H‑1B visas allow employers to hire skilled foreign workers for positions that require at least a bachelor’s degree, but government rules limit the workers’ ability to contribute to economic growth. A foreign worker can remain on an H‑1B visa for no more than six years. There is a cap of 85,000 on the number of these visas that can be issued each year, though visas for universities and certain nonprofit or government research jobs do not count against that cap. The fees to obtain an H‑1B visa can total as much as $8,500, not including lawyers’ fees. For employers subject to the cap, the process takes a minimum of seven months to receive a visa.

Given the restrictions, delays, and costs, employers typically only hire H‑1B workers for particularly high-value positions. In 2021, the median wage for H‑1B workers was $108,000. Nearly 70 percent of workers hired in 2021 had an advanced degree, and 90 percent of the jobs were in “STEM” fields.

For the last decade, the H‑1B cap has greatly constrained the ability of employers to hire eligible workers. Since 2014, the government has held a lottery to decide which employers will receive a slot, and the odds of winning have declined significantly. In the most recent lottery, less than a quarter of the applications were selected, leaving more than 350,000 applications unfulfilled. This represents a loss of tens of billions of dollars in U.S. productivity.

Aside from the immediate effects, the H‑1B cap indirectly restricts the number of non-citizen permanent residents because the visa category acts as the launching point for most employer-sponsored permanent residency documents, commonly known as green cards. Compounding the H‑1B cap problem is the fact that the government also caps the number of employer-sponsored green cards issued each year, so fewer immigrants can leave H‑1B status to become permanent residents.

The vast majority of pending green card applications—nearly 90 percent—are from India. The law limits immigrants from any single country to no more than 7 percent of the green cards issued each year, regardless of that country’s population (though if a portion of the overall cap would otherwise go unused, they are redistributed to the countries that have reached their country caps). Since Indians are about three-quarters of all H‑1B workers, a green card application backlog of over a million workers and their immediate families has developed. The government is currently processing the green card applications of H‑1B workers from India whose employers applied for them in 2011 or 2012.

H‑1B workers cannot change jobs and get promotions as easily as green card holders can. They cannot go unemployed for more than 60 days and cannot start businesses. Their children lose their dependent status when they turn 21, even if they grew up in the United States from a very young age. That engenders an enormous incentive for these young people (and often their parents, too) to return to India or head to countries like Canada with more welcoming policies toward skilled immigrants.

Reform / The H‑1B visa’s restrictions are harming U.S. competitiveness and innovation. Ideally, the H‑1B cap should simply be eliminated, but at a minimum it should be updated to reflect the current demand for visas, which is about four times the available visas. Moreover, visas that go unused or are revoked should be added back to the cap, and when an H‑1B worker receives a green card, the H‑1B slot should go to another applicant. These changes would put the focus on at least maintaining the stock of H‑1B workers rather than on the annual number of visas issued.

Finally, skilled immigrants need a clear path to leave H‑1B status for permanent resident status or they will leave the country. Ideally, H‑1B status should automatically convert to permanent residence after one year. Conversion to permanence would be a straightforward and easy-to-administer process. Many other countries already do this in their employment-based immigration systems.

If Congress feels obliged to keep the green card cap, it should focus on making its procedures logical and fair. For starters, it should eliminate the current green card caps on individual countries. Making green cards proportional to a country’s applicants would eliminate the unfairness inherent in discrimination based on someone’s national origin. It would also equalize the waits for green cards and eliminate the extremely long waits for Indian applicants, giving them a reason to stay in the United States.

Congress should also reform the green card cap so that it no longer counts spouses and minor children of workers against the cap. It makes no sense to reduce the number of green cards for workers if a worker has a child or spouse. Moreover, because the H‑1B cap does not count spouses and minor children, an inevitable disparity between H‑1B workers getting into the green card queue and the number of green cards is created, leading to further backlogs and wait times. If Congress stopped counting spouses and children against the green card cap, half the cap space would be freed up for workers.

The H‑1B visa category has the biggest potential for large economic effects in both the short and long term because the visa holders are so highly skilled. About 40 percent of all total factor productivity growth is attributable to skilled immigrants, and that percentage would be much larger if not for the H‑1B restrictions. With reforms, the H‑1B visa could drive U.S. innovation and economic growth for decades to come.