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High‐Skilled Immigration and the Labor Market: Evidence from the H‐1B Visa Program

This paper investigates the effect that high-skilled immigration has on the wages of U.S.born college graduates. College-educated immigrants study different subjects in college than do natives. I present descriptive evidence that workers with different college majors compete in different labor markets. I adapt a standard model of the U.S. labor market to allow for the imperfect substitutability of workers with different college majors. Because immigrants are twice as likely as natives to major in STEM, the model predicts that the wages of native STEM majors should fall relative to other majors as skilled immigration increases. Using an IV strategy that takes advantage of large changes in the cap of H-1B visas and controls for majorand age-specific unobservable characteristics, I find that workers who are most exposed to increased competition from skilled immigration have lower wages than you would expect given their age and college major. A 10 percentage point increase in the immigrant-native ratio of a skill group decreases their relative wages by 1.2 percent. Overall, I estimate that STEM wages fell 4–12 percent relative to non-STEM wages because of immigration from 1990–2010. ∗I would like to acknowledge helpful comments from Tania Barham, Brian Cadena, Jeronimo Carballo, Brian Kovak, and Terra McKinnish. I am grateful for financial support from the CU Population Center at the Institute of Behavioral Science and the Graduate School at the University of Colorado Boulder. †Contact: Department of Economics, University of Colorado Boulder, 256 UCB, Boulder, CO 80309-0256. E-mail: patrick.turner@colorado.edu