Is U.S. Immigration Policy Stifling Tech Innovation? What’s Really Behind the Tech Talent Shortage?

By Clayton BrowneDespite the myths about “tech talent shortages” promulgated by the mainstream media, US foreign worker visa programs that allow “technical talent” to immigrate here is not leading to greater innovation, according to experts. In fact, it appears that government programs focused on immigration reform are often simply helping companies keep labor costs down.

Current U.S. immigration policy allows immigrants that are suffering life-threatening political, ethnic or religious persecution to immigrate and seek asylum, but the US does not allow “economic immigrants,” that is, those who just want to come here to find a job and have a better quality of life.

The only exception to our immigration policy prohibiting economic immigrants is the H-1B and L visa programs. The idea behind these foreign worker visa programs is to allow immigrants to come to the US to work if they are employed in a field where there is a labor shortage, theoretically a win-win situation since they will not be taking jobs from Americans.

The system is based on a “trust the employer” approach. If the employer claims a foreign worker with critical skills is needed because they cannot find a US worker then the H-1B visa is automatically granted in most cases (up to annual limits, currently 65,000 + 20,000 more foreign workers with advanced degrees from U.S. universities as well as additional exemptions).

Stifling Technical Innovation?

The businesses hiring the large majority of H-1B visa workers argue that they need the critical technical skills these foreign workers offer not just to remain competitive, but to continue the technical innovations that have led to the recent massive productivity increases in American businesses. They also argue that future technical innovation will be seriously threatened if this supply of foreign technical talent is choked off.

“The foreign worker programs are directly and indirectly displacing Americans. In other words, these programs are causing an internal brain drain from technology fields in the US.”

Opponents of expanding the H-1B visa program point out that while it is true immigrants have been responsible for a great deal of innovation historically, that is not the case today. The first point is that the large majority of the foreign workers being hired on H-1B visas today are no longer the “best and brightest.”

According to Norman Matloff, a computer science professor at UC Davis, “…the former foreign students are producing about a half a patent fewer per person than are Americans of the same age and educational level.” Matloff further disproves the myth that foreign technical talent is necessary for innovation when he presents statistics showing that “former foreign students in CS and EE are significantly less likely to be working in R&D than the Americans.”

Matloff takes the argument to its logical conclusion when he suggests that it is possible that we would actually have more innovation if we had less imported technical talent.

Tech Talent Shortage Teeter-Totter

There have been real tech talent shortages in various computer-related fields over the last few decades. And many tens of thousands of foreign workers working in the U.S.during these times have truly been needed in the sense that there really were very few American workers with equivalent skills. But labor markets adapt over time, and except in a very few specialized areas, that is simply not the situation in 2012 and the reality is that there has been no technical talent shortage in the U.S. since at least 2008.

According to Matloff and a number of other sources including The Economic Policy Institute’s Ron Hira, who researches offshoring and high skilled immigration, there is actually a glut of computer science PhDs right now in the US and the glut is likely to get worse over the next few years. Matloff is blunt regarding his conclusions about foreign worker visa programs.

“The foreign worker programs are directly and indirectly displacing Americans. In other words, these programs are causing an internal brain drain from technology fields in the US.”

In some cases, the displacement has been direct, with mainstream firms firing Americans and replacing them with workers on H-1B and L-1 visas requiring the Americans to train their foreign replacements as a condition for severance pay according to Hira. However, most displacement is less direct, with foreign workers being hired in lieu of Americans.

“The impact is particularly acute on those who are older—which in the tech field, means over age 35. Employers prefer to hire the younger, thus cheaper, H-1Bs instead of the older, thus more expensive, Americans,” states Hira.

A related consideration is that there is never enough really top level talent in any field, and that there will always be great competition for those individuals regardless of their nationality, and to some extent even regardless of economic cycles.

Potential Solutions, Compromises and Political Will

Carlos Baradello is a successful entrepreneur, academic and venture capitalist based inSan Francisco. Baradello came to the US from Argentina in the early 1970s to pursue graduate work in electrical engineering and has lived and worked in the U.S. ever since, which gives him a unique perspective on American immigration policy.

Baradello believes that the US must be more realistic in its immigration policies and not allow the issue to become so politicized. He argues that there is a huge difference between a highly educated immigrant and an undocumented migrant worker coming to the US, and that the overall economic value of the high end human capital coming here must be weighed in formulating an immigration policy.

Baradello argues that the U.S. needs a flexible, dual-track immigration policy, and that the free market will eventually balance things out in terms of labor costs, whether you are talking changes in salaries or outsourcing, and that standing in the way of the “economic tsunami” of the search for lower cost technical talent is pointless and counterproductive.

There are no easy answers to the thorny knot of U.S.immigration policy. There are simply too many competing interests, and any solution is guaranteed to make some people unhappy. It is something to be debated that the current foreign worker visa system has been co-opted to the extent that it is largely a tool for businesses to keep labor costs down, and that many of the jobs being taken by foreign workers on visas today could be filled by Americans (despite the original intent of the law). The GAO issued a report in 2011 outlining a number of the current issues with the H-1B visa program.

It is up to Congress to muster the political will to tackle these issues, and come up with compromises in crafting a flexible immigration policy that will give everyone (including competing US workers) a fair shake and make sure that businesses have access to the high-end human capital they need to continue to innovate.