U.S. President Donald Trump's decision to place restrictions on new work visas for skilled immigrants resulted in "a supply shock to U.S. firms" that cost companies over $100 billion in market cap, according to a study by the National Bureau of Economic Research.
An estimated 200,000 workers and their dependents were barred from entry after Trump signed the executive order on June 22, 2020, preventing American companies from hiring immigrants via H-1B or L1 visas.
As opposed to immigrant visas granted to individuals seeking permanent residency, these non-immigrant visas are employment-based and temporary, resulting from requests received from companies to hire or transfer immigrants.
Based on a sample of 471 companies, the study determined that the restriction of skilled labor by the executive order resulted in cumulative average abnormal returns of up to negative 0.45% for Fortune 500 company stocks.
"This negative shock was common on firms regardless of their economic activity and was much stronger for firms that have maintained or increased their reliance on foreign workers during the years prior to the [executive order]," wrote the study's authors, Dany Bahar, senior fellow in the global economy and development program at the Brookings Institution, Prithwiraj Choudhury, associate professor at the Harvard Business School and Britta Glennon, assistant professor at the Wharton School of Business at the University of Pennsylvania.
Demand for such visas is typically highest among companies involved in information technology and science, technology, engineering, and mathematics, which accounted for 70% of all granted visas in the 2012 fiscal year.
Clamping down on immigration was a key policy of Trump's 2016 election campaign with the promise to build a wall along the U.S.-Mexico border a key pledge. The paper's authors argue that their findings add weight to previous studies that find economic benefits of skilled immigration includes increased productivity, production expansion, innovation, FDI and profits.
"Our results support the hypothesis that restrictions on skilled visas represent a supply shock to U.S. firms. While there may be longer run adjustments – such as offshoring – that U.S. firms can make when their access to skilled labor supply is abruptly constrained, one would also expect a short-run negative impact prior to any such adjustments, which is precisely what we document here."