Are Foreign IT Workers Cheaper? United States’ Visa Policies and Compensation of Information Technology Professionals

Management Science, Forthcoming

Posted: 13 Mar 2009 Last revised: 4 Sep 2014

See all articles by Sunil Mithas

Sunil Mithas

University of Maryland - Robert H. Smith School of Business

Henry C. Lucas

University of Maryland - Robert H. Smith School of Business

Date Written: February 14, 2010

Abstract

The use of H-1B and other work visas to hire foreign information technology (IT) professionals in the United States has attracted significant controversy and policy debates. On one hand, hiring high-skill foreign IT professionals on work visas can be advantageous for U.S. firms and the overall economy. On the other hand, high-skill immigration can adversely impact the wages of foreign and American IT professionals. This study uses data on skills and compensation of more than 50,000 IT professionals in the U.S. over the period 2000-2005 to study patterns in compensation of foreign and American IT professionals to inform these debates. Contrary to the popular belief that foreign workers are a cheap source of labor for U.S. firms, we find that after controlling for their human capital attributes, foreign IT professionals (those without a U.S. citizenship and those with H-1B or other work visas) earn a salary premium when compared with IT professionals with U.S. citizenship. The salary premiums for non-U.S. citizens and for those on work visas fluctuate in response to supply shocks created by the annual caps on new H-1B visas. Setting lower and fully utilized annual caps results in higher salary premiums for non-U.S. citizens and those with a work visa. We discuss implications of this study for crafting informed visa and immigration related policies by the U.S. government, for staffing practices of firms and for human capital investments by IT professionals.

Keywords: IT professionals, High-skill Immigration, H-1B, Work Visa, Compensation, Human capital, Globalization

JEL Classification: J30

Suggested Citation

Mithas, Sunil and Lucas, Henry C., Are Foreign IT Workers Cheaper? United States’ Visa Policies and Compensation of Information Technology Professionals (February 14, 2010). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1358621

Sunil Mithas (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

​Van Munching Hall
7699 Mowatt Ln
College Park, MD 20742-1815
United States

HOME PAGE: http://sunilmithas.com/

Henry C. Lucas

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

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