Wading Into The HB1 Visa Controversy
People Totally Miss the Point of Immigration and Why HB1 Exists
On the X platform, there has been an OK Corral-type gunfight over HB1 visas and immigration. Most of the analysis has been subjective, not objective. The analysis isn’t data-based, it’s based on that person’s perception of the issue. It is important to impose positive, not normative, analysis of immigration to get to the right policy that will work for America. It’s clear we have a real problem and the HB1 dust-up shows it’s not simply with low-skilled immigrants sneaking across our southern border. It’s with highly skilled immigrants too.
There is a solution to our national immigration problem. Gary Becker figured it out years ago. I listened to him present it at a Vishal Verma Brown Bag lunch on the campus of Chicago Booth back in 2007. It can be distilled into a simple thought.
Where you have a supply of people wanting to immigrate, and a demand for people who would be immigrants, there are two intersecting lines so there must be a market-clearing price.
Sounds like an economic market doesn’t it? Other countries have done this successfully. Singapore is one that comes to mind but Singapore is a small city state. It’s not like the United States when it comes to scale. But, I think markets can scale so charging for immigration will work in the US.
Here is a video of him presenting this idea at an academic conference. It is pretty dry but the ideas are exciting and compelling.
However, to understand the meaning behind charging for immigration, there has to be background. Here goes. I do think that you have to separate immigration from other issues that have risen to the top in the fiery X debate on immigration. For example, American culture used to have a higher tolerance for failure. Our educational system used to be great and now it stinks. Those tie into arguments around human capital but are separate from immigration. For example, if America had 0 immigrants, our public educational system would still stink.
First some assumptions.
America is the only place where people can assume a lot of calculated risks and rise. In other societies, it is impossible to assume that risk, or if a person does assume that risk, society does all it can to trip that person up or push them down.
We want risk-takers in America.
Immigration is an integral part of the American culture. We love to say, “We are all immigrants” and critics of any curbs on immigration will recite that phrase. The simple fact is early Americans, from the Pilgrims to people who came up until WW2 were “self-sifted”. These were people who picked up sticks from wherever they came from and decided to take the risk of coming to a new country. In most cases, it was a “burn the boats” type of psychological leap. Either they were going to make something of themselves in the new place or drown. There are certainly immigrants who left and went back. They didn’t like American culture. But, they are a minority in number.
You can’t have immigration without strong borders that limit who can come in legally and stop illegal immigration. That means a wall on the southern border is necessary.
People who immigrate both legally and illegally today are also “self-sifters”. They are looking for a better life and the opportunity America promises. It is the shining city on the hill. They picked up sticks in their country, left their friends and family, and are coming to America to try and build a better life.
When a free market has a transparent price, and actors can enter and exit the market with little to no costs, prices transmit signals and cause action. Supply and demand change as prices change and people make different decisions because of that transparent price.
Generally, when people have migrated they start at the bottom. The next generation does better and the next generation does better. Sure, there are plenty of exceptions but that’s how it is for most people.
There are positive externalities and positive network effects for America from having legal immigrants. The public debate focuses on illegal immigration.
This isn’t about political asylum seekers. That’s a different category and should be rare.
We should be indifferent to where people come from and the “diversity” part. We only care about the risk-taking cultural part.
We do care about the social cost part. Immigrants should impose relatively few social costs on the broader society.
There are some real problems with the way America is today and the way it was before The New Deal and Great Society concerning how immigration is managed. Before all that socialist bullcrap was passed, people came and had to rely on their family or some other type of network to find housing, get them a job, and support them. It was entirely private, and because it was private, the economic incentives were aligned. No one had to pay a price to immigrate.
As soon as the government got into the social safety net industry, incentives changed. They still do not pay a market price to immigrate, and there are all kinds of government programs and benefits for them when they come. In some cases, the level of government support creates a much better life for them in America than the life they had back in their indigenous country.
You can disagree with those assumptions but I think they are pretty innocuous.
There are gangs that charge illegals to bring them across the border today. The fact that they can do that shows there is a willingness to pay. The fact a black market exists shows there are terrifically large holes in immigration policy.
More from Becker.
One of the issues with his idea is paying for immigration. Essentially, HB1 visas are paying for immigration. Much of the debate I have seen on X talks about paying, how corporations are avoiding paying American workers full salaries, and how they are importing cheap labor avoiding “rules”. That’s normative analysis and muddies the water when we discuss immigration.
I do think that HB1 visas are abused. But, passing more government regulation isn’t the way to fix them. That will surely be politicized and the current HB1 visa program is full of all kinds of protectionist and political holes.
Becker was all for paying for immigration. But, who should pay? The immigrant or some other entity?
One thing is for sure, since the HB1 visa program was created, the data coming out of it shows there is a price ceiling on the market.
