Profitable the visa lottery
Research Highlights Article
August 13, 2026
Evidence from a US authorities lottery exhibits that proscribing overseas low-skill staff shrinks companies with out creating jobs for Americans.
Source: Ragesoss, CC BY-SA 3.0
Researchers broadly agree that high-skill immigrants complement native labor. But for low-skill work, the proof has been much less clear, with estimates swinging extensively relying on the assumptions made.
In a paper in the American Economic Journal: Applied Economics, authors Michael A. Clemens and Ethan G. Lewis studied the financial results of low-skill immigration by exploiting a randomized lottery for visas run by the federal authorities.
In the United States, the H-2B visa authorizes short-term overseas staff in seasonal jobs, reminiscent of landscaping, seafood processing, forestry, and hospitality. Ninety-eight p.c of those jobs require no highschool training.
The Immigration Act of 1990 capped the variety of H-2B visas at 66,000 per yr. Clemens traced the origin of that determine by way of a series of former congressional staffers to a subcommittee chairman who recalled that the regulation’s designers had merely tripled the roughly 22,000 visas issued the earlier yr and assumed the ceiling of 66,000 would by no means bind. But 36 years later, the cap falls far in need of the demand. For the second half of 2022, employers requested 136,555 staff for simply 33,000 visa slots.
H-2B visa petitions throughout the nation
The chart beneath exhibits the counties the place cap-subject petitions had been licensed by the Department of Labor for 2021 and 2022. There had been licensed petitions from all 50 states plus the District of Columbia and Puerto Rico.
After a surge of petitions crashed a Department of Labor (DOL) server in 2019, the company started processing employers’ petitions in randomized order, assigning every a letter. The DOL begins processing the A petitions first, continuing to B, C, D, and many others., so as. Firms drawing an A are extremely prone to rent almost all the employees they request, whereas corporations drawing later letters should not.
The authors constructed a dataset by surveying 472 companies that entered the 2021 and 2022 lotteries. They registered a pre-analysis plan specifying their hypotheses and strategies earlier than any responses arrived, a safeguard that stops researchers from inadvertently deciding on congenial outcomes. The logic of their design mirrored a scientific trial.
“You must think about what would have occurred to those corporations within the different globe the place they did not get immigrants,” Clemens advised the AEA in an interview. “And a lottery is without doubt one of the clearest home windows into that different globe we have now.”
The penalties had been important. Losing out on the lottery minimize a agency’s employment of H-2B staff roughly in half. Firms that gained and will rent all of the overseas staff they sought noticed proceeds rise with an elasticity of roughly 0.20, that means a doubling of H-2B employment raised proceeds by a few fifth. Investment in gear, autos, and buildings responded much more strongly, with an elasticity of 1.5 to 2.1.
Equally putting is what didn’t occur. Employment of low-skill American staff at dropping corporations didn’t enhance. Across all corporations the impact of overseas hiring on US employment was zero or constructive, and in a prespecified subsample of rural corporations it was considerably constructive, with an elasticity of 0.61, that means that for each one p.c enhance in H-2B staff there was simply over half a p.c enhance in US staff.
“If you do not enable corporations to rent immigrant staff, they only develop into smaller corporations,” Lewis mentioned. “They should not changed with US staff. Instead, the output of the agency shrinks, and there are fewer complete staff.”
The outcomes recommend that low-skill overseas and low-skill American staff are poor substitutes for each other. The authors’ estimates put the elasticity of substitution between H-2B and US staff at roughly 0.8 to 2.2, far beneath associated research of immigrants in low-skill work, which generally discover an elasticity of 4 to 10, and nowhere close to the proper substitutability assumed in some influential research.
If you do not enable corporations to rent immigrant staff, they only develop into smaller corporations. They should not changed with US staff. Instead, the output of the agency shrinks, and there are fewer complete staff.
Ethan Lewis
The purpose activates a distinction between two forces: substitution and scale. At a hard and fast degree of output, some American staff do step into jobs left open by overseas staff, however corporations which might be denied staff don’t maintain output mounted. A touring carnival visits fewer cities, and a fishing operation covers much less of the salmon season, with the consequence that the industry as an entire contracts. This scale impact swamps the substitution impact, leaving fewer jobs for everybody, Americans included.
The findings converse on to a cap that has not been revised in a long time. The proof signifies {that a} marginal enhance in H-2B visas would broaden manufacturing, capital allocation, and earnings at American corporations with out lowering American employment.
The authors warning that their short-run estimates might even understate the advantages since corporations dealing with continual uncertainty about visas underinvest, and related work finds that dropping corporations usually tend to shut down solely. For Clemens, the examine displays a conviction concerning the position of economics in political debates.
“When coverage is politically polarized, you want extra details,” he mentioned. “That’s exactly if you want some sort of frequent reference level of details, and that is the place financial science has its best position.”
♦
“The Effect of Low-Skill Immigration Restrictions on US Firms and Workers: Evidence from a Randomized Lottery” seems within the July 2026 concern of the American Economic Journal: Applied Economics.
