing STEM in primary and secondary education. The United States ranks 28th among countries that are part of the Organisation for Economic Co-operation and Development (OECD) in math. We are below the OECD average in math, behind countries like Japan, South Korea, and Canada. We perform better in science, ranking 12th among OECD countries; however, we are again behind Japan, South Korea, and Canada.
Degrees awarded in STEM fields represent those earned by individuals who are native-born citizens and permanent residents. Nonresident aliens are also included. Nonresident aliens typically have legal status under an F-1 (student) or J-1 (exchange program) visa. What’s fascinating about the data is that while nonresidents don’t represent large percentages of certificates, associate’s degrees, or bachelor’s degrees in STEM fields, they represent significant percentages of master’s and doctorates.
Broadly, the native population of the United States has an educational disadvantage compared to other OECD countries and many non-OECD countries. Although Singapore, Macao (China), Hong Kong (China), and Taiwan aren’t OECD countries, each of these countries ranks higher than Japan, the top OECD performer in math. Only Singapore tops Japan in science, but Macao and Taiwan aren’t far behind, while Hong Kong easily outpaces the United States.
The good news is that investments are being made in STEM education in the United States, but those investments will take time to show benefits. Meanwhile, there’s a skills and knowledge gap that exists now, and other factors at play still present significant challenges for the future economy of the United States. We’ll discuss those factors in a moment.
Back to H-1B visas. There are specific qualifications that individuals must meet to be eligible for an H-1B visa. For instance, an individual seeking an H-1B visa must have a sponsoring employer, hold at least a bachelor’s degree (or equivalent) in the field for which they are seeking work, and possess specialized knowledge in the field.
Generally, there’s a cap of 65,000 H-1B visas each fiscal year, along with an additional 20,000 visas available for individuals with advanced degrees or equivalents. Still, there are exemptions to the cap for nonprofit research organizations and universities. Chilean and Singaporean nationals also don’t count against the cap, but H-1B visas issued to individuals from these countries are capped at 1,400 and 5,400, respectively. Family members and nonadult children of the visa holder don’t count toward the cap. Instead, they can apply for an H-4 visa.
The H-1B cap was reached for FY 2025 on December 2, 2024. More than 135,000 registrations were selected, or roughly 29 percent of all eligible applicants. The percentage of approvals is up from nearly 25 percent in FY 2024 due to a decline in eligible registrations. FY 2024, however, may be an outlier for eligible registrations.
The cost to employers to sponsor an individual for an H-1B visa is quite high. For an initial petition, an employer can spend as much as $17,885 to sponsor one person. That cost can grow for an extension (up to $33,365, including the initial petition) or to sponsor the individual for permanent residence (up to $50,000, including the initial petition). By far, the top employers in FY 2023 are those in professional, scientific, and technical services, sponsoring nearly 278,000 H-1B visas and paying an average wage of $117,156. Although California was the top state for employers sponsoring H-1B visas, other states where employers sponsored these visas include Texas, Georgia, North Carolina, and Florida.
Many H-1B visa holders eventually seek permanent residence through any of the employment-based (EB) green cards available. Only 140,000 EB green cards are available each year, and family members count toward that cap. There is also a per-country cap of 7 percent. In 2022, more than half of EB green cards went to family members of workers.
One of the arguments against H-1B visas is that the workers admitted to work in the United States have a negative impact on Americans’ wages. H-1B visa holders aren’t cheap labor; they’re well compensated. With a median annual salary of $108,000 in 2021, the wages of H-1B visa holders were in the top 10 percent of all wages. The median of the top 10 percent of all wages in the United States was $102,810. Employers sponsoring a worker on the H-1B visa must prove that they are paying the greater of the prevailing or actual wage for a job.
The Economic Benefits of H-1B Visas and Immigration, Broadly
There are several compounding reasons why H-1B visas and immigration, in general, benefit the United States. In particular, immigration and H-1B visas can also benefit American workers. According to the American Immigration Council (AIC), this occurs in five primary ways.
First, there are often complementary skill sets between domestic and foreign workers. The AIC notes that unemployment rates tend to be relatively low in industries with large numbers of H-1B workers.
Second, as foreign workers earn wages in the United States, they will spend and invest those wages locally. Banking institutions and investment firms will benefit from these new customers, just like the new deli or coffee shop across from the office building. A foreign worker who may shop online from their home country isn’t likely to forgo spending money at their local corner store, grocery, or various other goods and services-based industries in America. It’s simply far more convenient than waiting for shipping and customs on consumable goods. These actions create demand in the marketplace, prompting the market to respond with new firms and employees to meet these needs.
