The Economics of H-1Bs: A Call to Strengthen the System

Thomas W. Hildreth
Of Counsel, Corporate Department
October 1, 2004

While the federal government holds the monopoly on issuing visas, the United States does not have a monopoly on the best and the brightest minds in cutting edge technology fields. When it works well, the H-1B visa program provides a reasonably streamlined, efficient and predictable means for a US company to employ in our country highly skilled foreign workers for temporary periods up to six years. Bringing talented H-1B workers to the United States allows their talents to be shared with US workers and promotes the kind of cross-border collaboration which is critical for US companies seeking to remain competitive in an increasingly global economy. H-1B professionals help their US employers to pursue new business opportunities, create new jobs for US workers, and improve their competitive position in the global marketplace.

In some cases, the ability of a US enterprise to employ a foreign professional as an H-1B worker in the United States enables the company not to have to outsource particular functions or to send the work abroad. When US companies can bring talented foreign professionals to work in the United States they often also create additional good jobs at good wages for US workers. If a US company is forced to outsource a function because it cannot bring in the foreign personnel needed to assist in the operation, then it is often more than just the foreign worker who loses an opportunity to work in the United States.

Basic economic theory doesn’t work perfectly when applied to a government service. As a monopoly supplier, the government doesn’t respond to consumer demands in the same way as would a private company, subject to ordinary competitive pressures. But in the case of H-1B visas, the government’s recent actions – and its failure to act – have distorted the market almost beyond recognition.

A Brief History of the Supply and Demand of H-1B Visas

Before the federal fiscal year which ended on September 30, 1991, H-1B visas were not subject to any annual numerical cap. Beginning in FY ’91, however, Congress capped the number of H-1B visas available each year at 65,000. That cap was hit the first time in FY 1997, and again in FY 1998. In each of those years, there was a demand for more than 65,000 H-1B visas, but because the cap was hit some positions went unfilled to the competitive disadvantage of firms that were not able to hire key foreign professionals.

It was clear in the healthy economy of the mid- to late-1990s that 65,000 H-1B visas per year were not enough.

Although Congress does not react to the law of supply and demand, it does react to well focused political pressure. In response to high profile political pressure by the business community, Congress did pass the American Competitiveness and Work Force Improvement Act of 1998 (“ACWIA”). ACWIA temporarily raised the cap on H-1B visas from 65,000 to 115,000 in both of fiscal years 1999 and 2000.

Despite the seemingly generous increase in the number of annual H-1B visas, the cap was still hit in both of those fiscal years.

Again, in response to concerted political pressure from the business community – and especially the hi-tech community – Congress passed the American Competitiveness in the 21st Century Act of 2000 (“AC21”). AC21 increased the number of H-1B visas available to 195,000 in fiscal years 2001-2003. The cap was not reached in any of those years. In FY 2004, however, the cap reverted back to its starting level of 65,000, a level which has been insufficient since at least 1997.

!Business executives manage by the numbers. These numbers above lead to two compelling conclusions:

  1. 65,000 annual visas are not enough; 115,000 are not enough; 195,000 have proven sufficient. Therefore, the right number of annual H-1B visas presently lies somewhere between 115,000 and 195,000.
  2. Congress reacts when business leaders apply political pressure.

In the current fiscal year – FY ’04 – the annual allotment of 65,000 H-1B visas was fully depleted before the year was half over. There were no new H-1B visas available by the middle of February, 2004, for job opportunities to commence earlier than October 1, 2004. While some business leaders have been talking to their elected representatives, there has not been the same concerted chorus of voices that lead to ACWIA or AC21 to provide appropriate expansion of the H-1B program in earlier similar circumstances.

It may be that business leaders are gun-shy about suggesting that Congress increase their ability to employ foreign workers at a time when business leaders are already being criticized for increasingly outsourcing US jobs. That rationale belies a false conclusion. Business leaders cannot be shy about making known their need for qualified foreign professional workers. Congress does not react to the law of supply and demand, but it does react to political pressure thoughtfully applied by business leaders fighting for the competitive strength of their enterprises.

Regulations of the Citizenship and Immigration Services agency which administers the H-1B program allow H-1B petitions to be filed up to six months before the commencement date for an H-1B worker. Therefore, because FY ’04 H-1B visas were all used up by the middle of this past February, CIS is presently only processing H-1B petitions for positions that will begin on or after October 1, 2004. CIS began accepting petitions for such positions on April 1. If Congress does not act to increase the number of H-1B visas available now, then we might begin FY ’05 on October 1, 2004, with all of the FY ’05 H-1B visas already used up. Please take this as a call to action and call your congressmen and senators to urge swift and responsible action to increase the number of H-1B visas available to strengthen our domestic work force now and in the future.

Tom Hildreth is a director for the McLane Law Firm who practices in the corporate, real estate and international law areas, with particular emphasis on immigration law. Tom can be reached at (603) 628-1177 or by e-mail at The McLane Law Firm is the largest full-service law firm in the state of New Hampshire, with offices in Concord, Manchester and Portsmouth.