The True Economic Impact of H1B Visa Holders

Posted by Frank Gogol

KEY FINDINGS

  • H1B workers contribute more than $27.1 billion dollars per year towards Social Security and Medicare benefits (that they may not be able to benefit from)
  • H1B visa holders spend $76.7+ billion at U.S. businesses annually
  • 74% of spending ($57.1 Billion) by H1B visa holders goes directly to local businesses with their communities
  • H1B visa holders invest more than $12 billion into U.S. businesses annually

Almost since its creation as part of the Immigration Act of 1990, the H1B visa has been a topic of debate.

It’s proven that hiring skilled immigrant workers is the key to a strong economy and a forward-looking country. Every year, as many as 85,000 new H1B visa holders can enter the U.S. (65,000 under the regular cap and an additional 20,000 under the master’s cap). We estimate that there are presently 3 million H1B visa holders in the U.S. These men and women are primarily working in STEM-related jobs and are developing new medicines, technologies, and creating other advancements that improve the world.

Some people, however, believe that H1B visa holders cost U.S. workers jobs while shrinking the U.S. economy and benefiting from taxes paid by U.S. citizens. But how true is that? 

To the point about H1B visa holders costing U.S. workers jobs, there’s a great deal of research that suggests just the opposite. A joint study between the Partnership for a New American Economy and the American Enterprise Institute found that every 1 additional H-1B visa awarded to a state was associated with the creation of 1.83 more jobs for U.S.-born workers in the following seven years.

As for the claims regarding H1B visa holders benefiting from taxes paid by U.S. citizens while shrinking the U.S. economy? We took a closer look at the actual impact of H1B visa holders in these spaces and the results told us something different.

H1B Workers Contribute Billions towards Social Security and Medicare

One way to measure the economic impact of H1B visa holders is to look at how much they are paying towards income taxes.

According to our data, the average salary of an H1B visa holder in the U.S. is $118,100. With a base tax rate of 24%, they pay $28,344 per year in taxes.

That’s a total income tax contribution of $85,032,000,000 per year for all H1B visa holders currently working in the U.S.

Additionally, some of the revenue generated by income taxes goes toward benefits that H1B visa holders cannot benefit from, such as Social Security and Medicare. 

Every year, H1B visa holders pay 6.2% of their annual income toward Social Security benefits, amounting to $7,322 (or $21,966,000,000 cumulatively across all H1B visa holders).

They also contribute 1.45% of their salaries toward Medicare, amounting to $1,712 annually (or $5,137,350,000 cumulatively across all H1B visa holders)

Overall, these contributions account for 7.65% of their annual income, or $9,034.65 each. Looked at another way, H1B visa holders contribute $27,103,950,000 annually to these taxes — which, again, they do not benefit from.

H1B Visa Holders Spend Tens of Billions at Local Businesses Every Year

One of the biggest criticisms of H1B visa holders (and immigrants, in general) is that they come to the U.S. and take away U.S. jobs only to then remit large portions of their salaries to their home countries.

The perception is that H1B visa holders take away from the U.S. So, next we looked at how much H1B visa holders are contributing to the U.S. economy.

For this analysis, we defined “U.S. economy” as any business that operates within the United States.

Our data showed that the H1B visa holders in the U.S. on average, spent no less than $1,585 per month for the last 17 months, with the exception of May 2020 (likely due to a downturn in all spending in the U.S. as a result of the COVID-19 crisis).

The average spend per H1B visa holder was $2,130.65 per month. Said another way, H1B visa holders in the U.S. each contribute $25,568 per year to the U.S. economy.

When accounting for all H1B visa holders in the U.S. those contributions account for $6,391,950,000 per month being pumped into the U.S. economy, or $76,703,400,000 per year.

Next, we looked at which states saw the largest total dollar contributions to the U.S. economy. Below are the top 10:

StateTotal Credit Card Spend
CA$13,679,185,000
TX $6,394,988,000
NJ $4,398,293,000
IL $2,724,349,000
MI $2,596,683,000
GA $2,242,081,000
NY $2,102,040,000
WA $2,035,339,000
FL $1,784,448,000
PA $1,730,219,000
Top 10 States$39,687,625,000

California — which is home to many of the U.S.’s tech companies and employs a significant portion of the H1B population — unsurprisingly tops the list with $13,679,185,000 in spending by H1B visa holders, more than the next three states (TX, NJ, IL) combined.

The above table also shows that the top 10 states account for slightly more than half (~52%) of all H1B spending in the U.S at $39,687,625,000.

74% of H1B Workers’ Spending Goes Directly to US Local Businesses

Next, we looked at how H1B visa holders contribute to their local economies. For this analysis, we are defining local businesses a non-online shopping (restaurants, supermarkets, etc. – as opposed to Amazon or other online businesses).

We found that H1B visa holders in the U.S. spend, on average, the following amounts every month on different segments of their local economy:

  • $1,145 on restaurant purchases (or $13,740.16 annually)
  • $264 on department store purchases (or $3,168 annually)
  • $179 on supermarkets and groceries purchase (or $2,148 annually)

The average total local spend per H1B visa holder was $1,588 per month, or $19,056 per year (approximately 16% of the average H1B annual salary).

Cumulative local economy spending for all H1B visa holders across those same for segments, however, shows the true impact of H1B visa holders on U.S. local economies every month:

  • $3,435,040,588 on restaurant purchases (or $41,220,487,059 annually)
  • $1,041,000,000 on food and beverage purchases (or $1,617,310,092 annually)
  • $792,000,000 on department store purchases (or $9,504,000,000 annually)
  • $537,000,000 on supermarkets and groceries purchase (or $6,444,000,000 annually)

All told, H1B visa holders spend $4,764,000,000 every month on local economies, or $57,168,000,000 every year.

3.4% of H1B Salaries were Reinvested into U.S. Companies in 2019

The last angle of H1B visa holders’ impact on the U.S. economy we wanted to explore was how they’re investing in U.S. businesses.

Our data showed that the average investment of an H1B visa holder into businesses in the U.S. was $4,025.09 annually, or the equivalent of 3.4% of the average salary.

While on an individual basis, a contribution that size certainly doesn’t seem like it’ll move the economic needle significantly, the overall contribution of all H1B visa holder investment tells another story. We found that the cumulative investment of H1B visa holders into U.S. businesses every year amounted to $12,075,270,000.

H1B visa holders are not just spending large portions of their salaries in the larger U.S. economy and their smaller local economies. They are reinvesting more than 12 Billion dollars into U.S. businesses every year and, effectively, growing the economy.

Methodology

This study included transaction data from 3,336 Stilt applicants who are in the U.S. on an H1B visa and applied for a loan between Jan 1st, 2019 and May 31st, 2020. All data was obtained from accounts Stilt borrowers connected with Stilt as part of the applications process. All transaction data for every borrower is complete for the period the study focusses on.

Final Thoughts

There’s a great deal of focus on what immigrants (including H1B visa holders) supposedly take away from the U.S., but the undeniable truth is that the building this country. Whether it’s creating jobs and leading the charge in the development of new technologies the bolster the U.S. economy, it’s H1B visa holders doing the work.

And that’s the say nothing of how their contribution with their dollars, including:

  • contributing more than $27.1 billion dollars in taxes annually
  • spending $76.7 billion at U.S. businesses every year
  • spending $57.1 billion at local U.S. businesses annually
  • investing more than $12 billion into U.S. businesses every year

It’s easy to claim that H1B visa holders take away from the U.S., but it’s hard to refute the data.

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