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

This paper investigates the effect of high-skilled immigration on the wages of U.S.-born college graduates. Descriptive evidence suggests that workers with different college majors compete in separate labor markets. Because immigrants are more likely than natives to study Science, Technology, Engineering, and Mathematics (STEM), a standard labor market model predicts that the relative wages of native STEM majors should fall as skilled immigration increases. Using an IV strategy that leverages large changes in the cap of H-1B visas and controls for major- and age-specific unobservable characteristics, I find that workers most exposed to increased competition from immigration have lower wages than one would expect. A 10-percentage point increase in a skill group's immigrant-native ratio decreases their relative wages by 1 percent. Overall, I estimate that the STEM wage premium decreased 4 to 12 percentage points from 1990 to 2010 because of immigration.