Trump's H1-B Squeeze Threatens U.S. Tech Leadership
It's hard to calculate the effect of H-1B visas -- which the U.S. government is now making it harder to obtain -- on the U.S. technology sector, but it's likely rather large. If restricting H-1B visas is a Trump administration goal, and there are reasons to believe that is the case, then it's time to imagine a world in which the U.S. has lost its technological leadership.
The U.S. government is supposed to only issue 85,000 H-1B visas a year. In reality, it issued 172,748 in fiscal year 2015, and 140,000 a year on average between 2006 and 2015.
That's because the H-1B visas are issued for three years and can be extended for a further three years. Workers already in the U.S. often get the extensions; they also need to reapply when they switch employers. There are no official data on the size of the U.S. H-1B community, but it should be close to a million people. The total U.S. employment in science, technology, engineering and mathematics -- the fields in which H-1B workers are employed -- reached 8.6 million people in 2015.
It's often said that software engineers are the factory workers of today: Their labor is often not particularly creative or intellectually demanding. These are the kind of workers tech outsourcing firms, which account for most of the H-1B visas, bring into the U.S. But not all the imported brains are the 21st-century equivalent of assembly-line workers. A 2013 paper by Harvard's William Kerr and the University of Michigan's William Lincoln showed that increases in the H-1B population caused tangible growth in the number of U.S. patent applications filed in major cities. Only about 70 percent of patent applications, according to that paper, are filed by people with Anglo-Saxon names; a large proportion of the inventors with Chinese and Indian names appear to be H-1B workers.
The thousands of H-1B workers going to Microsoft, Apple, Google, Facebook, Amazon and other major tech companies are hand-picked talent, selected from a sea of applicants. What if the U.S. firms stop getting these valuable imports because the Trump administration is trying to force these firms to hire Americans? And what if the administration also makes it harder for U.S. universities -- where immigrants are responsible for about three-quarters of patent applications -- to attract foreign professors and students?
The U.S. will lose much of its competitive edge in the global tech wars almost immediately. Skilled foreigners won't apply for jobs in the U.S., fearing unfair treatment at the hands of a mercurial White House. Those who seek visas may not get in. European and Asian companies will begin to snap up the top talent Silicon Valley is getting today. And a window of opportunity will open for European and Asian technology firms to catch up to U.S. behemoths.
More than half of U.S. startups valued at $1 billion or more were set up by immigrants. It's a story of foreign-born capitalists hiring foreign workers to give the U.S. a near-monopoly advantage in several areas of the technology industry.
Even today, an anti-U.S. geek in Europe could probably make do with non-U.S. services. He'd get a mobile phone running Samsung's Tizen operating system, Finnish-developed Sailfish OS or a version of Linux; he'd use Moscow-based vk.com for social networking, Russian-owned Yandex or Czech-owned Seznam for search, New Zealand-based Meta for cloud storage, German-owned Here! for maps, and Berlin-based Telegram for instant messaging. But that would be a series of exotic choices. Only Chinese people forced to do without Google search or Facebook by their government are justified in opting for weaker local services. Even years of sluggish technological development -- the worst that could happen to the U.S. market leaders if they were to lose the ability to bring in international talent -- probably wouldn't unseat them.
But in areas where the U.S. is not dominant yet, a diminished ability to import brains may cost it a shot at similar importance. Israel, Japan or China can seize leadership in battery technology, an area in which these countries are doing pioneering research. Canadian, German and Israeli companies could beat the U.S. in autonomous vehicle technology. Asian companies such as Samsung, Sony and HTC, as well as Finland's Nokia, could pull ahead in virtual and augmented reality. German and Scandinavian firms might get an edge in developing storage for energy generated by solar and wind plants.
The races for the holy grail in these respective areas are still wide open. Firms, and nations, are running full tilt to win. It may be enough for the U.S. to turn away a few hundred specific engineers, and for some other ambitious country to pick them up, to end U.S. leadership hopes in a future multibillion-dollar market. It's too early for the U.S. to rest on its laurels; tech is, to a great degree, about hype and fashion. Lifestyles and preferences change, and in 10 years' time, the current U.S. tech leaders may be far less relevant than they seem today. And countries that keep their best tech brains or make a special effort to lure them from elsewhere will be the new kings.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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