This article is based on research that was funded by the Alfred P. Sloan Foundation.

Comprehensive immigration reform has been on the front-burner in Washington in 2013 and it seems to stand alone on the congressional agenda as an issue that enjoys at least a modicum of bipartisan support. Some components of current proposals are more contentious than others, with the “path to citizenship” coming under intense criticism from conservatives and additional border security measures from liberals.

The political glue that keeps immigration reform “comprehensive” is the push to expand visas for high-skilled workers, which has been promoted by legislators as politically diverse as Rep. Darrell Issa (R‑Calif.) and Sen. Charles Schumer (D‑N.Y.). This includes increasing the number of temporary visas for college-educated immigrants, such as the H‑1B or L‑1 visas, and awarding green cards to foreign students who graduate from American universities with a science, technology, engineering, or mathematics (STEM) degree.

The popularity of high-skill visas presents a remarkable contrast with other policies governing access to American public life. Restrictions on voting based on education levels, such as literacy tests in the Jim Crow era, are today considered abhorrent. Low parental education levels are not a basis for restricting their children from public schools. And yet, on questions of citizenship and residence, it is a foregone conclusion for much of the public, and even more policymakers and analysts, that special accommodations should be made for people with high skill levels and their families.

High-skilled labor shortage? | Interventions that favor the supply of high-skilled migrants become at least theoretically justifiable if there is a labor shortage or some impediment preventing labor supply from responding to price signals. Although we can’t look at the supply and demand curves associated with an occupational labor market, economists do expect to see the market respond to shortages in several predictable ways. First, wages should increase significantly as firms with unmet demand for workers try to outbid each other. Wages are expected to grow over time as productivity increases (a force that is particularly relevant when considering high-skilled labor), but shortages should provoke even faster compensation growth. Second, the ratio of unemployed workers in an occupation to job openings should be low. A labor market experiencing a shortage is by definition a “tight” labor market because fewer workers will lose their jobs and more jobs will be open for those without work. Finally, depending on how “labor shortage” is defined, we should not expect to see longer-term adjustment of behavior in response to price signals. In a well-functioning labor market, shortages would be eliminated by students attracted into STEM fields exhibiting growing wages and tight labor markets, and STEM graduates should enter these occupations at higher rates. (Many STEM graduates never work in STEM occupations.) If persistent shortages were a problem, this market-based remedy would not be operational.

The data suggest that occupations commonly filled by high-skilled visa-holders (principally information technology (IT) occupations, but also other STEM fields) failed to exhibit any of the major indicators of labor shortage during the repeated legislative attempts at comprehensive immigration reform over the last decade. Inflation-adjusted programmer salaries as well as the salaries of a broader group of computer and IT occupations have remained essentially flat since the end of the dot-com bubble in the early 2000s, only increasing or decreasing by a few percentage points each year with no discernible upward trend.

Job-opening data are generally not available at the occupational level, but are collected by industry. The professional, scientific, and technical services (PSTS) industry is the most relevant sector to consider for a high-skilled work force because it includes independent research and development, engineering, and IT firms. In the period before the Great Recession, the ratio of unemployed workers to job openings in the PSTS industry was relatively modest, averaging 0.8 from 2004 (after the recovery from the dot-com bust) to the end of 2007. After the Great Recession this ratio increased to 2.8 unemployed PSTS workers for every PSTS job opening. Not surprisingly, the recession has been associated with a loose labor market, but this is the opposite outcome of what we would expect in a work force plagued with shortages. There is no obvious indication of a labor shortage in the industries and occupations that typically employ high-skilled visa-holders.

We also know, from the record of the dot-com bubble, how students respond to fluctuating labor market prospects in a STEM field. As salaries and employment opportunities steadily grew for computer and IT workers during the 1990s, the number of computer science majors grew considerably. Between 1998 and 2003 alone, the number of computer science graduates doubled. A useful reference point for assessing this growth is the number of engineering graduates, which increased by only 12 percent over the same period. Computer science degrees declined from that peak for the rest of the decade as computer and IT salaries flattened, losing over half of the gains made since 1998 by 2008. My recent research (with colleagues) on electrical, petroleum, and nuclear engineering degree awards over the last three decades generates similar conclusions: students respond to price signals in making educational choices, so that unmet labor demand attracts additional workers. Although the process is not instantaneous, persistent shortages of labor never seem to materialize. Economists have repeatedly observed these market responses to increases in demand for high-skilled labor for decades, going back at least to David Blank and George Stigler’s landmark 1957 book The Demand and Supply of Scientific Personnel and continuing to modern analysis by Richard Freeman, Sherwin Rosen, and many others.

Counterarguments from proponents of the high-skilled labor shortage view usually rely on absolute comparisons of salaries or unemployment rates across occupations. STEM workers consistently enjoy higher salaries and lower unemployment rates than workers with lower education levels. The problem with this argument is that STEM workers have higher productivity levels than most other workers, which enables them to command higher wages in the labor market. Just as wage rates in the economy as a whole are expected to grow with productivity in the long run, higher-productivity occupations will be associated with higher salaries at any point in time. These differences are principally derived from productivity differentials; they are less helpful for identifying shortages than stark changes in salary that cannot be attributed to growing productivity in a given occupation over time. Lawyers have earned more than the average worker since the commencement of that profession, but no one would use that fact to argue that we have a shortage of lawyers.

