This post was originally published on the Cato-at-Liberty blog here and is republished with the permission of the author.

On Friday, Ross Eisenbrey of the Economic Policy Institute wrote an op-ed in the New York Times titled “America’s Genius Glut,” in which he argued that highly-skilled immigrants make highly skilled Americans poorer. 

A common way for highly-skilled immigrants to enter the United States is on the H-1B temporary worker visa. 58 percent of workers who received their H-1B in 2011 had either a masters, professional, or doctorate degree. The unemployment rate for all workers in America with a college degree or greater in January 2013 is 3.7 percent, lower than the 4 percent average unemployment rate for that educational cohort in 2012. That unemployment rate is also the lowest of all the educational cohorts recorded. 

Just over half of all H-1B workers are employed in the computer industry. There is a 3.9 percent unemployment rate for computer and mathematical occupations in January 2013, and an unemployment rate of 3.8 percent for all professional and related occupations. For selected computer-related occupations from the Bureau of Labor Statistics’ “Quarterly Census of Employment and Wages,” real wage growth from 2001 to 2011 has been fairly steady:   

 11 percent of H-1B visas go to engineers and architects but wage growth in those occupations has been fairly steady too:

Mr. Eisenbrey concludes that those rising incomes would rise faster if there were fewer highly-skilled immigrants. 

The unemployment rates for engineers and computer professionals are low but not as low as they used to be. There are a whole host of factors explaining that, but highly-skilled immigration is not likely to be one.  

Mr. Eisenbrey also claims that American firms hire H-1B visa workers because they are paid lower wages. Complying with certain regulations prior to hiring an H-1B can cost a firm $10,000, filing and other fees can cost additional thousands of dollars, and legal fees can be steep. The cost of hiring H-1Bs is high.

Contradicting Mr. Eisenbrey’s story about H-1Bs lowering American wages, IT workers on H-1Bs actually earn more than similarly skilled Americans. According to survey data, H-1B workers are more willing to work long hours and relocate to a job, making them more productive and raising their wages. Additionally, H-1B engineers are paid $5,000 more a year than American born engineers. If the goal of employers was to hire cheaper workers through the H-1B visa, they’re going about it in an odd way. The high regulatory costs and wages of employing H-1B workers incentivizes firms to hire foreign workers when they are expanding and can’t find American workers fast enough.  

Mr. Eisenbrey’s doesn’t touch on other characteristics of highly-skilled immigrants such as their high rates of entrepreneurship, inventiveness, or skill complementarity. If the New York Times chooses not to run one of my letters to the editor about those topics, I will be writing about them in the upcoming weeks.

Ross Eisenbrey of the Economic Policy Institute has written an op-ed in the New York Times titled “America’s Genius Glut” with the argument that the United States should not increase non-immigrant guest worker visas for (allegedly) high-skilled workers (the H1B visa category). Eisenbrey’s argument is thoughtful and nuanced, and he comes at this restrictionist conclusion from a more progressive stance than the majority of restrictionists I read (though, to be fair, many allegedly right-wing restrictionist groups often use very similar rhetorical arguments).

Below are my quick thoughts on Eisenbrey’s piece. These were written very quickly, hence my sincere apologies to Mr. Eisenbrey if I misrepresented his position. I’ve also tried to argue based on (what I understand to be) Mr. Eisenbrey’s framework of assumptions and goals, even though I don’t share them in many respects.

• Eisenbrey writes:
  

  But America’s technology leadership is not, in fact, endangered. According to the economist Richard B. Freeman, the United States, with just 5 percent of the world’s population, employs a third of its high-tech researchers, accounts for 40 percent of its research and development, and publishes over a third of its science and engineering articles. And a marked new crop of billion-dollar high-tech companies has sprung up in Silicon Valley recently, without the help of an expanded guest-worker program.

  I’m in broad agreement with Eisenbrey that the United States (or for that matter, the world at large), is not at risk of systemic collapse if it fails to increase H1B quotas or relax the requirements for getting a H1B visa. I expect that things will keep getting better for the world, with or without open borders. I don’t think that Silicon Valley, or any other stereotypical high-skilled worker sector, is at risk of folding up due to a lack of immigrant labor. The current guest worker visa regime seems good enough to keep these sectors alive, though at the same time they may face competition from other jurisdictions outside the US that are easier to migrate to (see, for instance, here and here). Those who claim imminent collapse are probably mistaken.

  But while the crisis argument is misguided, that is hardly an argument for the status quo and hardly an argument against improvement. The relevant question to consider with any proposal is how it compares with the alternative, not whether it is absolutely necessary. So overall, while it’s valuable to point out what Eisenbrey did, the point of contention is still open to debate.

• Eisenbrey writes:
  

  almost 90 percent of the Chinese students who earn science and technology doctorates in America stay here; the number is only slightly lower for Indians. If they’re talented enough to get a job here, they’re already almost guaranteed a visa.

  I think it’s true that the vast majority of high-skilled and qualified workers educated in the US can stay in the US if that is their primary aim. But not necessarily doing the job of their choice, or the job that would create the maximum value for society (from either a citizenist or universalist perspective). The existing H1B regime favors (in relative terms) large established companies that can afford the legal fees and other resources to help procure visas. Of course, this isn’t to say that these large established companies are favored in absolute terms — even these companies would prefer not to have to make these outlays. But what’s an inconvenience for large established companies can be a dealbreaker for startups and small companies. Also, the inflexibility of the guest worker visa program means that it’s difficult for workers to do short-run internships at companies before deciding whether to work there long-term, and other intermediate and flexible arrangements may also be ruled out. Many foreigners who want to create a startup, or work at one, or attempt a flexible arrangement of this sort may compromise either by not choosing to stay in the US, or working at a large company instead. John Lee’s recent post had some examples, see also the quote from Natalie MacNeil here or the story of entrepreneur Amit Aharoni.

