This piece is published as part of our Immigration Idea Incubator series, which features policy ideas our team has been thinking about in addition to our formal immigration strategy work.
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Small businesses have always been at the heart of the American economy. They create two of every three net new jobs, write the paychecks for nearly half of the private sector workforce, and account for around 44 percent of all economic activity in the United States. Yet, the U.S. hasn’t provided the most straightforward pathway for these essential businesses to reach their full potential and access the talent they desperately need: a cap-exempt allocation of H-1Bs explicitly reserved for small businesses.
Every year, small businesses that need specialized workers unavailable in the U.S. must compete with large multinational corporations in the H-1B lottery. This year, the chance of selection in the randomized lottery plummeted to less than 25 percent, compared to over 46 percent just a few years ago. The staggering decrease was driven at least partially by companies who attempted to unfairly increase their chances of selection by utilizing subsidiaries or partner companies to submit multiple registrations on behalf of the same employee.
When large corporations flood the lottery, small businesses seeking a few vital employees struggle to compete. In FY2023, just under 6900 companies received just one initial H-1B approval, accounting for about 18 percent of initial approvals. Still, an equivalent share of 6941 initial H-1Bs were handed out to 44 of the biggest sponsoring companies. These companies had an average global staff of over 160,000 employees, and a quarter had over 250,000.
Just six companies claimed over half of the initial approvals given out to the top 44 sponsors. These six companies, boasting an average staff size of over 355,000 each, benefited from over 10,000 H-1B extensions this year.
These top sponsors operate vast global staffs and can likely pivot to Canada or other countries if they do not secure sufficient slots in the H-1B lottery. This offshoring still costs the U.S. economy, but the relative scale means business operations can continue generally uninterrupted.
On the other hand, small businesses are far less likely to have the same capacity to move operations internationally without interruption. Small businesses often submit far fewer lottery registrations–and given their size, each vacant position significantly impacts business continuity.
Sponsoring a singular employee requires small businesses to enter a random lottery with a 75 percent chance of non-selection and to compete against companies submitting hundreds of registrations. If the lottery is unsuccessful, these businesses must operate without the talent they need or must move their business to another country with more hospitable immigration policies.
Losing these businesses is detrimental to the American economy and American competitiveness. Small businesses are hubs of innovation that employ 40 percent of our nation’s scientists and engineers and generate 14 times more patents than large businesses and universities. If these small businesses want to expand and innovate within the U.S. market, the U.S. must be willing to facilitate the entry of the talent they need.
H-1B petitioners already submit documentation attesting to the specialized nature of the desired employee, confirm that the H-1B recipient will earn a comparable wage to his American counterparts, and pay a fee that reinvests in the education and training of U.S. citizens. These requirements protect American workers. Still, retaining innovation, economic activity, and vibrant businesses within our borders would protect them even more.
The U.S. must do more to facilitate access to talent if we want to keep these businesses. Small businesses should have a special allocation of H-1B visas yearly, separate from the traditional annual cap — up to 20,000 foreigners with advanced degrees from U.S. universities and employees of universities and non-profit research institutions are already exempt from the cap. A similar allocation could be reserved for small business employees.
This allocation would ensure that small business lottery entries are not lost among the sea of large-scale corporate sponsors. It would also afford the petitions put forward by small businesses a chance to be evaluated.
Businesses of all sizes have struggled since the pandemic, but small businesses have been particularly devastated by the recent labor shortages. Reliable visa pathways that simultaneously invest in the upskilling of Americans are critical to creating a sustainable and reliable labor market that fosters innovation and growth. With the implementation of a size and revenue-limited exemption, the H-1B could be that pathway for the small businesses that are integral to Americans’ lives and livelihoods.