As this new demand grows, a third point made by the AIC is that with increasing demand locally, existing firms will focus on meeting that demand in the United States before seeking expansion opportunities abroad. Why invest resources to enter foreign markets, which can be quite challenging due to established players, when it is possible to expand locally and use fewer resources to enhance corporate profits from a domestic audience? The same investment that could have been directed elsewhere can now simply be utilized nearby or along the interstate instead of halfway around the world.
The final two ways this program greatly benefits the United States are, borrowing from the hit Broadway play Hamilton, “Immigrants, we get the job done.” Immigrants create new enterprises at a higher rate than native-born Americans. As new firms are established, they will require new employees. These employees will need to come from somewhere, and as this article has shown, it’s much easier to hire locally than to attempt to import highly skilled labor through the limited H1-B program.
AIC also highlights that immigrants bring fresh ideas. Ajay Bhatt may not be a household name, but we all use one of his inventions every day: the humble universal serial bus, or USB. One immigrant and a team brought about a significant change in how data moves. Decades later, he continues to have an impact, boasting more than 125 patents to his name. A National Bureau of Economic Research (NBER) working paper found that firms winning the H1-B lottery, when there are more applications than available visas, are more likely to be acquired or file for an initial public offering (IPO) and become public companies.
In the quest to produce and attract the best and brightest, America’s H-1B visa program is a crucial component of its ongoing economic dominance. New people bring fresh ideas, and we all benefit from them.
There are two pieces of evidence indicating that immigration, broadly speaking, boosts the population, stimulates economic growth, and reduces budget deficits. The first comes from the Congressional Budget Office (CBO). In its cost estimate for the Comprehensive Immigration Reform Act, published in June 2013, the CBO projected an increase of 10.4 million permanent residents in the United States. Additionally, another 1.6 million would enter the country temporarily through employment, student, or other visas.
The budgetary savings were also significant. Although the bill would have reduced the deficit by approximately $200 billion from FY 2014 to FY 2023, deficit reduction in the second decade would be around $700 billion. This deficit reduction in the first ten years would have been supported by the projected $450.7 billion in income and social insurance taxes paid by immigrants.
More recently, the CBO stated in February 2024 that the immigration levels observed in 2022, if maintained through 2026, would expand the workforce and boost gross domestic product (GDP). Regarding the latter, the CBO remarked, “[H]igh rates of net immigration through 2026 will support economic growth, contributing an average of approximately 0.2 percentage points to the annual growth rate of real GDP over the 2024–2034 period.” The annual increase in GDP–a total of 2 percent over ten years–may seem modest, but it translates to billions of dollars in growth in consumer spending and investment that wouldn’t otherwise occur.
The increase in GDP also raises tax revenues by $1 trillion more than if population growth had not occurred. Given the severe budget deficits the United States will face in the next decade and beyond, along with the impending insolvency of social insurance programs such as the Social Security Old Age and Survivors Trust Fund and the Medicare Hospital Insurance Trust Fund, higher levels of immigration could significantly extend the timeline for avoiding benefit cuts or bailouts, especially if Congress continues to neglect modernizing these programs. The only caveat is, as we will discuss in the next section, that population projections have recently been revised downward, including those for immigration, which may affect projected revenues when the CBO releases its updated budget outlook. That release is imminent.
The Broader Issue Facing America Isn’t Only the Need for More High-Skilled Workers
More broadly, the anti-immigration side of MAGA overlooks a significant issue that America faces: the aging of our population. The CBO recently projected that deaths among the native-born population in the United States will outnumber births by 2033. After that point, net immigration will be the sole contributor to population growth in the United States. The 2033 projection is seven years sooner than the estimate made in January 2024.
CBO based its projections on current trends. The CBO forecasts the fertility rate will remain at the current 1.6 births per woman, which is lower than the 1.7 births per woman projected in January 2024. Fewer births mean increased reliance on legal immigration to stimulate the United States economy. If legal immigration is restricted, the United States may begin to experience a population decline in 2033. The country needs 2.1 births per woman for society to sustain itself.
Separately, the Census Bureau examined three different scenarios for population estimates from 2023 to 2100. Using the July 2022 population estimate, the Bureau projected that the United States would experience a population decline in 2025 under a zero-immigration policy. With a low immigration policy, the population decline wouldn’t occur until 2044. There would be no population decline under a high immigration policy. At baseline immigration levels, a population decline wouldn’t be expected until 2081.
