Are Foreign IT Workers Cheaper? U.S. Visa Policies and Compensation of Information Technology Professionals

Abstract

T he use of H-1B and other work visas to hire foreign information technology (IT) professionals in the UnitedStates has attracted significant controversy and policy debates. On one hand, hiring high-skill foreign IT professionals on work visas can be advantageous for U.S. firms and the overall economy. On the other hand, high-skill immigration can adversely impact the wages of foreign and American IT professionals. This study uses data on skills and compensation of more than 50,000 IT professionals in the United States over the period [2000][2001][2002][2003][2004][2005] to study patterns in compensation of foreign and American IT professionals to inform these debates. Contrary to the popular belief that foreign workers are a cheap source of labor for U.S. firms, we find that after controlling for their human capital attributes, foreign IT professionals (those without U.S. citizenship and those with H-1B or other work visas) earn a salary premium when compared with IT professionals with U.S. citizenship. The salary premiums for non-U.S. citizens and for those on work visas fluctuate in response to supply shocks created by the annual caps on new H-1B visas. Setting lower and fully utilized annual caps results in higher salary premiums for non-U.S. citizens and those with work visas. We discuss implications of this study for crafting informed visa-and immigration-related policies by the U.S. government, for staffing practices of firms, and for human capital investments by IT professionals.

Research Commentary—Too Big to Fail: Large Samples and the p-Value Problem

“…Authors who recognized the "large-sample, small p-values" issue addressed it by one of the following approaches: reducing the significance level threshold 5 (which does not really help), by recomputing the p-value for a small sample (Gefen and Carmel 2008), or by focusing on practical significance and commenting about the uselessness of statistical significance (Mithas and Lucas 2010).…”

“…In such cases the interpretation of effects must take into account the additional coefficients (e.g., X 2 or X 1 * X 2 ). Moreover, with a large sample, interactions that involve a categorical variable can be studied by splitting the data into the separate categories and fitting separate models (Asvanund et al 2004, Forman et al 2008, Gefen and Carmel 2008, Ghose 2009, Gordon et al 2010, Li and Hitt 2008, Mithas and Lucas 2010, Overby and Jap 2009, Yao et al 2009). In general, a large sample often provides sufficient data for conducting analyses on subsamples of interest while maintaining sufficient power in each subsample.…”

Reforming a Large Foundational Course: Successes and Challenges

“…And, from the industry perspective, it is routinely paying a premium for foreign talent anyways (about 7 percent of annual salary); it might not matter if that same premium were rendered to the U.S. government as a fee instead. 622 Ideally, funds collected from these fees would be dedicated to NSF STEM fellowship programs.…”

“…Research by Mithas and Lucas shows that throughout the years of the H-1B visa debate, H-1B visa holders were complements to, rather than substitutes for, U.S. workers in the IT industry. 617 These researchers show that the salaries of H-1B-visa holders were about 7 percent higher than those of U.S. citizens, after controlling for educational attainment and work experience. Raising the H-1B caps diminished the premium (for example, down to about 3 percent in 2001, because of the larger available pool of H-1B workers) but never erased it.…”

Immigration and Innovation: Chinese Graduate Students in U.S. Universities

“…Opportunities for arbitrage may exist, however, in the presence of frictions in the market for scientists and engineers. The only paper we are aware of in the management literature that speaks to these issues is Mithas & Lucas (2010) who show that foreign I.T. workers command a wage premium.…”