February 13, 2019

The Case for a Visa Auction



On February 7, Senators Kamala Harris (D-CA) and Mike Lee (R-UT) introduced the Fairness for High-Skilled Immigration Act. Their bill would eliminate unfair, country-based limits on employment-based green cards — limits that leave skilled immigrants from China and India waiting years to obtain permanent residency while other immigrants wait only months.

In introducing the bill, Lee noted: “Immigration is often a contentious issue, but we should not delay progress in areas where there is bipartisan consensus just because we have differences in other areas.” He’s absolutely right. And nowhere is the bipartisan consensus on immigration stronger than on high-skilled immigration.

A recent study from Pew suggests that Americans overwhelmingly support encouraging the immigration of high-skilled people to the United States. Tellingly, even those with restrictionist views on immigration in general favored the encouragement of high-skilled immigration in particular. The vast majority of us seem to understand that getting high-skilled immigration policy right will redound to the benefit of all Americans. Which is why Congress should also be exploring ways to reform and expand our nation’s largest source of temporary work visas, the H-1B program for high-skilled workers.

There are three major concerns about the H-1B visa program as it is currently constituted. First, because employer applications for H-1B visas routinely outstrip the number of visas made available by the federal government, the visas end up being distributed by lottery. The concern here is that visa allocation is based more on luck than the idea that visas should go to the firms that can put them to the highest-value use.

Second, there is a concern that firms use H-1B visas to hire inexpensive foreign workers rather than paying the prevailing wage for qualified natives. Finally, there is the concern that the H-1B program effectively ties foreign workers to one employer, making them vulnerable to wage suppression or other abuses.

In a recent paper, Alessandra Casella, a professor of economics and political science at Columbia, and Adam Cox, a professor of law at NYU, make the case that distributing temporary work visas via auction rather than lottery could address all three of these concerns, improving the efficiency and fairness of America’s temporary-work programs.

Consider how the Cassella-Cox framework would apply to the allocation of H-1B visas: The annual quota of H-1B visas would be auctioned directly to employers interested in the right to employ a high-skilled foreign worker. The auctioned visas would give employers with winning bids the right to employ a foreign worker for a specified period of time. The visas would be “pre-contract” in that an employer would have the option of either hiring a foreign worker immediately, holding the visa for use at a later date, or selling the visa to another employer on a secondary market. The clock on the visa would not start until the employer that owns it signs a contract with a foreign worker.

Critically, the Casella-Cox approach would split up the rights that the temporary work visa conveys to the employer and the foreign worker as soon as they enter into an employment contract. Post-contract, the employer retains the right to employ the foreign worker, but the worker possesses the right to live and work anywhere in the United States for the duration of the visa, conditional on finding another job.

This would mean that a foreign worker on an H-1B visa would have the freedom to pursue employment opportunities with other firms. To ensure that new employers do not simply poach foreign workers from the firms that pay for the visas, the new employer would be required to pay a fee to the government equal to the price of a pre-contract visa on the secondary market, prorated for the amount of time the worker has remaining in the country. Simultaneously, the government would reimburse the former employer for an identical amount.

So, what improvements might the Casella-Cox system offer over the status quo?

First, the right to employ a foreign worker is valuable and, as it stands, the government simply gives that right away. Auctioning the visas would allow the government to capture the value, perhaps using the revenue to improve other aspects of our immigration system — for example, securing ports of entry or hiring more immigration judges.

Second, by auctioning the quota of H-1B visas each year, we would do more to ensure that the rights to employ skilled foreign workers go to the firms that value them most rather than the firms that are lucky enough to win the lottery (or crafty enough to game it). This would improve the productivity-enhancing potential of the H-1B program by placing skilled foreign workers where they are valued most.

Third, because firms would have to bid competitively for visas (rather than receiving a windfall via lottery), the auction approach addresses the concern that a firm would seek out an H-1B visa in an effort to pay less for a foreign worker than the prevailing wage for a qualified native.

Fourth, because the migrant receives the post-contract right to live and work in the United States for the duration of the visa, her freedom to pursue jobs with other firms would limit her vulnerability to poor working conditions and wage suppression — further alleviating the concern that foreign workers will be used to undercut the wages of natives. The ease of transferring between employers would also allow for better matches between foreign workers and domestic businesses, improving economic productivity overall.

For lawmakers with an interest in improving America’s high-skilled immigration system, the Casella-Cox framework is worthy of consideration. Given that President Trump’s rhetoric on H-1B visas has tended to focus on two issues — a concern that employers use the program to hire inexpensive foreign labor in lieu of natives and a desire for the program to be used only to attract the highest-skilled foreign workers — the White House might want to take a look as well.

If a pilot of the Cassella-Cox approach, or something like it, were successful, it would address the concerns on the left and right about worker protections and programmatic efficiency. Addressing those concerns may be key to enhancing the viability of increasing the number of temporary work visas issued to high-skilled foreign workers each year — a change that would allow more foreign talent and more foreign graduates of American universities to make the sorts of beneficial contributions to the American economy that the vast majority of Americans say they want more of.

Brandon Fuller is Deputy Director of the Marron Institute of Urban Management at New York University.