Becker writes, “For example, the United States has H1B immigrants who come in on special visas as skilled workers and stay for up to six years. Congress has pushed back the quota so that only about seventy thousand H1B immigrants can enter every year. The quota is usually filled by the end of January. Many more skilled individuals want to immigrate to the United States under this and other programs, but they cannot. The current approach does not seem to be the right one.”
Venture capitalists, companies, and all kinds of people complain we don’t have enough “high-quality immigrants”. Donald Trump has said that we need high-quality immigrants. But, a “high-quality” immigrant is kind of a subjective normative analysis of who is coming in. Why is a college graduate better than someone who didn’t go to college? What if that graduate was a non-quantitative, or “easy” major?
For those of you who don’t understand what price ceilings do to marketplaces, here it is graphically. Demand for immigration is above the ceiling. This is the same as rent control, price caps, price gouging laws, and any other market disruption where a regulator tries to “do good”. Letting the market work and deciding is always better.
By charging for immigration, there would be a psychological difference in the kind of immigrant. They would pay the price to immigrate, and a psychological construct would be created, they would become “American” by paying that price. That means assimilation happens faster.
What about illegals that already are here? Some of them would pay to stay. That would open up better opportunities for them.
Do we care who pays? I think we should be indifferent.
If the immigrant pays, that means they have saved money to pay. They are going to be invested in America. They will have taken the longer-term view and culturally, will be part of this country. Right now with work visas and other programs, we are hiring mercenaries to come into our country that will leave.
What if a corporation pays? Who cares. Today, many corporations pay for education benefits for their employees. Those employees have to work for that company or pay that company off if they leave.
What about poor people? Critics of immigration limits love to recite the Emma Lazarus inscription on the base of the Statue of Liberty,
"Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!"
If a company needs cheap labor, the company can pay for it. The company still has to abide by prevailing labor laws on minimum wage, working conditions, and all the rest. The company can decide if it is worth the cost to import cheap labor, shoulder the burden for that cost over the time the immigrant will work for them, and pass along the cost via the end product price to consumers.
Applying Coasian principles to immigration is a great idea.
But, does Becker go far enough? I think he gets it right when it comes to permanent immigrants. Charging for immigration is the way.
But, what about very talented people who do want to work for a short period in the US but do not want to immigrate from their home country? This could be a research scientist or a high-level employee at a company. Should there be an HB1-type program for them? Richard Epstein thinks so.
Epstein says globalization and the internet have created a skilled labor market without borders. It’s possible to ship work to lower-cost labor in other countries. Plenty of startup companies do this. They have teams in all kinds of countries around the world that pay to do tech work for them. The startup doesn’t have to pay them as much, and in a lot of cases, they don’t part with any equity to pay them either.
Epstein opines that the government ought to create an HB1-type visa, and then get out of the way. Labor should be treated similarly to wheat and free trade principles should hold sway. Public companies could be forced to disclose in their annual report how many employees they use via this program.
This nation could cut administrative costs, eliminate political intrigue, and improve overall productivity if it stripped out any and all government oversight with respect to these temporary visas.
In highly skilled positions, there is generally little to zero social cost. None of these high-paid immigrants are a drain on government resources.
America’s regulatory rulebook is riddled with normative policies. It screws up markets and enables people to gain power by politicizing everything in life. That political hand delves deeper and deeper into our lives so that it becomes impossible to live daily life without recognizing how the political hand affects us. Having a simple price system for immigration based on a market eliminates the political hand and depoliticizes the immigration process.
Getting rid of the powerbrokers and politics from immigration will generate outsize outcomes for American citizens and society.
As I just commented at Ruxandra Teslo's substack:
One thing that is interesting about the debate so far: the almost exclusive focus on 'engineers'...the term seems to be generally used to include anyone who can write code, at whatever level (pretty sure a lot of the H1Bs are actually sysadmins and such who actually *can't" write code)...as opposed to electrical, mechanical, and structural engineers.
But as important as engineering is, there are a lot of other skills also needed to grow the American economy. The biotech industry is very important, and while it does need some engineers, the key need is for scientists: molecular biologists, for example. Pretty sure that Ruxandra Teslo, for instance, could add a lot of value in an entrepreneurial US biotech company. (Indeed, Vivek's own company, Roivant, surely needs more people in the biological sciences than it does engineers)
There are also a lot of shortages among skilled workers who don't need to be college graduates..for example, there is a shortage of machinists, which is getting worse as older ones retire and younger people have not followed them into the field.
To earn a degree in a hard science, math or engineering fields you have to be able to read, write and be competent in math from grade school thru high school. Fail to do this and you will likely not make it thru college in these, three fields of study. The Chicago public school system does an abysmal job in teaching students in these areas. I would bet a few dollars that the percentage of K-12 students that make it to college, earn a degree in science, math or engineering, from Chicago public schools is very, very low.