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High-Skilled Immigration: Firm-Level Complementarity, Offshoring, and H-1B Program Changes

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High-Skilled Immigration: Firm-Level Complementarity, Offshoring, and H-1B Program Changes

A long-standing debate in labor economics centers on how high-skilled immigration, particularly through the H-1B visa program, impacts native-born workers and firm performance. While proponents argue that high-skilled immigrants complement native workers and drive innovation, critics contend that the program is used by employers to lower labor costs and substitute cheaper foreign labor for comparable native-born professionals.

The H-1B Wage Gap and Employer Demand

A major new study by George J. Borjas (NBER Working Paper 34793, 2026), titled "The H-1B Wage Gap, Visa Fees, and Employer Demand," provides fresh empirical evidence on this debate. Borjas analyzes the wage differences between H-1B visa holders and comparable native-born workers, finding a significant wage gap that directly shapes employer demand:

"The H-1B program lets firms hire high-skill foreign workers for a six-year term. On average, H-1B workers earn 15 percent less than comparable natives."

This finding suggests that a primary driver of employer demand for H-1B visas is the cost savings associated with hiring foreign workers who are bound to their sponsoring employers, which limits their labor market mobility and bargaining power. Borjas's analysis suggests that the program can create downward wage pressure in STEM fields, challenging the view that H-1B workers are only hired when native talent is completely unavailable.

Firm-Level Complementarity vs. Substitution

This new evidence adds nuance to existing firm-level research. Prior studies using H-1B lottery outcomes have found mixed results regarding whether winning firms expand native employment or simply substitute foreign workers for natives:

  • Some research shows that firms winning the H-1B lottery do not significantly increase their overall employment levels compared to losing firms, supporting the substitution hypothesis.
  • Other studies argue that high-skilled foreign workers complement native-born managers and specialized professionals, leading to firm-level expansion, increased R&D investment, and a reduced likelihood of offshoring technical operations.1

The 15% wage gap identified by Borjas (2026) suggests that even if high-skilled immigration yields firm-level efficiencies or complements certain native roles, it does so in part by establishing a lower-cost tier of professional labor. This cost differential creates a strong financial incentive for firms to utilize the H-1B program, particularly in highly competitive tech and engineering sectors.

  1. An instance of Restricting foreign labor fails to protect domestic workers as firms simply offshore or contract capacity. — It confirms that high-skilled immigrants reduce a firm's need to offshore operations, meaning restrictions on these visas would drive work abroad. ↩︎

Part of

This finding is an example of a pattern recurring across your work:

Revision history

  • Update the high-skilled H-1B immigration note with George Borjas's new 2026 NBER paper (WP 34793) demonstrating a 15% wage gap between H-1B workers and comparable native-born workers.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent