Comparing temporary skilled visas: H1B and 457 visas

When I worked in the immigration department, I was sometimes frustrated by the pace of change. It was slow. You can see this in the media, the thirst to ‘fix’ problems or improve policy almost instantaneously. This doesn’t happen for a range of reasons, most of them sensible.

Luckily, there are also moments when we can reflect on how far ahead of the curve Australia is in many regards.

In immigration policy, perhaps nothing symbolises this than to compare temporary skilled visas. The American H1B visa is akin to 457 visa in Australia. Both provide employers the opportunity to sponsor a foreign worker who has a set of skills. These programs aren’t without their faults, but I want to focus on how they operate.

The fundamental difference is that the H1B program is capped at 85,000 (with a few exemptions, particularly around higher education). The 457 visa program is uncapped. The U.S. labour market is over 155,000,000 people while Australia’s is about 11,500,000.

In the U.S., every year on April 1, employers lodge their applications. Last year 124,000 applications were lodged for the 85,000 positions and estimates for this year are higher given the improving economy. These applications are them randomly selected to fill the number of places. In Australia, with no cap, employers are able to apply to the program at any stage of the year, providing they meet the program requirements. In 2012-13, about 68,000 primary visas were granted under the 457 program.

From an Australian perspective, this U.S. system is astounding.

Random allocation of temporary skilled visas flies in the face of efficiency, something that from Australia, the U.S. political system seems to prioritise. There is no method to determine the importance of specific job vacancies or which employers are willing to pay the most for such visas. It is simply left to random chance. If an employer has a vacancy they cannot fill, and they lose the lottery, bad luck. This appears shortsighted and defeats the primary purpose for having a temporary skilled visa program, filling labour shortages. Random chance is perhaps more equitable for the participating employers, but this hasn’t seemed particularly relevant for U.S. policy-makers in relation to immigration policy for awhile now.

I should acknowledge this cap figure is contentious and many attempts have been made to raise it. However these attempts occur within the framework of a broader immigration reform debate, a debate which inevitably goes nowhere regardless of who is the president over the past decade. Last year, the U.S. Senate passed a bill, amongst other major reforms, lifting the cap to between 115,000 and 180,000 depending on the labour market. Yet this bill has failed to even muster a vote in the House of Representatives. So this year, the cap remains 85,000 (a good explainer on the immigration reform bill).

Comparing the relative size of the programs the their labour markets is even more remarkable. Annually, the H1B is equivalent to 0.05 per cent of the U.S. labour market while the 457 program is equivalent to 0.6 per cent of the Australian labour market (I’m comparing stocks with flows which isn’t optimal, but this is difficult to avoid in migration analysis). By this measurement, the Australian program is more than 10 times larger than the U.S. program. Of course, the U.S. runs a predominantly family-based migration program, as well as a larger low-skilled program than Australia. While different migration categories can be fairly fungible, it’s still incredible that in terms of skilled temporary visas there is such a vast difference between the two countries. A large body of literature has shown the economic benefits of temporary skilled migrants, particularly in terms of innovation, yet the U.S. House of Representatives cannot overcome an inability to compromise on the big questions of immigration policy.

Yesterday was April 1, hilarious to some but to U.S. employers seeking skilled migrants, a day of random chance. For someone like me interested in migration policy, this is an annual reminder that parts of Australia’s immigration framework aren’t just marginally different than elsewhere. We are ahead of the curve. This doesn’t mean there isn’t more work to do, especially in terms of managing the number of temporary migrants in rising unemployment and their opportunities and conditions in the labour market, but its important to take stock every now and again of where we have got to.

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2 thoughts on “Comparing temporary skilled visas: H1B and 457 visas

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