High Skilled Immigration – the H-1B Visa

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On September 19, 2025, the US announced that all new H-1B petitions (the H-1B is the visa for immigrant workers with college degrees) would require a payment of $100,000. The size of the fee is sufficiently large enough that it may de facto end high-skilled immigration to the US via the H-1B visa (there are other available visas, although getting approved for them is harder). Such an outcome will end up being very costly for the US and its citizens.

Immigration – Economic Growth Engine

Skilled immigration is a large driver of economic growth. Specifically in the case of H-1Bs in the US, research has shown that immigrants:

• Increase employment of locals;

• Increase the wages of most locals;

• Increase venture capital investment and IPOing;

• Increase patenting;

• Decrease outsourcing and offshoring.

We have covered the above in our article here, which we will put an extract of at the end of the article. These well-documented positive impacts of immigration, however, continue to be dismissed by politicians and commenters. Here is why I think immigration is misunderstood.

Immigrants and Locals are Not Substitutes

The main argument against immigrant workers is that immigrant workers take away jobs from locals. That is, absent the immigrant, the job of an immigrant would be done by a local. A corollary to that argument is that immigrant workers reduce the wages of locals.

These two arguments rest on two key assumptions:

1. Immigrant workers and locals are perfectly (or closely) substitutable;

2. The total number of jobs is more or less fixed.

To understand why these two assumptions are faulty, let’s look at how economists model the labor market using the canonical Diamond-Mortensen-Pissarides (DMP) model.

Model of Job Formation

In the DMP model, there are two types of agents – firms (or firm owners) and workers. Let’s call the firm owner Frank and the worker, Wyatt. Frank’s firm produces steel, but only if Frank’s firm has an employee. The