Visa-based labor market regulation | With decades of economic research suggesting that high-skilled labor shortages are problems that will resolve themselves in a market setting, why the increasing support for government intervention to restrict immigration on the basis of skill level? One reason, of course, is that the legislation is framed positively rather than negatively. Visas are not presented as being denied to low-skilled workers; instead they are said to be made available to high-skilled workers. This subtle distinction is sufficient in many cases to paint high-skilled temporary visas as the “pro-immigrant” option when it actually restricts the free flow of workers across borders. Unconditional defense of liberal immigration is difficult given the unpopularity of low-skilled and undocumented migrants, so the promotion of high-skill visas offers a way to tip-toe around the more controversial dimensions of immigration policy.

The high stakes of temporary visa policy for the information technology industry also generate what Bruce Yandle called a “bootleggers and Baptists” dynamic (“Bootleggers and Baptists,” May/​June 1983). Yandle observed that both Baptists (for moral reasons) and bootleggers (for pecuniary reasons) advocated laws that would forbid the sale of liquor on Sundays. In other words, regulation tends to makes strange bedfellows. High-skill visa policy attracts advocates from the ranks of tech company CEOs like Bill Gates and Mark Zuckerberg, whose primary interest is steering immigration policy to help them access low-cost labor with specific skill sets. However, the resources brought to bear on the debate by the tech industry also attract more idealistic advocates who conceive of themselves as being “pro-immigrant” or “pro-science.” Wider and more powerful political coalitions are made possible by restricting the scope of immigration liberalization to a narrow class of potential migrants (such as highly educated workers or STEM graduates).

In addition to the politics of high-skilled immigration policy, deeper structural issues around existing visa programs help to drive the debate, particularly the relationship between student visas (F‑1s) and high-skill work visas (H‑1Bs, L‑1s, etc.). Student visas are relatively unrestricted. Unlike work visas, they have no caps and minimal entry requirements, so the number of student visas awarded is determined primarily by academic institutions. The result is that despite the wide variety of visas that are dedicated to guest-workers, the number of foreign students graduating from American universities still substantially exceeds the number of high-skill work visas available. This imbalance between student visas and work visas is entirely a function of immigration policy itself, but it provides a perennial justification for expanding the number of visa opportunities that are exclusively available to high-skilled migrants. The inconsistencies of current policy redirect efforts away from immigration liberalization and toward catering to well-educated workers and their potential employers.

Market-based alternative | For some, a market-based immigration alternative implies the elimination of all restrictions on the access that the foreign born have to the United States: open borders. The prospect of open borders is intriguing, but public concerns about assimilation and security are likely to make some regulation of entrants to the United States a foregone conclusion in the future. However, even in the context of the continued regulation of migration, current practices can be reformed to eliminate many of the distortions caused by a skill-based visa policy.

A market-based immigration policy would of course be liberal, affording broad, orderly access to law-abiding individuals with an interest in building new lives in this country. More apropos to the subject of this article, a market-based policy would maintain legal recognition of the distinction between permanent residence and temporary migration to ensure that employers have ready access to foreign workers without crowding out (or competing with) migrants seeking permanent residence during boom years when labor demand is especially robust.

Critically, within the temporary visa program no distinction would be made between workers on the basis of their education level or the type of work they will be pursuing. Theoretically, special treatment of certain classes of workers might be justified if persistent labor shortages constrained certain occupations, but no evidence of this problem exists. Temporary visas should also be “portable” in the sense that they are not tied to a specific employer or educational institution. Current visa rules that tie migrants to their employers (or at least introduce obstacles to mobility) create circumstances that have been referred to as “indentured servitude.” Employers use the leverage that they have over foreign workers to exploit them through lower pay, and in some extreme cases even through physical or sexual exploitation.

Unfortunately, most current efforts to rectify the problem of special treatment for high-skilled migrants rely on the creation of new regulatory authority to determine whether or not an occupation is experiencing a labor shortage. Even worse are proposals to establish wage floors for high-skilled immigrants based on prevailing domestic wages to ensure that high-skill visas are not used to undercut American workers. A more natural solution is to address the problem at its source and (1) end the policy of discriminating between immigrants based on their level of education, and (2) allow wages to fluctuate naturally.

Emma Lazarus’s poem “The New Colossus,” emblazoned on the Statue of Liberty, welcomes immigrants to the United States regardless of their background. It is a message that reflects not only the principles of American classical liberalism, but also a prudent economic policy that makes no effort to actively regulate international labor market flows. It is an ideal that is threatened by the recent popularity of high-skill visa policies.

Readings

• “Guestworkers in the High Skill U.S. Labor Market: An Analysis of Supply, Employment, and Wage Trends,” by Hal Salzman, Daniel Kuehn, and Lindsay Lowell. Economic Policy Institute Briefing Paper #359, 2013.
• “How to Make Guest Worker Visas Work,” by Alex Nowrasteh. Cato Institute Policy Analysis #719, 2013.