These data from the CBO and the Census Bureau are sobering for different reasons. First, the United States is already experiencing a gap between the number of jobs available and the number of people actively looking for work. In November 2024, there were 8.1 million job openings. At the same time, there were 7.1 million unemployed people actively looking for work. Put another way, there are 953,000 more job openings than people actively seeking employment.
Some may say this is a symptom of the post-COVID-19 economic recovery, but employers consistently had more job openings than people seeking work from March 2018 through February 2020.
Second, because our society is growing older, there will be fewer workers paying into federal social insurance programs like Social Security and Medicare. This is one of the reasons why these programs aren’t sustainable in their current form and why legal immigration is so important for the United States.
For example, the worker-to-beneficiary ratio for Social Security has declined over time. In 1980, there were 3.3 workers per beneficiary. In 2023, there were 2.7 workers per beneficiary. That figure is projected to continue to creep downward to 2.4 workers per beneficiary in 2035. Of course, the Old Age and Survivors Insurance (OASI) Trust Fund will be insolvent in 2033. (Including the Disability Insurance Trust Fund, Social Security becomes insolvent in 2035.)
Reducing legal immigration, thus further shrinking the pool of available workers, means more fiscal problems for Social Security and Medicare, which, together, are projected to be roughly 36 percent of all federal outlays in FY 2025 (or $2.484 trillion) and nearly 41 percent in FY 2034 ($4.213 trillion). Again, that’s only Social Security and Medicare. That doesn’t include net interest on the public share of the debt, Medicaid, other mandatory spending, or defense spending. It also doesn’t include reductions in general tax revenue that would result from reducing legal immigration.
Finally, some may argue that Congress could incentivize people to have more children, which would boost birth rates. Other countries have tried this and seen little success. To think the United States would be any different is wildly off-base.
What Does All This Mean for You?
Look, there’s no way of getting around it. America needs increased levels of legal immigration and providing legal immigrants with a less complicated path to citizenship, although for various reasons. The overriding problem is the native-born population not having enough children to replace society. That trend isn’t likely to change, regardless of the increasingly taxing culture wars currently playing out in the country. Evidence from other nations that have relied on financial benefits to boost fertility rates hasn’t seen much, if any, real success. When it comes to the pool of available workers to fill jobs, we’ve been in a crisis stage for some time. The crisis has simply accelerated.
Modern economies grow from productivity. Consumption also matters, but productivity leads to more investment and better economic opportunities for Americans. Although automation, artificial intelligence, and machine learning will fill some of the gaps left by the future decline in America’s available native-born workforce, legal immigration will be needed to fill the rest of those gaps. Again, as of November 2024, there were 954,000 more job openings than people actively seeking work.
Even if financial incentives did work and were implemented in the United States, it would take years–perhaps even decades–for the increase in fertility rates among the native-born population to correspond to more people available to work. There’s also a cost associated with financial incentives, regardless of how they are constructed, which would either be a shift in the tax burden or a direct cost to taxpayers through tax credits or actual outlays from the federal government.
Contrast the fiscal impact of financial incentives to generate a specific social policy outcome–which hasn’t worked where it has been tried anywhere else in the world–to the economic benefits of legal immigration. Certainly, legal immigration will lead to some increased costs to the social safety net, including social insurance programs, but a broader tax base diminishes those costs.
Finally, there’s the added factor of international competition. This is one particular long-standing problem the United States has had in recent years as Chinese investment through its “Belt and Road Initiative” and alliance between Brazil, Russia, India, China, South Africa, and several other countries (“BRICS” or “BRICS+”). BRICS is a direct challenge to the economic power of the United States and other G7 economies. As businesses look for investment and expansion opportunities, a stagnant or declining population and workforce, particularly one not suited to new and emerging markets and technologies, will see its superiority begin to wane on the international stage.
The emergence of isolationism, hyper-nationalism, hyper-partisanship, and immigration restrictionism has, in many ways, put the United States on a path of decline. It’s increasingly difficult to view it as a managed decline because of the speed at which it’s happening and its seriousness.
Let me put it another way. I have a 9-year-old stepdaughter. What keeps me up at night is the knowledge that she will have fewer opportunities than her mother and I had when we were young adults unless the fever breaks. Those opportunities for her won’t come unless Congress begins to take the crises that the United States is staring down thoughtfully and seriously.
Congress can’t take those crises seriously unless and until the hyper-partisan messaging wars that Republicans and Democrats use to “juice the rage” in their respective party bases are diminished to the point where those who do rely on hyper-partisanship are put back on the fringes of the national body politic where they belong.
Eric Harrison contributed to this post.
