Insource More Jobs by Raising the H-1B Visa Cap

Report Jobs and Labor

Insource More Jobs by Raising the H-1B Visa Cap

October 13, 2004 6 min read
Visiting Fellow
Kirk Johnson
Former Visiting Fellow
Kirk is a Former Visiting Fellow.

This political season, much has been made of the notion that America is outsourcing jobs to other nations. As the argument proceeds, such a phenomenon effectively throws American employees out of work. Although outsourcing affects only a very small slice of American jobs (less than one percent),[1] there is something Congress can do to encourage more employment here at home: increase the number of H-1B visas.



H-1B visas allow highly skilled foreign workers, such as computer specialists, physicians, teachers, and a handful of other professionals, to work in America for a set amount of time (usually between three and six years). There are a number of regulations regarding H-1B visas. Chief among them are the following:

  • The worker must be sponsored by a U.S. company, and
  • The worker must be paid wages that similar workers would be paid in the labor market.

The H-1B visa program is remarkably popular. Early this decade, Congress increased the H-1B visa cap, the statutory maximum number of H-1B visas that can be authorized under the law, to 195,000. The law specified that the cap remain at that level until Fiscal Year (FY) 2004, at which point it was to return to 65,000, its previous level.


In FY 2004, the 65,000 H-1B visa cap was reached by mid-February, not quite halfway into the year. On October 1, 2004, the very first day of the 2005 fiscal year, the cap for the entire year was met, meaning that no more specialty occupation visas may be issued for another 12 months.


Student Visas and Work Visas

Curiously, while the United States restricts the number of foreign workers in the country, it does not restrict the number of foreign students studying domestically. In FY 2003, more than 617,000 students studied in the United States legally via the F-1 student visa program, which allows foreign students to study at American universities.[2]


Many of these students go on to attain graduate degrees in a host of subjects. In the 2000-01 academic year, about a quarter of all students at U.S. universities completing doctoral degrees (e.g., Ph.D.s and Ed.D.s) were foreign students.[3] A smaller percentage-about 13 percent-of all master's degrees in the same year were awarded to foreign alien students.[4] Half of the doctoral degrees awarded to foreign students were in three broad subject areas: engineering, physical sciences, and life sciences. Significant numbers of foreign students also received doctoral degrees in history/social sciences, math, and education.


What Congress Should Do

The two policies show a paradox in American policy toward foreigners who want to come to America. On the one hand, the United States is reasonably open to foreigners who want to study. On the other hand, U.S. policy is less welcoming towards those who wish to work in productive American industries.


Ideally, Congress would immediately raise or eliminate the cap on H-1B visas. The best workers should be employed in America, paying federal, state, and local taxes here and otherwise contributing to the U.S. economy. The current policy cap makes future outsourcing more likely.


An intermediate policy change forwarded by Compete America, a coalition of corporations and universities that rely on H-1B visa holders, would exempt foreign workers who have college degrees from U.S. universities from the H-1B cap. Such a proposal is not without a certain allure-after all, these graduates have already gone through security screening to be in America in the first place and are often recruited directly for H-1B visa positions in companies.[5]


Additionally, American resources have gone into the education of these students. As Jeff Lande, senior vice president at the Information Technology Association of America, put it, "If they can't stay, we're wasting that investment, and we're losing access to some of the best and brightest around."[6]


According to recent reports, Sen. Saxby Chambliss (R-GA) has considered adding an amendment to a bill on visa abuse (S. 1635) to boost the number of H-1B visas available this fiscal year.[7] A representative from the U.S. Citizen and Immigration Services indicated that the agency could easily re-open H-1B petitions if Congress increased the cap.


Some argue that increasing the cap would not create jobs in America but instead shift work to foreign-born workers, just like offshore outsourcing. This argument fails for two reasons. First, jobs awarded to H-1B visa holders do not happen in a vacuum; companies who employ H-1B visa holders typically employ other workers in both technical and support positions. If outsourced, not only would the specialty worker be employed abroad, but also a range of support positions. Second, because of the additional expense involved in acquiring an H-1B worker, it would often be cheaper to employ a U.S. citizen for the job, if available.[8] And as noted above, these usually well-paid workers will contribute payroll and income taxes to governmental units in the United States, rather than abroad. Finally, H-1B via holders typically are well educated workers who have highly sought-after skills; their presence in the United States-and absence abroad-increases the competitive strength of the U.S. economy.



The H-1B visa program is one way for U.S. companies to recruit highly trained and specialized workers from other countries. Currently, the demand for new visas greatly exceeds the supply set by Congress. The limit on such visas should be expanded or eliminated so that more technical jobs and opportunities-as well as the attendant economic benefits-can be realized here in America. While this may not stop American companies from outsourcing, it is one way that U.S. policy can encourage more job creation at home.

Kirk Johnson, Ph.D., is Senior Policy Analyst in the Center for Data Analysis at The Heritage Foundation.

[1] Tim Kane, Brett D. Schaefer, and Alison Fraser, "Ten Myths About Jobs and Outsourcing" Heritage Foundation Webmemo No. 467, April 1, 2004, at

[2] Department of Homeland Security, Office of Immigration Statistics, 2003 Yearbook of Immigration Statistics, September 2004, Table 24, p. 101 at

[3] National Center for Education Statistics, Digest of Education Statistics 2002, Table 241 at

[4] Ibid, Table 268 at

[5] According to Compete America, some 65 percent of all H-1B visa holders in FY 2002 were already in the United States under some other non-immigrant visa program. See

[6] Eric Bangeman, "Senate Debates Changes to H-1B Visa Program" ArsTechnica, September 28, 2004, at

[7] See Fawn H. Johnson, "At Start of Fiscal Year, Annual Cap on H-1B Visas Exhausted, DHS Says" BNA Daily Report for Executives October 4, 2004, p. A-41.

[8] Since employers are required to pay H-1B holders a "prevailing wage," the argument that H-1B workers are simply "cheap labor" is not correct. Paying prevailing wages on top of the time and expense of the H-1B process can make American workers more attractive, if they are available.


Visiting Fellow
Kirk Johnson

Former Visiting Fellow