H1-B Workers and Gains From Trade

The NYT reports on the battle of the status of the H1-B program that allows highly skilled foreign workers in the United States for a period of time. The article describes the debate as being between opponents of the visas, who argue that it lowers the wages in the most affected occupations and the supporters who claim that they cannot find enough skilled workers in the United States. It would have been helpful to include some economic analysis. By increasing the supply of highly skilled workers, the H1-B program undoubtedly reduces the wages for the most affected occupations. According to standard trade theory, this is precisely the point of the program. Allowing firms to get lower paid workers will reduce their cost and increase the economy's potential output. It is the same argument that is used for the gains from getting cheap textiles or steel from foreign producers. The argument from high-tech employers, that they simply can't get enough high tech workers in the United States is ridiculous on its face. If these jobs paid millions of dollars per year (like jobs at Wall Street investment banks), then highly skilled workers would leave other occupations and develop the skills necessary to work in high tech occupations. Obviously, Bill Gates and the other high tech employers cited in this article want to be able to employ high tech workers at lower wages. The issue is wages, not a shortage.

--Dean Baker