$200,000 H-1B Fee May Not Cut Hiring: Study

A proposed $100,000 fee on hiring H-1B workers may not significantly reduce employer demand, according to a new study released by the National Bureau of Economic Research (NBER).

The paper, authored by economist George Borjas, examines wage differences between H-1B visa holders and US-born workers, and assesses whether higher visa fees would change hiring behaviour.

The study finds that H-1B workers, on average, earn about 16 per cent less than comparable US-born workers in the same location, with similar education, age, gender and occupation.

Wage differences vary by employer. At large American technology firms such as Amazon, Google, Microsoft, Meta, Apple and Tesla, the wage gap between H-1B and US-born workers is relatively small. In some cases, it is statistically close to zero.

However, at several IT services firms, including Infosys, Tata Consultancy Services, Wipro and HCL, the study estimates a wider wage gap, with H-1B workers earning below what comparable US workers receive.

The report notes that H-1B employment is not limited to a small number of companies. Nearly 75 per cent of H-1B hires occur outside the top 25 firms. Data from I-129 filings show that more than 46,000 firms hired at least one H-1B worker over a four-year period. The median employer hired just one such worker during that time.

Even among smaller employers hiring only one to three H-1B workers, the wage gap persisted, with some estimates showing an 18.5 per cent difference for firms hiring a single worker.

The study also highlights that H-1B workers are concentrated in specific occupations. Software developers alone account for over 38 per cent of the H-1B workforce. The top five occupations represent nearly two-thirds of all H-1B jobs.

Borjas argues that because many H-1B workers are paid below comparable US wages, employers may still find it financially beneficial to hire them even if a $100,000 visa fee is imposed. He estimates that payroll savings over a six-year visa term could approach $100,000 for a single hire.

The paper further suggests that even a higher fee, between $150,000 and $200,000, may not drastically reduce hiring levels. According to the study’s projections, such fees could generate between $10 billion and $20 billion in annual revenue, while potentially shifting the programme toward higher-paid roles.

Borjas also points to structural aspects of the H-1B programme. New visas for for-profit firms are capped at 85,000 per year. Employers must apply for specific individuals, which, according to the study, creates scarcity. The paper argues that this scarcity may increase employer leverage in wage negotiations.

The findings come amid ongoing debate over US immigration policy and the economic impact of skilled worker visas.

As discussions continue around potential changes to the H-1B programme, the study suggests that higher visa fees alone may not significantly reduce employer demand for foreign skilled workers.