US Companies Denied H-1B Visas to Hire Talent Abroad

Recent studies have shown that restricting H-1B visas has the opposite effect, leading American businesses to hire more talent abroad. The study was released at the same time that two US senators have reintroduced legislation that, if passed, would probably cause more jobs to leave the US.

According to research by Britta Glennon, an assistant professor at the Wharton School of Business at the University of Pennsylvania, “this paper combines visa microdata and comprehensive data on U.S. multinational firm activity to demonstrate that firms respond to restrictions on H-1B immigration by increasing foreign affiliate employment at the intensive and extensive margins, particularly in China, India, and Canada.” “R&D [research and development] intensive jobs were most negatively impacted, but there is some evidence that non-R&D employment was also impacted. The paper identifies ways for businesses to get around restrictive laws and reduce risk at the national level.

The most likely companies to offshore jobs in response to H-1B visa restrictions are those with a presence in international markets, according to Glennon. The most internationally oriented multinational corporations (MNCs) are the most likely to offshore in response to these restrictions, demonstrating how firm capabilities—in the form of prior internationalization—shape the decision and capacity to offshore in response to skilled immigration restrictions. These companies hire 0.9 employees abroad for every visa denial. More generally, the paper shows that artificial resource constraints force businesses to find creative ways to get around restrictive laws—a push factor for internationalizing knowledge activity.

The more globally oriented multinational corporations are examined in greater detail in the updated research. When U.S. companies are denied H-1B visas, Glennon explained in an interview, “they go abroad, setting up new foreign affiliates and hiring talent there instead of in the U.S.” This is almost a 1:1 rate for the majority of multinational corporations. The findings highlight a significant unintended consequence of immigration restrictions: the movement of talent and jobs abroad, which has a significant impact on the competitiveness of the United States.

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Glennon’s findings are supported by a recent national survey of more than 500 human resources specialists. According to a study by Envoy Global and Cint, restrictions on H-1B visas and immigration result in a greater flow of resources, workers, and jobs outside of the United States. Because of uncertainty surrounding visas, 86% of businesses, according to the survey, hired workers from outside the United States for positions that were originally intended to be based there. (I added emphasis.)

Senators Richard Durbin (D-IL) and Charles Grassley (R-IA) reintroduced legislation in March 2023 that, as its sponsors must be aware, would result in the H-1B and L-1 visa categories being essentially useless to employers, which would result in the loss of more jobs in the United States. The legislation, which is a modified version of a bill that has been proposed since 2007, would implement numerous measures that would subject employers to significant legal liability whenever they hired someone with an H-1B visa or transferred an employee with an L-1 status into the country.

The bill would expand the H-1B “non-displacement” of U.S. worker mandates to all employers and to a period described as “at any time” rather than 90 days before or after filing an H-1B petition, in violation of the General Agreement on Trade in Services (GATS). Many company legal departments would probably advise against hiring highly skilled foreign nationals in the United States if possible due to the legal ambiguity in the current statute and under the Durbin-Grassley legislation on “non-displacement” and other measures, including the recruitment mandate. A reasonable observer would conclude that is the intended purpose of the legislation.

The bill’s nearly all-restrictive measures for H-1B visa holders would also apply to L-1 visa holders, discouraging foreign and domestic businesses from investing in the United States. The “specialized knowledge” definition for L-1 visa holders is condensed by the bill. It bases experience-based eligibility for H-1B status. It would not be permitted to assign an H-1B or L-1 visa holder to work with a client without consent—a waiver—from the Department of Labor. Almost limitless investigative power would be granted to DOL regarding employers who hire highly skilled foreign nationals. The bill aims to significantly raise the salaries of those with H-1B and L-1 visas above typical market wages that take experience level into account. The number of H-1B visa holders who would be eligible for an exemption from the H-1B numerical limit for universities and nonprofit research institutions is also significantly reduced.

Those who prefer H-1B temporary visas over employment-based green cards should keep in mind that many people in the immigration backlogs held Sen. Durbin responsible for blocking (or at the very least not supporting at a crucial juncture) legislation to remove the per-country limit. If Sen. Grassley hadn’t blocked the provisions from being added to the CHIPS and Science Act in 2022, likely, foreign nationals with master’s or doctoral degrees in science and engineering fields would now be exempt from the annual cap on green cards.

According to Glennon’s research, “U.S. multinational corporations respond to restrictive skilled immigration policies by increasing foreign affiliate employment at existing foreign affiliates and by adding new foreign affiliates.”

You can check further details of H1B visas by visiting the official site. Though sometimes before the United States Allows Tourists To Apply For Jobs & Interview While On a Tourists Or Business Visa

Policymakers need to understand the implications of the study. The discovery that highly skilled foreign-born workers are hired at foreign affiliates rather than in the United States may have significant repercussions for the country’s capacity for innovation. The innovative spillovers produced by skilled foreign-born workers at a U.S. company’s foreign affiliate will go there rather than back to the United States. In other words, restrictive H-1B policies might not only be sending more jobs and businesses abroad, like to Canada, but they might also be contributing to a decline in American innovation.

According to Glennon’s research, immigration restrictions against highly qualified foreign-born scientists and engineers have had unintended—but, according to many analysts, predictable—negative consequences.