NBER Study: Foreign STEM Workers Boost Wages for U.S. Workers

H1B skeptics put us in mind of a quip attributed to Winston Churchill – that a lie gets halfway around the world before the truth has a chance to put its pants on – even though, in this case, the skepticism seems to be driven less by deception than fear. Notwithstanding the mountain of contrary evidence, some still worry that the H1B program will erode the wages of native-born workers – even though employers are explicitly required to pay prevailing wages to all of their H1B employees, and comply with other stringent measures that protect American workers.

We realize we are largely preaching to the converted in this space, but when you meet those who still need convincing there is a new study from the National Bureau of Economic Research (NBER) that shows these concerns to be unfounded: in fact, the H1B program – far from depressing wages – actually has raised wages for American workers in the 219 metropolitan areas that were examined by the authors. [See Foreign STEM Workers and Native Wages and Employment in U.S. Cities, by Giovanni Peri, Kevin Shih, and Chad Sparber, National Bureau of Economic Research, May 2014.] In the period spanning 1990-2010, the authors found:

“… a one percentage point increase in the foreign STEM share of a city’s total  employment increased wages of native college educated labor by about 7-8 percentage points and the wages of non-college educated natives by 3-4 percentage points… . These results indicate that growth in STEM workers spurred technological growth by increasing productivity, especially that of college educated workers.”

As the NBER study indicates, the H1B program paid big dividends to the communities with the foresight to take full advantage of it. This explains why rustbelt cities like Detroit are taking a newfound interest in attracting foreign STEM workers: they have run the numbers, and understand the kind of benefits this will bring to their city. In other cities of the nation’s industrial heartland, business and government leaders have reached the same head-smacking conclusion: STEM immigration matters, and can make or break the local economy.

Cincinnati is another case in point. In a recent op-ed, an executive with the Cincinnati USA Regional Chamber fretted about her city’s failure to attract more H1B workers:

“Competitive regions are ahead of us in their global orientation. In the latest round of annual applications for 85,000 federal H1B visas for highly skills workers, the supply was exhausted in just five days. Again, Cincinnati lags behind our competition, with Columbus winning nearly twice as many visas and Austin, Texas, a top performer, winning nearly 250 percent more.” [See Cincinnati Region Lags on Immigration, by Mary Stagaman, 04.May.2014, Cincinnati.com.]

Why does she care? Because foreign STEM workers bring leading-edge technical skills along with the entrepreneurial drive needed to get their innovations out of the lab and into the marketplace, a process that creates jobs and strengthens the local tax base. The rising concern about the rate of local H1B participation shows that this has become an important indicator of regional economic health. Given the results of the NBER study, it’s easy to see why.

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