Creation or Destruction? STEM OPT Extension and Employment of Information Technology Professionals

Abstract

Information technology (IT) professionals play an important role in firms' IT investments, technology formation, development, and innovation, contributing to economic growth in the U.S. The use of temporary work visas and related immigration policies that import foreign IT professionals has attracted a significant controversy and policy debates in the U.S. On the one hand, foreign IT professionals may complement domestic IT professionals by facilitating local innovation and expanding local employment. On the other hand, foreign professionals may substitute the domestic counterparts by intensifying labor-market competition, leading to a decrease in wage or even crowding-out of domestic IT professionals. In this study, we focus on an extension in the Optional Practical Training (OPT) program for graduates in science, technology, engineering, and mathematics (STEM) from U.S. institutions, a policy change which greatly increases the supply of foreign IT professionals in local labor markets. Specifically, we explore: (1) the effects of the OPT extension on the number and wage of domestic workers in STEM occupations and (2) how the effects may differ between IT and non-IT STEM occupations. We test the effects using a novel and rich data set that is merged from several sources and use a difference-in-differences model to bring identification. Our results demonstrate that an increase in the supply of foreign IT professionals as a result of the OPT extension boosts employment for domestic IT professionals. The unique characteristics of IT human capital differentiate the impacts on IT occupations from non-IT STEM occupations. This study contributes to the information systems, labor economics, and public policy literature by quantifying the impacts of a policy change on the supply and return of IT professionals and provides rich implications for policymakers.