How Restricting Skilled Immigration Could Spur Offshoring

The H-1B program acts as a pathway for high-skilled immigrants, including those trained at U.S. universities, to enter the U.S. labor market. Critics of the program complain that it displaces U.S. workers; supporters argue that it spurs innovation and job creation. In this essay, Britta Glennon explores a different angle, i.e. the extent to which restrictions on the H-1B program encourage employers to hire foreign labor through their foreign affiliates. She examined the hiring practices of employers after passage of the H-1B Reform Act of 2004, which greatly restricted the number of visas available in this category and forced many employers to reconsider their plans to hire workers domestically. She found a “huge growth” in foreign affiliate employment, especially in R&D intensive software IT firms. The three countries with the biggest increases were Canada, India and China. Moreover, there was a substantial increase in foreign affiliate patenting in response to these restrictions on skilled immigrants, which she suggests has obvious policy implications. She suggests that firms are “really creative” in getting around “artificial constraints” and that those people arguing for curtailment of the H-1B program may actually be spurring economic activity elsewhere in the world. An interview with the author about this research may be found at this link.

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