Chapter 1: Automatic Adjustment of the H-1B Visas and Employment‐ Based Green Cards Caps

Two of the most important visas for foreign‐​born workers are the H-1B visa and the employment‐​based green card, both for more‐​skilled and more‐​educated foreignborn workers. Yet the number of such visas available has not changed significantly in almost three decades despite transformational growth in the U.S. labor market.

Congress last significantly adjusted the number of visas in each of those categories in 1990, when the Immigration Act of that year set the annual numerical cap of H-1B visas at 65,000 and employment‐​based green cards at 140,000. In 2004, Congress approved an additional 20,000 H-1B visas a year for foreign‐​born workers who earn an advanced degree from an American college or university, but otherwise, those caps remain the status quo.

Since 1990, real U.S. gross domestic product (GDP) has almost doubled; the number of people employed in the private‐​sector economy has increased by 39 percent; and the general population has increased by 31 percent.¹ In the labor sector where high‐​skilled immigrants are most likely to be employed—business and technical services—the number of jobs has doubled, and growth has been even greater in subsectors such as computer programming.

When Congress set the still‐​binding caps almost three decades ago, there was no World Wide Web available to the general public. Smartphones, social media, video and music streaming, and online gaming didn’t exist. Nor did Google, Facebook, Amazon, Netflix, eBay, Uber, Lyft, and Twitter. There was no ecosystem of high‐​tech startups and “unicorns” employing high‐​skilled workers to innovate and create products.²

The inflexible caps have collided with the growing U.S. economy to reveal a dearth of both types of visas compared to the revealed demands of the labor market. It has become an annual ritual that the number of applications for the H-1B visa each April far exceeds the 85,000 visas available. In 2019, U.S. companies filed 190,098 applications for H-1B workers, but the maximum allocated number of H-1B visas under the current lottery system was only 42 percent of the visas requested by U.S. employers.³ The low numerical cap for employment‐​based green cards has created long wait lines, most acutely for workers from countries bumping against the annual 7 percent per country quota.⁴ The restriction of H-1B and employment‐​based green cards imposes a real cost on the U.S. economy in terms of lost innovation, output, and tax revenue.⁵

A practical and politically salable answer to this problem would be the creation of a legal mechanism that would automatically adjust visa numbers to reflect changes in the U.S. labor market. This proposed reform would include a one‐​time adjustment to the 1990 quotas for both H-1B visas and employment‐​based green cards to take account of changes in the U.S. labor market and a formula set in law for annual readjustment to adapt to future changes in the labor market.

Broad indicators such as growth in the GDP, population, or overall workforce would fail to capture the specialized role that higher‐​skilled immigrant workers play in the economy, although increasing visa caps based on those measures would be an improvement over the current inflexible system. Instead, the benchmark for the adjustment should be a subsector of the labor market that would be a close proxy for the changing demand for the two kinds of visas.

About two‐​thirds of H-1B visa holders work in computer‐​related occupations. Most of the rest are employed in architecture, engineering, and surveying; administrative specializations; education; and medicine and health care.⁶ As for employment‐​based green cards, the first three preferences include 40,000 visas each for people of “extraordinary ability,” such as outstanding professors, researchers, or multinational executives or managers; architects, lawyers, doctors, teachers, and engineers with advanced degrees; skilled and some unskilled workers who provide services not available from U.S. workers; and professionals, such as engineers and teachers who do not have advanced degrees.⁷

Based on those profiles, a better proxy of demands for employment‐​based green cards would be the “professional and technical services” category in the Bureau of Labor Statistics (BLS) employment data. This includes lawyers, accountants, architectural engineers, computer systems design and related services, management, and management and technical consulting services. The number of jobs in this broad category has more than doubled since Congress fixed the visa caps, from 4.57 million in 1990 to 9.30 million in 2018.⁸ If the number of employment‐​based green cards had kept pace with job growth in the most relevant labor market, 285,176 would have been available in 2018 (see Figure 1).

A good proxy for the demand for H-1B visas would be the subcategories of computer systems design and architectural and engineering services.⁹ Combined, employment in these two categories has grown by 165 percent since the regular H-1B cap was set, from 1.36 million in 1990 to 3.60 million in 2018. If the number of H-1B visas had been adjusted to keep pace with its most relevant employment subcategories, the number of regular H-1B visas available in 2018 would have been 172,496, plus the additional 20,000 visas set aside for foreign‐​born postgraduates from U.S. institutions, for a total of 192,496 (see Figure 2).

The readjusted H-1B visa cap plus the additional visas for postgraduates would produce a total that would be remarkably close to the 190,098 H-1B visa applications received in the past fiscal year. It would also nearly match the 195,000 cap that the “I‐​Squared” immigration reform bill that then Sen. Orrin Hatch (R-UT) introduced in 2018 would have set and the temporary 195,000 ceiling that Congress approved in 2000.

From those readjusted baselines, employment‐​based green cards and H-1B visas could be adjusted each year to reflect the employment changes in the relevant labor market subcategory as reported by BLS. If the number of jobs in the sector increased by 3 percent from the year before, the number of visas would be adjusted by the same proportion. As a byproduct, the escalator formula would effectively fix the number of visas as a share of the employment sector, which could help to mollify the concerns of more immigration skeptical lawmakers. Nothing in the proposal would prevent Congress or administrative agencies from continuing to impose reasonable fees for visa applications to cover administrative costs, job retraining, or other related purposes.

