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Winning the Visa Lottery
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- DeepHorus
New research exploiting a randomized US government visa lottery finds that restricting low-skill foreign workers shrinks businesses without creating jobs for Americans. The study, by Michael A. Clemens and Ethan G. Lewis, appears in the American Economic Journal: Applied Economics and offers rare causal evidence on a long-debated question.
The H-2B visa program authorizes temporary foreign workers in seasonal jobs such as landscaping, seafood processing, forestry, and hospitality. Ninety-eight percent of these positions require no high school education. The Immigration Act of 1990 capped H-2B visas at 66,000 per year, a figure reportedly set by tripling the roughly 22,000 visas issued the previous year. Demand now vastly exceeds supply: for the second half of 2022, employers requested 136,555 workers for just 33,000 slots.
After a surge of petitions crashed a Department of Labor server in 2019, the agency began processing applications in randomized alphabetical order. Firms drawing an A are highly likely to hire nearly all requested workers, while those drawing later letters are not. The authors surveyed 472 businesses that entered the 2021 and 2022 lotteries and registered a pre-analysis plan before responses arrived, mirroring a clinical trial design.
The consequences were significant. Losing the lottery cut a firm's H-2B employment roughly in half. Winning firms saw revenue rise with an elasticity of about 0.20, meaning a doubling of H-2B workers raised revenue by roughly one-fifth. Investment in equipment, vehicles, and structures responded even more strongly, with an elasticity of 1.5 to 2.1.
Equally striking is what did not happen. Employment of low-skill American workers at losing firms did not increase. Across all firms, the effect of foreign hiring on US employment was zero or positive, and in rural firms it was significantly positive, with an elasticity of 0.61.
"If you don't allow firms to hire immigrant workers, they just become smaller firms," Lewis said. "They are not replaced with US workers." The authors estimate the elasticity of substitution between H-2B and US workers at 0.8 to 2.2, far below the 4 to 10 found in many earlier studies. The findings suggest visa restrictions mainly reduce firm size and output, not American joblessness, and point to the need for policy reforms that account for complementarity between foreign and native low-skill labor.
