Elon Musk and Bernie Sanders are both right about immigration

The H-1B visa program helps corporations replace US workers with cheap foreign laborers who lack basic rights. It also makes America wealthier.

These twin truths are at the heart of our nation’s debate over the policy.

Officially, the H-1B program aims to provide temporary visas to foreign workers who possess rare intellectual skills. And it has helped Silicon Valley giants attract top talent, while enabling hundreds of thousands of foreign-born people to enter the United States and earn far higher wages than they would have received back home.

For these reasons, factions on both the left and right see value in the H-1B visa. 

Trump-aligned tech moguls like Elon Musk argue that it fuels innovation and national prosperity. Many Democrats, meanwhile, feel compelled to defend H-1B visa holders’ economic contributions, particularly when these guest workers become subject to xenophobic attacks. 

Yet the H-1B visa has also attracted criticism from progressives and reactionaries alike. They argue that, in practice, many companies don’t use the visas to secure exceptionally skilled workers — but rather, exceptionally exploitable ones: An H-1B visa holder’s right to be in America is contingent on the sponsorship of their employer, which limits their bargaining power with their bosses, and may even force them to tolerate abuses, such as wage theft. 

What’s more, by providing employers with this hyperexploitable pool of labor, the H-1B visa undermines the wages and employment of native-born tech workers, in the tellings of both socialist Sen. Bernie Sanders (I-VT) and far-right podcaster Steve Bannon. (More ignobly, some aligned with the latter figure disdain the program because H-1B visa holders are heavily nonwhite.)

The H-1B’s proponents and detractors both make some reasonable points. In recent years, IT staffing firms and outsourcing companies have gamed the H-1B visa system, securing nearly half of all such visas through various subversions of the program. These companies typically do not seek out specific individuals with hard-to-find talents, but rather, interchangeable junior-level workers with lower wage expectations than their American counterparts. Meanwhile, H-1B workers’ vulnerability to deportation does enable abusive practices by some employers.

And yet, despite these flaws, the H-1B program has likely been economically beneficial for native-born Americans. Studies suggest that increasing the admission of H-1B visa holders boosts the innovation at US tech firms, lowers prices for American consumers, and actually lifts wages for US workers.

Fortunately, the H-1B’s economic benefits do not derive from its most exploitative features. The fact that the H-1B system has been gamed by low-value outsourcing companies makes it worse for innovation. Similarly, were highly skilled H-1B workers given permanent legal residency — rather than a time-limited visa that they could lose the minute they’re laid off — they would simultaneously be less vulnerable to exploitation and more capable of contributing to the US economy in the long term. 

Therefore, the H-1B visa system should be reformed — or replaced — in a manner that makes America’s high-skill immigrants both more numerous and more free. 

Why the H-1B visa system is broken

When Congress created the H-1B visa, it intended to give US employers access to workers they could not find domestically — specifically, those who possessed extraordinary, hard-to-find skills.

But this is not how many companies actually use the program. 

Part of the problem lies with the way that H-1B visas are allocated. Demand for the visas far outstrips their supply; 446,000 people sought an H-1B visa in 2023, but only 85,000 received one. The government therefore distributes the visas through a lottery: Every worker who appears remotely qualified is entered into a drawing, in which winners are chosen at random.

This scheme prevents the government from giving priority to the most highly skilled applicants or those seeking to fill the best-paying jobs. What’s worse, the lottery actually tilts the scales in favor of relatively low-skilled applicants seeking some of the least well-paid jobs in tech. 

The reason for this is simple. A Silicon Valley company that’s trying to hire one specific individual due to their rare capabilities is all but certain to lose the lottery; the odds of any individual applicant winning a visa are low. 

On the other hand, the lottery system is quite favorable for an outsourcing or staffing company looking to hire lots of IT workers with basic, widely held skills. Such firms don’t need one specific candidate, just a large number of interchangeable entry-level laborers. So, they can sponsor the applications of many more workers than they actually need and then take whichever individuals happen to win the lottery. If too many of their workers get selected, they simply decline to complete all of their applications. According to Bloomberg, when IT staffing firms get one of their H-1B applicants through the lottery, they complete that worker’s application only 50 percent of the time; for other companies, that figure is closer to 90 percent.  

