Monday, October 8, 2012

H-1B VISAS AND THE UNEMPLOYMENT RATE


The US Department of Labor reported on Friday that the unemployment rate fell to 7.8%, which is the lowest rate since the recession started.  This rate is still historically quite high.  The unemployment rate never exceeded 8 % between 1984-2009.

Many question why the US should allow H-1B visas if many US workers are out of work.  The answer is that H-1B visa usage is a microeconomic phenomenon, not a macroeconomic one.

H-1B visas are used by industries in short supply.  These industries include IT, science, engineering, and healthcare.  Not coincidentally, these industries are expected to have continued demand for future workers. 

The Brookings Institute says that the occupations with the largest supply vacancies are:
1. Computer Occupations
2. Health Diagnosing and Treating Practitioners
3. Other Management Occupations
4. Financial Specialists
5. Business Operations Specialists
6. Sales Representatives, Services
7. Engineers
8. Information and Record Clerks
9. Advertising, Marketing, Promotions, Public Relations, and Sales Managers
10. Supervisors of Sales Workers

US high school students ought to be preparing for these jobs if they want to be adequately employed when they reach adulthood.  Until then, American companies will search around the world for talented workers to fill these supply shortages. 

One bogeyman in the H-1B debate has always been that H-1B workers are only used to tamp down US wages and supplant American jobs.  As we have argued many times in the past, there is little evidence that this is actually the case for at least two reasons.

For one, if the H-1B program was being used to reduce wages and displace American workers, we would see H-1B workers spread across many industries, instead of concentrated in just a few industries.  But we don't see that.  We see H-1B workers concentrated in just a few industries   

Also, we would see more consistent annual H-1B usage by US employers.  The incentive to reduce workers’ salaries is likely greater in a recessed economy, not less.  However, when the economy was in its weakest state, there were many fewer H-1B visa petitions filed by US businesses.

Critics of the H-1B system should acknowledge that the H-1B system does what was designed to do.  It provides needed workers in industries where workers are needed.  It is not a macroeconomic policy, but a microeconomic one.  The national unemployment rate has little relevance.

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