Solving The H-1B Visa Problem

In this corner: A number of employers, particularly tech companies, who claim they have a large number of unfilled positions and can’t find enough skilled American workers to fill all their needs, and thus need to attract skilled foreign workers through an expanded H-1B visa program.

In the opposite corner: Immigration skeptics, including probably every unemployed programmer in the country, who think tech companies simply prefer to hire cheaper imported labor rather than more expensive American workers. From this perspective, even one unemployed American tech worker is proof that the H-1B program undermines citizen employment.

How shall we break this impasse and make progress on what should be one of the easiest incremental reforms in the immigration reform debate? A bipartisan commission likely to end in gridlock? Raw political “we won, you lost” power? Further inaction, which just exacerbates the problem?

Here’s a better idea — a market mechanism that would determine once and for all not only who is right, but what the market-clearing price for skilled immigrant labor actually is, thus informing future immigration policy formation.

Of all the controversial elements of proposed immigration reform plans, the H-1B visa impasse should be the easiest to solve.

Right now, H-1B visas are issued on a first come, first served basis, for a flat fee, and the number is arbitrarily capped. Such a system tells us nothing about how much an H-1B visa (and thus a skilled immigrant worker) is actually worth to an employer. And because the number is capped and the fee low, the system actually encourages a lottery or jackpot approach — in other words, employers would apply for as many visas as possible, hoping to get enough. This is an irrational system.

It would make much more sense to allocate H-1B visas via an auction process. If H-1B visas were auctioned to employers each year in a sealed-bid process, with the bids allocated from highest to lowest until the available permits were exhausted, supply and demand would establish the market-clearing price for the right to hire a skilled immigrant worker.

Because of the likely higher fees resulting from the auction mechanism, employers would have no incentive to hire an immigrant worker if an equivalent American worker were available, which would lead to more accurately determining areas where shortages of American workers actually exist.

Additionally, it has been estimated that such a process could raise significant revenue, perhaps as much as $1 billion annually, which could be directed toward funding improvements in border control, a biometric entry and exit system and other features of a modernized immigration system.

Further, these new, market-determined H-1B visas should be transferable between employers, which would allow for further gathering of value information and market efficiency through a dynamic allocation of skilled immigrant workers.

Such a system would effectively price the value of skilled immigrant workers to the U.S. economy, informing immigration policy decisions, providing tech employers with more certainty and particularly serving to help determine how many H-1B visas are made available based on market forces rather than the arbitrary fiat dictates of bureaucrats.

Of all the controversial elements of proposed immigration reform plans, the H-1B visa impasse should be the easiest to solve. Moving the allocation decision from an arbitrary process to a market-clearing auction should settle the debate over our economy’s demand for skilled immigrant labor, and an incremental success in our highly controversial immigration debate might help break the immigration reform impasse in other areas, as well.