The H1-B Visa Is Systemic Wage Theft
Calling BS On Elon Musk And Vivek Ramaswamy
I voted for Donald Trump, and I support Agenda 47. I firmly believe those policy proposals are, on balance, very much in the best interests of the United States.
I begin with that declaration because that is essential framing for assessing the recent contretemps over the H1-B Visa program, and the advocacy Elon Musk and Vivek Ramaswamy have made on its behalf.
Suffice it to say, Elon is wrong. Vivek is wrong. And the data shows that they are wrong.
The H1-B Visa program is as bad as many have already said it is. The H1-B Visa program—and every other immigration program designed to import workers into this country—amounts to the systemic theft of wages from workers who are already here in the US. The H1-B Visa program is contributing to the declining employment-population ratio in this country.
As regards the ongoing jobs recession in this country, the H1-B Visa program is an integral part of the problem.
The data proves it.
Elon Musk Collides With Agenda 47
Where this begins is with Elon Musk and other Silicon Valley “tech bros” voicing their support last week for the H1-B Visa program, by which many tech companies—including several Silicon Valley mainstays—bring in foreign workers because of a claimed skills shortage.
On Christmas Day, Elon very bluntly claimed on X that there were not enough “motivated” workers in the United States to fill needed tech jobs.
Vivek Ramaswamy saw fit to chime in with a bizarre rant on X about American culture being too “lazy” and “mediocre”.
Regardless of the claimed merits of the H1-B Visa program, Elon’s and Vivek’s advocacy of H1-B immigration visas have one singular unavoidable problem: at least on the surface they run counter to the very first commitment Donald Trump made as part of his campaign platform “Agenda 47”.
Expanding H1-B immigration does not sound very much like “stop the migrant invasion”. Neither Musk nor Ramaswamy engaged with that policy point.
Politically, that was almost certainly an epic fail, because many of Trump’s supporters—myself included—are looking at his incoming Administration with both eyes wide open and expect him to deliver on the very specific commitments made within Agenda 47.
Advisors to a President-elect who campaigned on a fundamentally anti-immigration platform are not serving the President-elect well by telling Americans that the country needs more immigration.
Unsurprisingly, several Trump supporters were less than pleased. There have been innumerable tweets on X to the effect of “this is not what I voted for.” And more than a few indicating that Donald Trump himself is losing support over this issue.
Whether the fracture within the MAGA coalition is irreparable remains to be seen, but at present the fracture is real.
Politics vs Business
At the heart of the debate over the H1-B Visa program is a growing chasm between the political will of Trump voters and the business desires of “tech bros” such as Elon Musk.
Certainly there is no getting around the driving force behind most employers’ interest in expanding the H1-B visa program: Control labor costs.
A review of H1-B lottery data shows the majority of H1-B visa applications involve positions which pay less than the prevailing wage for that industry. Even though H1-B applications are primarily targeting jobs in information technology, some 75% of those positions pay less than $150K per year.
While the desire of employers to hold down labor costs is both normal and understandable from a business perspective, the desire of workers to seek higher wages—i.e., increased labor costs—is equally normal and equally understandable.
Politically, this divergence between employer and employee interests opens the door for the H1-B visa program to be criticized as simply a means for employers to force down wages across the board.
Nor is that merely political rhetoric. Harvard economist and former Treasury Secretary for President Clinton Larry Summers tweeted in November that President Trump’s commitment to “ending the migrant invasion” would cause a labor shortage which would in turn exacerbate inflation.
As William Upton noted writing in The National Pulse, one implication of such effects from Trump’s proposals is that immigration levels have been used to suppress wages for all American workers.
Summers’s post exemplifies the likely line of attack corporate lobbyists and Democrats on Capitol Hill will take against Trump’s immigration crackdown. However, his argument belies the fact that rising wages would cause the inflationary pressures he is referring to—an acknowledgment that mass immigration, and especially illegal immigration, is used to artificially keep the cost of labor lower than its actual market value.
Given the arguments by many that there are available American workers for many positions being filled via the H1-B visa program, just at higher wage levels, the conclusion that the H1-B visa program is primarily used to force down wages in otherwise high-paying professions is not hard to comprehend.
Alas for Elon and the “tech bros”, overall employment trends in the United States confirm that H1-B visas serve primarily to suppress wages in the United States. Eliminating H1-B visas as part of fulfilling Agenda 47’s commitment to securing the border and getting control over immigration would very likely help increase wages in the United States—most workers would like making more money.
Damning Data
Longtime readers will recall that I have often criticized the BLS Job Openings and Labor Turnover Summary (JOLTS) report for stating what amount to fictitious numbers of job openings every month.
Even before the start of the (Biden-)Harris Administration, the number of reported job openings has surged, especially relative to actual hiring.
However, while job openings have outpaced actual hiring for most of the past decade, it is only in the past few years that the excess of job openings has become…”excessive” (yes, I have a weakness for bad puns!).
More importantly, not all industries have been equally prone to having such surplus job openings. Construction, for example, has shown job openings and hirings to more or less align with each other.
That has not been the case with either Professional and Business jobs, however, or Private Education and Health Services.
Other sectors tend to fall somewhere in between.
The excess of job openings particularly in Professional and Business services stands out post-COVID, because there was no such excess pre-COVID.
Only in Private Education and Health Services did we see significant surplus of job openings pre-COVID, a surplus which more than doubled post-COVID.