The escalator mechanism as envisioned here would be automatic, nonpolitical, and procyclical. When economicoutput and employment contract, so would the number of visas available in the following year. And when growth and employment expand, as they have in recent years, so too would the number of available visas. No agency, council, or commission would be involved in deciding the actual escalator adjustment, insulating the process from regulatory capture. Like the cost‐​of‐​living adjustment for Social Security payments, the escalator would be baked into law and could only be modified by a vote of Congress.

The visa adjustment would inevitably lag changes in the labor market because of the delay in BLS reporting, but that delay could be mitigated by adjusting the number of available visas as soon as possible after the BLS numbers are reported.¹⁰ Congress should also allow any unused visas from one year to be carried over to the next as a one‐​time addon to the number determined by the escalator. This would not authorize any additional visas but would smooth their distribution over the business cycle. While indexing the number of visas would not reflect employment changes in real time, it would greatly reduce the chance of a long‐​term mismatch. And if such a mismatch does develop over time, Congress always has the authority to adjust the visa numbers in whatever direction it deems appropriate.¹¹

Past ideas and actions to deal with the inflexible visa caps have failed to provide a viable solution. Congress has tried to adjust the visa caps in the past but failed to find a lasting solution. Applications for H-1B visas first exceeded the 1990 cap in 1997 and 1998, when the “dot‐​com” economy was gaining steam. To its credit, the 105th Congress responded with the American Competitiveness and Workforce Improvement Act of 1998, which temporarily raised the H-1B cap to 115,000 for fiscal year (FY) 1999 and FY 2000 and to 107,500 for FY 2001. Two years later, the 106th Congress enacted the American Competitiveness in the Twenty‐​First Century Act of 2000, which temporarily increased the cap further to 195,000 visas for FY 2001, 2002, and 2003 (while exempting certain H-1B workers from the numerical limits).

The problem with this congressional good‐​faith effort was that the higher caps were both temporary and out of cycle with the economy. By the time Congress approved the temporarily higher cap of 195,000 in October 2000, the dot‐​com bubble was already deflating. The tech‐​heavy NASDAQ stock index was down by 35 percent that month from its peak in March 2000 and would ultimately lose 78 percent of its value by October 2002.¹² Meanwhile, the general economy fell into recession in 2001.

The result was a sharp decline in demand for H-1B visas. With the bursting of the dot‐​com bubble, the number of H-1B visa petitions fell to 79,100 in FY 2002 and 78,000 in FY 2003, far below the cap of 195,000 visas that Congress had set for those same years—leaving more than 100,000 unclaimed H-1B visas in each of those years. Just as the high‐​tech economy and broader labor market began to recover in 2004, the H-1B visa cap reverted to the 1990 cap of 65,000. As a consolation, Congress did approve that year an additional 20,000 visas for foreign‐​born workers with graduate degrees from U.S. institutions of higher learning. Over a span of two decades, the only period in which Congress raised the visa cap significantly above the 1990 limit was exactly those years in which demand was lowest. In the following years, as demand has grown to higher and higher levels, the effective cap has remained at 85,000.¹³

In the wake of failed congressional efforts to adjust visa caps, some have proposed to establish a semiautonomous commission with the ability to change visa caps based on market conditions.¹⁴ A version of this commission, called the Bureau of Immigration and Labor Market Research, was even part of the proposed reforms included in the 2013 comprehensive immigration reform bill that was hotly debated before failing to become law.¹⁵ Other proposals have included one from former secretary of labor Ray Marshall that would have created an independent Foreign Worker Adjustment Commission to assess the U.S. economy’s demand for foreign labor and the type of skills and training such workers would need. That commission would have had the power to set employment‐​based immigration levels, which would have become law unless explicitly rejected by Congress. Other proposals would have limited a commission’s role to making recommendations to Congress to change the ceilings for permanent and temporary admissions. The AFL-CIO and the Economic Policy Institute supported such proposals at the time.¹⁶

Among the major problems with a commission is the same one that has bedeviled congressional efforts to periodically adjust the visa limits: any commission, like Congress, would lack sufficient information and incentive to accurately determine the number of foreign workers that the U.S. labor market needs in any current or future year. Like the errant efforts of Congress in 1998 and 2000, any commission would probably be setting visa caps based on past conditions, not on real‐​time or estimated future demands.

Even if a commission had the most current data available on the supply and demand for labor in various regions and sectors of the U.S. economy, its ability to make timely decisions could be hamstrung by factional interests and bureaucratic procedures. A commission, no matter how “independent” it was designed to be, would be vulnerable to capture by special interests, including immigration restrictionists, who could use it to reduce visa numbers even when the labor market is signaling its demand for more qualified foreign‐​born workers.

More fundamentally, empowering a nonelected and only semiaccountable commission to unilaterally alter the number of visas available in a given year would raise serious issues regarding the separation of powers under the U.S. Constitution.

Ultimately, Congress must take responsibility for the U.S. immigration system. By resetting visa caps to more accurately reflect the growth and demand of the U.S. labor market, and setting into law a mechanism for adjusting those caps to reflect future changes in the labor market, Congress would take a big step toward fixing a system that is seriously out of step with the manifest demands of a dynamic and expanding American economy.