Outsourcing companies — like those that provide American firms with tech support teams based in India — are especially well-suited to gaming the lottery. Such companies collectively employ hundreds of thousands of workers in India, but want to embed a minority of them within the offices of American clients. They can therefore instruct tens of thousands of their overseas employees to enter the lottery en masse, then bring the winners to the US. Altogether, IT staffing and outsourcing firms commandeered 40 percent of all H-1B visas in 2023, according to a Bloomberg investigation. 

This outcome serves neither Silicon Valley giants nor US tech workers very well. Google, Amazon, and other superstar companies lose out on top foreign talent, as outsourcing and IT staffing firms hoard scarce H-1B visas. And since the latter firms are not recruiting specific, uniquely talented individuals — but rather, large numbers of interchangeable laborers — their use of the H-1B is especially likely to undermine the wages and employment of Americans.

In fact, outsourcing firms directly subvert the H-1B program’s protections for US workers. 

When applying for an H-1B visa, companies must pledge that they will pay their desired guest worker at least as much as they currently pay similar American workers. Thus, a US company cannot fire its existing workforce and then hire cheaper H-1B workers to fill their shoes.

But if an American firm decides to fully eliminate its IT department — and contract out those functions to outsourcing companies — then it can indirectly replace its US employees with H-1B workers willing to accept a lower wage. 

This is because, in that scenario, it is the outsourcing company — not the American firm — that applies for the H-1B visas. These outsourcing companies typically pay lower wages to their US citizen IT workers than major American corporations do. So they can promise to pay their H-1B applicants as much as they pay their US employees — and still pay the former lower wages than most American IT workers earn. 

To see how this works, consider the case of Southern California Edison (SCE). In 2015, the energy provider contracted out some of its IT operations to Infosys and Tata Consultancy Services, two major outsourcing companies. SCE proceeded to lay off hundreds of its own employees — but not before requiring them to help train Infosys and Tata’s H-1B workers, who would be effectively replacing them. A Department of Labor investigation of this incident found that it violated no laws.

If the H-1B program’s design fails some US workers, it can also harm guest workers.

These harms shouldn’t be exaggerated: H-1B workers are not akin to “indentured servants.” Even the guest workers who fill IT jobs at relatively low-wage staffing firms generally earn exponentially higher salaries than they would back home. According to Bloomberg, the median wage of an H-1B worker at an outsourcing company is $90,000 a year — far higher than a similar worker can earn in India (from which a majority of such guest workers hail).

Nevertheless, H-1B workers’ dependence on their employers for legal status leaves them vulnerable to abuse. If an H-1B holder loses their job, they must find a new one within 60 days or face deportation. And they cannot change jobs unless they convince a new employer to sponsor their visas. Some employers seek to capitalize on their H-1B workers’ vulnerability. According to a 2021 report from the Economic Policy Institute, the IT staffing firm HCL has systematically underpaid their H-1B workers — relative to what was required by law — effectively stealing $95 million in wages from them.

It’s clear then that the H-1B program is seriously flawed. But it doesn’t follow that America would be better off if the H-1B visa did not exist.

Even with its flaws, the H-1B visa benefits Americans

The H-1B visa has doubtlessly harmed some US workers. But the program’s impact on Americans appears to be highly positive. Specifically, the policy seems to raise wages for native-born workers as a whole, while increasing the welfare of American consumers.

There are a few explanations for how this could be true. 

One is that immigrants in general tend to complement native-born workers more than they replace them. This is because immigrant workers don’t just provide labor — they also demand it, since they consume goods and services. Thus, immigration, like population growth in general, does not eat into a finite number of jobs. Rather, it enables a higher degree of labor specialization and thus higher productivity. 

Immigrants and native-born workers also have disparate strengths, and often occupy different niches within the labor market. It seems likely that some portion of H-1B workers genuinely possess skills that are in short supply domestically. And if nothing else, such visa holders are more fluent in the culture and languages of their home countries than the vast majority of native-born American workers are. That can be valuable for an international firm with overseas affiliates or business partners. Conversely, native-born workers may be better suited to certain roles in light of their fluency with American culture. 

The notion that companies often don’t see H-1B and native workers as interchangeable is buttressed by empirical evidence. In 2004, the annual cap on H-1B visas abruptly fell from 195,000 to 65,000. But this did not lead affected firms to increase their hiring of native-born workers, according to a 2017 study. That finding, the paper’s authors write, suggests that there is “a low degree of substitutability between H1B and native workers.”

