The H-1B Wage Gap, Visa Fees, and Employer Demand

The H-1B program lets firms hire high-skill foreign workers for a six-year term. The annual number of visas allocated to for-profit firms is capped at 85,000 and there is excess demand for those visas. The analysis merges administrative data, including the I-129 petitions that report the wage offer made to specific H-1B beneficiaries, with the American Community Surveys. On average, H-1B workers earn 16 percent less than comparable natives, suggesting that firms may be willing to pay a one-time fee to obtain the visa. The data are examined using a labor demand model to simulate how a fee alters the hiring decision. Depending on the level of excess demand, the unobserved productivity gains or costs from an H-1B hire, and the rate of job separations, the revenue-maximizing fee is between $118,000 and $264,000, has little or no impact on the number of H-1Bs hired, and generates between $6.2 and $22.4 billion in revenues. The demand for visas remains strong even if firms offshore some of the jobs currently held by H-1Bs. The fee also changes the skill composition of the H-1B workforce, making it more skilled.