Researchers broadly agree that high-skill immigrants complement native labor. However, for low-skill work, the evidence has been less clear, with estimates varying widely based on different assumptions. In a paper published in the American Economic Journal: Applied Economics, authors Michael A. Clemens and Ethan G. Lewis analyzed the economic effects of low-skill immigration by utilizing a randomized lottery for visas administered by the federal government.
In the United States, the H-2B visa allows temporary foreign workers to fill seasonal jobs in industries such as landscaping, seafood processing, forestry, and hospitality, with 98% of these positions not requiring a high school education. The Immigration Act of 1990 established a cap of 66,000 H-2B visas per year. Clemens traced the origin of this figure through former congressional staffers to a subcommittee chairman who noted that the cap was based on tripling the approximately 22,000 visas issued the previous year, with the assumption that the ceiling would never be reached. However, 36 years later, the cap is insufficient to meet demand, as employers requested 136,555 workers for just 33,000 available visa slots in the second half of 2022.
Following a surge in petitions that caused a Department of Labor (DOL) server crash in 2019, the agency began processing employer petitions in a randomized order, assigning each a letter. The DOL processes petitions starting with A, then B, C, D, and so on. Firms that receive an A are likely to hire nearly all the workers they request, while those with later letters are less likely to do so.
The authors created a dataset by surveying 472 businesses that participated in the 2021 and 2022 lotteries. They established a pre-analysis plan outlining their hypotheses and methods prior to receiving any responses, a measure to prevent researchers from unintentionally selecting favorable results. Their design mirrored that of a clinical trial.
Clemens stated, "You need to imagine what would have happened to these firms in the other world where they didn't get immigrants. A lottery is one of the clearest windows into that other world we have."
The findings were significant. Losing out on the lottery reduced a firm's employment of H-2B workers by approximately half. Firms that won and could hire all the foreign workers they sought experienced a revenue increase with an elasticity of about 0.20, indicating that a doubling of H-2B employment raised revenue by roughly 20%. Investment in equipment, vehicles, and structures showed even stronger responses, with an elasticity ranging from 1.5 to 2.1.
Notably, employment of low-skill American workers at firms that lost the lottery did not increase. Across all firms, the impact of foreign hiring on U.S. employment was either zero or positive, with a significant positive effect observed in a subsample of rural firms, where an elasticity of 0.61 indicated that for every 1% increase in H-2B workers, there was just over a 0.5% increase in U.S. workers.
Lewis remarked, "If you don't allow firms to hire immigrant workers, they just become smaller firms. They are not replaced with U.S. workers. Instead, the output of the firm shrinks, and there are fewer total workers."
The results suggest that low-skill foreign and low-skill American workers are not effective substitutes for each other. The authors estimated the elasticity of substitution between H-2B and U.S. workers at approximately 0.8 to 2.2, significantly lower than related studies of immigrants in low-skill work, which typically find an elasticity of 4 to 10.
The study highlights the distinction between substitution and scale. While some American workers may fill jobs left vacant by foreign workers, firms that are denied access to workers do not maintain fixed output levels. For example, a traveling carnival may visit fewer cities, and a fishing operation may cover less of the salmon season, resulting in overall business contraction. This scale effect outweighs the substitution effect, leading to fewer jobs for all workers, including Americans.
The findings raise questions about a visa cap that has not been updated in decades. The evidence suggests that a marginal increase in H-2B visas could enhance production, investment, and profits at American firms without negatively impacting American employment.
The authors caution that their short-run estimates may underestimate the benefits, as firms facing ongoing uncertainty about visas tend to underinvest. Related research indicates that firms that lose out on visas are more likely to shut down entirely. Clemens emphasized the importance of economics in political discussions, stating, "When policy is politically polarized, you need more facts. That's precisely when you need some kind of common reference point of facts, and that's where economic science has its greatest role."
The study titled “The Effect of Low-Skill Immigration Restrictions on US Firms and Workers: Evidence from a Randomized Lottery” is set to be published in the July 2026 issue of the American Economic Journal: Applied Economics.