• Eisenbrey writes:
  

  If there is no shortage of high-tech workers, why would companies be pushing for more? Simple: workers under the H-1B program aren’t like domestic workers — because they have to be sponsored by an employer, they are more or less indentured, tied to their job and whatever wage the employer decides to give them.

  I’m not sure if, controlling for all relevant skill variables, this is true, but if, in fact, those on H1B visas get paid less than identically skilled natives, one simple explanation might be all the legal outlays, as well as uncertainty, associated with H1B hiring, which factor into the cost on the employer side but don’t actually reach the employee’s pocket. That’s the demand-side story. The supply of workers story is that workers prefer to take lower wages than natives that are still substantially higher than wages in their home country.

  Eisenbrey is also correct that guest worker programs that are tied to a single program lock workers in and may allow employers to offer lower wages to workers because of lower fear of exit. But this also cuts in another direction: employers aren’t able to “poach” such guest workers that easily from their competitors. Overall, I don’t think that the inflexible guest worker programs are all that beneficial to employers in the big picture (though you could make an argument that employers as a whole benefit modestly by keeping wages slightly lower than they would be in a market equilibrium, this effect would still be lower than the naive estimate due to greater friction in hiring employees from competitors). In any case, in so far as the proposal being critiqued by Eisenbrey fails to offer flexibility with respect to changing employers, this is a valid critique. However, in as much as it doesn’t make things worse than the status quo, I’m hard-pressed to see why Eisenbrey would oppose it. (note that most versions of guest worker programs proposed by open borders advocates allow for easy change of employers — see here and here).

• Eisenbrey writes:
  

  Bringing over more — there are already 500,000 workers on H-1B visas — would obviously darken job prospects for America’s struggling young scientists and engineers.

  The citizenist connotations here are striking, but it would be pointless to critique citizenism yet again here. Still, there is an interesting question: to what extent does high-skilled immigrant labor depress the wages of high-skilled native labor? It’s hard to measure “skill” so most labor economists use proxies such as education level and type of degree. There are theoretical reasons to believe that many sectors using high-skilled work may enjoy more complementarity than substitution between different workers. At any rate, that’s my guess, as I mentioned here. But this is a controversial position. The most pessimistic estimate I’m aware of is that by George Borjas, which estimates that the last few decades of immigration have depressed the wages of college graduates by 3.9% in the short run and 0.5% in the long run (interestingly, in Borjas’s numbers, the only groups experiencing long run wage declines are college graduates and high school dropouts). I think that Borjas’s model by design ignores complementarities, making some of these conclusions suspect from my perspective, but this is something I’d need to examine far more closely than I’ve had time for so far.

  Now, obviously, the numbers could look a lot different under open borders. But Eisenbrey is talking of marginal changes to an existing system, not complete open borders. A 0.5% long run wage decline is nothing to be laughed at, but it is hardly a catastrophe, and not the same as destroying people’s livelihoods and life prospects.

• Eisenbrey writes:
  

  But it would also hurt our efforts to produce more: if the message to American students is, “Don’t bother working hard for a high-tech degree, because we can import someone to do the job for less,” we could do significant long-term damage to the high-tech educational system we value so dearly.

  Although I’ve read many restrictionist arguments, this is a new one: immigration of high-skilled workers lowers the pay for high-skilled native workers, which lowers the payoff of acquiring high skills, which lowers people’s degree of education. I’d have to think a lot more about this to come up with a clear view on the matter, but offhand, this does seem plausible once you agree with the preceding claim that high-skilled immigration lowers high-skilled natives’ wages (again, in practice, we’ll proxy “high-skilled” with “college graduate” or something similar when measuring stuff).

  Still, if this is true, is this an additional reason to worry about high-skilled immigration? I don’t see why. If, for some reason (immigration or otherwise) the returns to high-skilled work fall, and people respond by pursuing less of education in those skill areas, this seems like an appropriate response to the changed economic conditions, that is both privately and socially beneficial. If you believe that education is mostly about signaling, then this is even more socially beneficial than it appears. The only way I see where you’d consider this bad is if you think either that people undervalue their own gains from education or if you think education confers significant social benefits over and above the private benefits it offers.

  The undervaluing story may be valid, but you’d then need to show that the extent to which people undervalue education also increases with a reduction in the return to education, which would seem somewhat self-contradictory and hard to show.

  I’m not opposed to the idea of significant social benefits to education (though my personal view is that it’s more than canceled by signaling, but let’s set that aside for now). However, if these significant social benefits exist in the form of positive spillovers, it seems prima facie plausible that educated guest workers would generate very similar positive spillovers, so this fails to be an additional argument against guest worker programs, even from a citizenist perspective.

UPDATE: Here’s a somewhat more forceful response from Alex Nowrasteh, that critiques some of the numerical and empirical claims made by Eisenbrey. Alex’s critique is largely complementary to mine (in that it covers a different set of points, with minor overlap).