How has the H-1B visa program—the US program that enables US employers to hire foreign nationals with specialty skills—impacted the US and Indian economies? Amidst the ongoing debates in both the United States and India about the H-1B visa program, The IT Boom and Other Unintended Consequences of Chasing the American Dream, prepared with my colleague Nicolas Morales, demonstrates the positive impacts of the H-1B visa program in both the United States and India. We find that the program provides benefits to US and Indian workers and consumers, and that it is a contributing factor to the expanding hi-tech sectors in both countries.
Relevant to the ongoing US debate about immigration policy, we offer this evidence-based report examining the relationship among migration, the IT sector, and the economy. We found that:
- US workers are on average, better off by about $431 million (or $1,345 per additional migrant) in 2010 because of the H-1B program. The study incorporates crucial mechanisms like innovation by businesses, trade with other countries, and the choices made by students and workers to become computer scientists.
- While there are some negative impacts for a subset of US workers (earnings for US born computer scientists are lower by 1.5 percent), the overall gains outweigh the losses as the combined incomes of the US and India both rise under the H-1B program by about $17.3 billion or 0.36 percent. And total IT output from both nations rose steadily under the H-1B regime by about 0.45 percent in 2010.
- Better technology, as a by-product of this immigration of tech workers, increased the overall productivity of other sectors as well, and consumers of computer-related goods enjoyed better software and lower prices. The study found a 1 percent decrease in price for US IT products and an 7.4 percent fall in Indian IT products.
Similarly, in India, critics assert that the H-1B program is causing a “brain drain” from the country, i.e., highly skilled Indian workers are lost to the United States under this visa program. But to the contrary, our study found that the US H-1B visa program leads to a brain gain for India:
- The prospect of migrating to the US and earning a higher wage induced many students and workers to switch to Computer Science and Engineering fields. Those who could not join the US workforce—due to a cap on the number of H-1B visas—remained in India, enabling the growth of the Indian IT sector.
- Those who migrated to the US acquired skills, technical know-how, and established networks with US companies. As their visas expired, some returned with this acquired human capital and technology and contributed to the growing tech-workforce in India. Together, the “brain gain” to India under the H-1B program outweighs any “brain drain.”
- The increase in IT sector productivity, because of the additional knowledge and skilled workers spurred by the H-1B visa program, allowed India to eventually surpass the US in software exports. Over time, some IT production begins to be outsourced from the US to India.
The bottom line? Each country’s economy and workforce as a whole are better off because of the H-1B visa program. Furthermore, instead of causing “brain drain” from India to the United States, the H-1B visa program has led to a “brain gain,” spurring Indian workers to acquire education for high-skilled tech jobs.
Read the full paper: The IT Boom and Other Unintended Consequences of Chasing the American Dream
Listen to the CGD podcast with myself and Michael Clemens on the impact of immigration on US workers’ wages.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.