As you may have read, President Trump announced last night1 that the issuance of a H-1B visa will now come with a $100,000 fee.2 This is up from around $3,400,3 a 25x increase.
The administration claims that this will make firms hire Americans instead, and therefore this will increase the economic outcomes for the native-born.
I do not think this is true. I have previously written that the entry of H-1B holders into the US is good for the American economy. It is possible that Trump is right that firms that hire H-1Bs do hire fewer Americans, but it’s equally possible they don’t. What is clear is that the H-1B program increases American innovation. Considering economists believe innovation is the way that living standards increase, that’s a big deal.4 Decreasing American innovation is not worth maybe a few more jobs going to Americans.
There is not some fixed pool of jobs in the United States, where hiring an immigrant means definitely not hiring an American. Immigration exists in general equilibrium, where the labor market changes over time and new industries, technologies, and innovations can be created. Immigrants can (and often do) create jobs when they create new industries and firms. And of course, immigrants also consume goods and services from the native-born. An Indian software engineer does not simply collect his paycheck and go sit in a cardboard box on the street, spending none of it; he goes to restaurants, he hires accountants, he also creates economic activity.
Most immigration policy experts I respect have had similar reactions. David Bier has a post on how this new fee is both a bad policy idea and illegal. Jeremy Neufeld is also tweeting on this.
Part of the reason I’m writing this post is a question from my friend Oscar Sykes,5 which I hadn’t seen discussed yet. He texted me tonight to ask if this would really be that bad. He agrees that more immigration would be better, but since the US has a statutory cap on the number of H-1B visas issued per year, and it’s already vastly over-subscribed, this might serve as a sort of salary sorter. Under this policy, firms would only offer jobs to those they’d be willing to spend an extra $100,000 to employ - clearly, these would be the highest value immigrants.
Indeed, Jeremy Neufeld has previously argued that the US should instead sort H-1B applicants by salary.6 Perhaps this fee could ensure that only the highest-paid applicants get through rather than the current random selection process. If only the highest-salary applicants stay in the pool, that could eliminate the participation of low-wage off-shoring firms in the H-1B program but keep the participation of high-wage product firms in the program. If there are still more than 85,000 H-1B applicants that would get through this new Trumpian salary sorter, overall immigration wouldn’t even decrease.
Unfortunately, I don’t think that the fee would do this, for two reasons:
The above logic relies on the H-1B being oversubscribed. It is only true if you can swap out one H-1B applicant for a new one willing to pay the fee. At the moment, this is true for private sector organizations, which must go through the H-1B lottery. Last year, there were about 339,000 people who wanted one of the 85,000 available visas.
However, it is not true for many users of H-1Bs. Non-profits and universities are exempt from that 85,000 visa cap, and can currently hire as many people on H-1Bs as they please. In 2024, I’d estimate that there were about 40,000 new entrants from cap-exempt employers.7
There isn't a pool of 50,000 additional qualified applicants for these visas that one could seamlessly select instead. If you charge large fees to this population, an employer with only a fixed amount of money to spend on salary will hire fewer people.
This seems especially likely to hit postdoc employment. The text of the proclamation suggests that it is a one-time payment of $100,000 for a three-year duration of status.8 This means a de facto fee of $33,333 a year.
The average US postdoc makes around $60,000 a year. Adding a $33,333 per year immigration fee will obviously decrease the number of foreign postdocs hired. This will decrease the competitiveness of US science and academia, as postdocs are a key part of the scientific ecosystem.
The private-sector H-1B lottery is about 4x over-subscribed (339,000 entrants for 85,000 slots in 2024). For overall immigration to stay at the same level, I don’t think that >25% of private sector H-1B applicants would still be economically viable with this large of a fee.
The H-1B visa generally requires that one pay $60,000 or the local prevailing wage, whichever is highest. With the fee, the employer would end up paying (at least) the local prevailing wage… plus $33,333 a year.
Certainly, some H-1B applicants probably are so good that they make $30k more than would be expected in their area. I doubt it’s 25%, though.
On an emotional rather than economic level, it also makes the US seem very hostile to immigrants. I recognize that this is why Trump did it, but also: it will make talented, high-earning immigrants with other options take those options more seriously.
If the UK did this, I would not want to stay in the UK long-term, even if my employer would pay the fee for me. I would simply not want to live in a country that would treat me like that.
I fear that many highly talented US immigrants may feel the same way. The US will be worse for losing them.
In the way of Trump administration policies, new details are coming out even over the weekend, sometimes via Twitter. This post is being written at 7 PM ET Saturday on 9/20/25. There is some chance this post will be outdated by the time you read it, as the details of the program will have changed. Doug Rand thinks this proclamation won’t last the weekend.
For a firm of >26 employees that has less than half of its employees with L-1 or H-1B status. This can be as low as $2630, or as high as $10,185, depending on various employer characteristics.
Himself an immigrant. Hi Oscar!
To increase the economic value of the program without having to go through the politically-fraught process of increasing the cap
There were around 125,000 new H-1B visas issued in 2024, 85,000 of which were presumably from the private sector.
I think. The original announcement suggested $100,000 per year, but the text suggests $100,000 per approval. It also might be waivable on the whim of the administration, a power I’m sure the Trump administration will use wisely.
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