Employment of Indian and other foreign students does not reduce American jobs, study finds

Washington DC. February 2019. There is no evidence that foreign students, working in the U.S. on practical training (OPT) visas, reduce job opportunities for American workers, according to a study by the National Foundation for American Policy (NFAP.) Instead, the evidence suggests that U.S. employers are more likely to turn to foreign student workers when U.S. workers are scarcer.

The OPT program offers employers a chance to see if foreign students are a good fit before sponsoring them for a costly—and scarce—H-1B temporary visa, the study notes. Also the practical training program gives foreign students (and their employers) multiple shots at obtaining an H-1B visa, particularly if they are eligible for an extension of their visas due to science, technology, engineering and math degrees. Another winner, the study says, are U.S. colleges and universities since the OPT program makes them more attractive to foreign students, with the visa being issued only to graduates of U.S. schools.

The study finds:

• There is no evidence that foreign students participating in the OPT program reduce job opportunities for U.S. workers. Instead, the evidence suggests that U.S. employers are more likely to turn to foreign student workers when U.S. workers are scarcer.

• The relative number of foreign students approved for OPT is negatively related to various measures of the unemployment rate among U.S. STEM workers. A larger number of foreign students approved for OPT, relative to the number of U.S. workers, is associated with a lower unemployment rate among those U.S. workers.

Analysis of the data show unemployment rates are lower in areas with larger numbers of foreign students doing OPT as a share of workers in STEM occupations. Comparisons at the state level likewise show a negative relationship.

• The number of foreign students approved for OPT as a share of all new graduates with STEM majors is low, ranging from less than one-half of one percent of students earning a bachelor’s degree to 13 percent of PhDs. The number of foreign students approved for OPT as a share of STEM workers is even lower.

• The number and share of foreign students approved for OPT has risen over time. The increase is most notable for students with a master’s degree.

By acting as a safety valve for tight labor markets and a source of STEM workers, albeit on a fairly small scale, the OPT program may contribute to economic growth. STEM workers are vital to the U.S. economy, and a substantial share of STEM workers in the U.S. are foreign-born. Areas with more foreign-born STEM workers have higher patenting rates, faster productivity growth and higher earnings among U.S. natives, among other positive outcomes. At a time when other countries are increasingly vying for foreign students and skilled STEM workers and U.S. firms are turning to offshoring because of a shortage of IT professionals, the OPT program is an important way for America to attract and retain foreign-born talent. 

The National Foundation for American Policy is a non-profit, non-partisan public policy research organization based in Arlington, Virginia, focusing on trade, immigration and related issues. Its advisory board includes Columbia University economist Jagdish Bhagwati. Research on the impact of practical training visas was conducted by Madeline Zavodny, a Research Fellow at the National Foundation for American Policy. She is a Professor of Economics at the University of North Florida (UNF) in Jacksonville. She received a Ph.D. in economics from the Massachusetts Institute of Technology. She worked as an economist at the Federal Reserve Bank of Atlanta and the Federal Reserve Bank of Dallas.

Photo credit: University of Chicago