The official narrative about these surpluses has been that they signify a “tight” labor market.
However, this cannot be the case, because at the time these surpluses were rising to their highest levels, average real weekly wages in these same professional service areas were declining.
Even in the Education and Healthcare sectors, real wages declined as job openings surpluses rose.
If the labor markets were truly tight, and were truly response to market forces—including tight supply conditions—average real wages in these sectors should have risen. That real wages fell indicates that in fact the labor market was far looser than was being reported.
Indeed, when one considers the numbers of H1-B visa applications each year—numbers which greatly exceed statutory limits—the presumption that labor markets are somehow “tight” becomes quite dubious indeed.
That labor markets were looser than realized lends significance to the fact that the pace of employment growth among foreign-born workers in this country increased post-COVID.
That employment among foreign-born workers was increasing relative to native-born workers is confirmed by the rising employment population ratio among foreign-born workers, while the native born employment population ratio has declined.
Employment among foreign-born workers has been rising, while employment among native workers has actually been in decline for over a year now. Using foreign-born workers to expand the labor supply in this way would produce the reductions in average real weekly earnings.
Using foreign-born workers, however, is an arbitrary manipulation of the labor supply, and one that would clearly and predictably reduce wages—what else should we call such deliberate and sustained reduction of market wages but systemic “wage theft”?
H1-B Not The Only Cause, But Definitely A Cause
I have written at some length about the “jobs recession” this country has been enduring since late last year. The data bears that thesis out unequivocally. There is a significant imbalance between the amount of available work and the amount of available workers in this country.
It would be an oversimplification to ascribe all of the imbalance to the pernicious effects of an abused H1-B visa program. It would also be fundamentally wrong. There are other causes as well, not the least of which are the likely aftereffects of the COVID Pandemic Panic lockdown lunacies in 2020.
However, it would also be fundamentally wrong to suggest that the H1-B visa program has not played a role. The totality of the data, including the levels of H1-B visa applications, can only be explained if we accept that the H1-B visa program has been used to displace native-born workers and to suppress wages in multiple industries.
Donald Trump pledged to rein in immigration as part of his Agenda 47 platform. As it stands, the levels and manner of immigration this country is currently experiencing are not economically beneficial. The data leaves little room to debate that. The data also leaves little room to debate but that programs such as the H1-B visa program are contributing to out-of-control immigration.
The H1-B visa program may not be the entirety of the problem with US labor markets, but there is little doubt but that the entirety of the H1-B visa program is a problem with US labor markets.
There is little doubt but that the H1-B visa program needs to be terminated completely. Whatever benefits which might be realized from the program do not outweigh the costs to labor markets—the costs to American workers overall.
Can the H1-B visa program be somehow reformed, and its defects cured? That seems unlikely. The foundational premise of the program—to recruit workers abroad when there are no workers available domestically—necessarily must work to depress wages across entire industrial sectors. By design, the H1-B visa program seeks to expand the labor supply, and expanding the supply of any resource is going to reduce the market price for that resource. That is Economics 101.
Moreover, the surge in job openings reported in this country, a level of increase which has not been matched by an increase in hiring (except in a few areas, such as construction), is all too easily explained by employers gaming the system. As I have commented before, it is quite probable that a significant portion of the reported job openings each month do not really exist, and represent hiring the reporting company truly has no intention of completing. That hiring has not risen to keep pace job openings for nearly all sectors other than construction makes the surge in job openings highly suspicious. That such a surge takes place amid falling real wages looks even more suspicious—real wages should be increasing as a consequence of the labor shortage.
Unfilled job openings, however, make for a very convenient justification for pursuing H1-B visa applicants.
Within a free market system, scarcity results in the market price of any commodity being progressively bid up until an equilibrium is reached. In labor markets, scarce labor should result in wages being progressively bid up, as wages are the market price for labor. A true shortage of workers should result in real wages skyrocketing, not shrinking as they have been.
If the H1-B visa program were truly necessary to fill jobs that cannot be filled with domestic workers, that would be reflected in the average wage data, and it is not.
If the H1-B visa program were not creating distortions between available work and available workers, that would be reflected in the employment-population ratio, and it is not.
There is simply no defense to be had for the H1-B visa program. The program is suppressing wages and distorting labor markets in this country. The program is, as I said at the beginning, “systemic wage theft” which is absolutely harming workers by reducing their wages.
A program which cannot be defended should be eliminated. Elon Musk and Vivek Ramaswamy, instead of seeking to expand H1-B Visas, should be using their DOGE mandate to pursue ending them.
Elon and Vivek say H1-B Visas are good and necessary for the economy. I call BS on them both, and so does the data.
Peter, bravo for posting actual data regarding this issue! I haven’t seen data in anyone else’s stances, and thus have been hesitant to take a pro or con position. I’m such a fan of Elon and Vivek that I’m biased in their favor, but on this H1-B visa, well, are they being biased toward their tech industries? It now appears so. Thanks for setting the matter straight.
You really should be on staff at the White House, Peter.
How much does DEI come in to play with this as well? Brown skin trumps white by those standards. Immigration status probably adds extra points. When college grads have been struggling to find jobs for decades, I think that may also contribute to the workforce aged becoming disenchanted and frustrated. Kick in a little more frustration with 2020 madness and the ongoing histrionics and you have people who are sick, injured, dead and mentally unwell/exhausted.