Similarly, a 2024 study found that companies that win the H-1B lottery tend to subsequently increase their hiring of college-educated immigrant workers — without reducing their employment of native-born ones. This result indicates H-1B visa holders often complement the labor of a firm’s American employees, rather than replacing it.

Whatever impact H-1B holders have on the wages of their American colleagues, there are reasons to think they increase living standards for US workers writ large. 

For one thing, H-1B workers can help tech firms scale their operations more rapidly, leading to higher rates of innovation. Innovation, in turn, can spur higher economic growth and therefore wages and employment. Economists have found that increases in the H-1B visa cap are associated with a jump in patented inventions, and that winners of the H-1B lottery subsequently introduce more new products and hire more native-born workers.

Separately, boosting the amount of highly skilled labor in a given area can attract investment. The larger the pool of STEM workers in a given city, the more incentive that tech firms have to open or expand operations there. This can improve conditions throughout a local labor market. A 2015 study found that increases in H-1B holders at the municipal level were associated with wage gains for native-born workers, both college-educated and non-college-educated. 

As the economics blogger Noah Smith argues, it’s plausible that this same basic dynamic holds at the country level, such that bringing more tech workers into the US increases investment into the United States. Researchers have found that when multinational firms lose access to H-1B workers, they tend to replace them by increasing hiring abroad. This effectively transfers dollars out of the US economy and into foreign ones, to the detriment of American workers.

Of course, Americans are not only laborers but also consumers. And a 2017 study of the economic impacts of the H-1B visa estimated that the program increases output and lowers prices in the IT sector.

None of this is to deny that the H-1B program has adverse impacts for certain workers. Although most studies find that the visa is beneficial for native-born wages in the aggregate, some researchers estimate that it reduces pay and employment for American computer scientists.

This said, the case for opposing the H-1B visa on this basis seems weak. The median salary for a US computer scientist in 2023 was $145,080, according to the Bureau for Labor Statistics. This puts the typical computer scientist in roughly the highest-earning 10 percent of all Americans. 

If a given policy 1) increases the wages and employment of American workers writ large, 2) boosts innovation in the US economy, 3) lowers prices, and 4) radically increases the material welfare of foreign-born tech workers (by letting them work in the US) — at the cost of slightly reducing wage growth for workers in the top decile of the income distribution — that policy seems beneficial on net. At the very least, it is hard to think of a progressive argument for prioritizing the interests of high-income workers over those of Americans as a whole. 

We don’t need to choose between innovation and labor rights

Fortunately, US policymakers do not need to choose between maintaining the existing H-1B system — with its copious flaws — and eliminating it. 

The H-1B system is economically beneficial primarily because high-skilled immigration is economically beneficial. If we replaced the H-1B visa system with a dramatic expansion of green cards for highly educated immigrants — distributed on the basis of a merit-based point system, like those that exist in Canada — we could eliminate the peculiarly exploitative features of the H-1B system while retaining its material upsides.

Indeed, letting in more highly skilled immigrants is almost certainly more beneficial than admitting more temporary guest workers. As is, H-1B visa holders often receive an education at a US university, hone their skills for six years at American companies, and are then forced to leave the country, taking their enhanced human capital with them. 

Of course, the Trump administration is unlikely to support a large expansion of legal immigration. For the moment then, it might be best for policymakers to focus on more closely aligning the H-1B system with its official purpose. Instead of distributing H-1B visas through a lottery that outsourcing companies can game, the government could give priority to firms seeking to fill the most highly skilled and best-paid positions. It could also establish a higher minimum wage for H-1B visa holders (something the first Trump administration tried to do, before courts shot them down), bar companies from indirectly replacing their workers with lower-wage H-1B visa holders through outsourcing, or attempt to disqualify IT staffing firms from seeking H-1B visas.

To reduce H-1B workers’ vulnerability to exploitation, meanwhile, we could immunize them from deportation for a longer period after they are laid off: If visa holders were given 180 days to find a new job, instead of only 60, they might feel more comfortable standing up to abusive employers.

Ideally, these changes would help build political will for increasing the overall number of H-1B visas. Even in its present, highly flawed form, the program boosts the prosperity of Americans and guest workers alike. A reformed H-1B system — that prioritized advanced skills and high wages — would surely be worthy of expansion.