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

The use of H-1B and other work visas to hire foreign information technology (IT) professionals in the United States 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 econo...

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Bibliographic Details
Published in:	Management science 2010-05, Vol.56 (5), p.745-765
Main Authors:	Mithas, Sunil, Lucas, Henry C.
Format:	Article
Language:	eng
Subjects:	Alien labor Alien registration cards Applied sciences Book publishing Business management Citizenship Citizenship status Compensation Compensation and benefits Computer science control theory systems Emigration and immigration Emigration and immigration law Employers Employment Exact sciences and technology Firm modelling Foreign labor Foreign workers Globalization H-1B high-skill immigration Human capital Immigration policy Information systems Information systems. Data bases Information technology Information technology workers IT human capital IT professionals Labour costs Management science managing IT resources Memory organisation. Data processing Noncitizens Operational research and scientific management Operational research. Management science Passports & visas Professional workers Software Studies U.S.A United States economic conditions Visas Wages Wages & salaries work visa Work visas
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Summary:	The use of H-1B and other work visas to hire foreign information technology (IT) professionals in the United States 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 2000-2005 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.
ISSN:	0025-1909 1526-5501