H1-B visas are the lifeblood of U.S. innovation and a shortcut to semiconductor supremacy

In December, Samsung postponed the start-up date of its Texas-based chip manufacturing facility. In January, Taiwanese semiconductor manufacturing company TSMC postponed one of its planned Arizona factories. reason? Labor shortage. Two years after the U.S. passed a bill providing $280 billion over the next 10 years to boost the development of the semiconductor industry, the delay comes two years after the U.S. passed a bill that would provide $280 billion over the next 10 years to boost the development of the semiconductor industry, which will increase its ability to make advanced computer chips. This means that US plans are being seriously hindered.

The United States has provided significant financial investment and support to chipmakers. But running a business requires more than just financing. Often overlooked reforms to boost high-tech manufacturing are expanding skilled immigration. Our new research on H-1B visas, America's largest skilled immigration program, suggests they are one of the missing pieces to successfully bring more high-tech manufacturing within our borders doing.

No wonder we need additional workers who understand chip manufacturing. Consultants predict hundreds of thousands of workers will go missing. This number will increase to 1.4 million by 2030.

In the case of TSMC, this labor shortage has been a commonly reported concern for more than two years. The delayed announcement in January reiterated the lack of properly trained workers.

The same factors are at work in the case of Samsung's factory delays. Samsung partnered with the University of Texas in 2023 to build a talent pipeline for the state's semiconductor industry.

Such investments in domestic talent are certainly part of the solution to the skilled labor shortage. To this end, CHIPS and the Science Act provide tens of billions in support for workforce development. These are common sense investments in America's domestic workforce.

However, training takes time. If the U.S. is serious about revitalizing chip manufacturing, it needs to attract ready workers.

Measuring the impact of H1-B visa holders on US technology

This is where our new research comes into play. We are the first to examine the impact of skilled immigration policy reforms on young firms in high-tech sectors. Using data from companies that received H-1B visas in 2014 and 2015, we can see the impact that skilled immigrants have on high-tech companies and their success.

For example, we found that companies that secured all the foreign workers they wanted in a given year were more likely to survive for the next five years. On average, he is 2.6 percentage points more likely to survive compared to a company that never received the H-1B visa it requested. The effect is stronger for younger firms, which are 3.5 percentage points more likely to survive.

This may seem like a small difference, but it has important consequences. This keeps the entire technology department lean and healthy. Our quantitative results show that the increased business dynamism associated with the elimination of frictions caused by the current major H-1B policy will increase the total output of high-tech industries by 26% and increase the average productivity of firms by 0.4%. % is expected to increase.

By fostering the success of young companies, immigrants refresh the competitiveness and dynamism of technology companies. The mechanism in our model suggests that lower H-1B recruitment frictions increase the survival rate of young firms and limit the survival of older, less productive firms.

Moreover, our results show that alleviating current frictions in skilled immigration policy has significant implications for increasing output and average productivity of firms in high-tech sectors. In other words, if we make it easier for American companies to hire skilled workers everywhere, we will make the American economy stronger.

Based on our model mechanism, measures to streamline the processes of young enterprises can benefit the economy. At the simplest level, policymakers can increase the number of skilled workers through the H-1B program by increasing the number of visas available, simplifying the application process, reducing application fees, and facilitating the workforce transition of international students. You can leverage our research findings by streamlining access to. It makes your work easier.

Although our research is new, we are not the first to point out that the United States needs to think about immigration as a tool to support innovation at home. Just a few months ago, Adam Ozimek and Conor O'Brien of the Economic Innovation Group proposed a chipmaker visa to support chip manufacturing in the United States. More than a decade ago, a 2011 report from the Government Accountability Office found that small and medium-sized businesses often struggle to obtain visas. They requested his H-1B visa and suggested changes to improve the program.

The reality is that the H-1B program is the primary route to accessing foreign skilled labor in the United States today. But its strict regulations plague businesses and limit their ability to grow and innovate domestically. While moves to train American workers for these roles are critical, the spark that ignites success may be changes to U.S. immigration policy.

Mishita Mehra, Hewei Shen, and Federico Mandelmanare are co-authors of the Center for Growth and Opportunity's forthcoming paper, “Skilled Immigrant Friction as a Barrier to Young Businesses.”

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