TODAY is the opening of

lottery season

at America's Citizen and Immigration Services. Beginning today, employers can apply for a slice of the annual allotment of 65,000 H-1B temporary work visas.

Here

Last year, faced with 123,480 applications in two days for a pool of just 65,000 H1-B visas, the Bureau of Citizenship and Immigration Services was forced to run a lottery to see who would get a visa and who wouldn't. With a full year to decide what to do about this year's tranche of applicants, the Bureau has gone back to the drawing board, and decided that this year it will, er, run a lottery again.

's Felix Salmon with some context:

Do note that just a few years ago, the annual pool of visas was reduced from 195,000 to 65,000. Even the larger figure vastly underserves the potential demand for visas, both among American employers and willing immigrants. The source of opposition to an increase in the number of visas is depressingly familiar--concern that foreign workers will bid down wages. Why any nation would want to limit growth in its stock of human capital is absolutely beyond me, but it apparently sounds reasonable to some Senators and so here we are.

Both Mr Salmon and Peter Suderman (writing at Megan McArdle's Atlantic blog) discuss economist Dean Baker's take on the situation. Mr Baker writes:

It would have been helpful to include some economic analysis. By increasing the supply of highly skilled workers, the H1-B program undoubtedly reduces the wages for the most affected occupations. According to standard trade theory, this is precisely the point of the program. Allowing firms to get lower paid workers will reduce their cost and increase the economy's potential output. It is the same argument that is used for the gains from getting cheap textiles or steel from foreign producers.



The argument from high-tech employers, that they simply can't get enough high tech workers in the United States is ridiculous on its face. If these jobs paid millions of dollars per year (like jobs at Wall Street investment banks), then highly skilled workers would leave other occupations and develop the skills necessary to work in high tech occupations. Obviously, Bill Gates and the other high tech employers cited in this article want to be able to employ high tech workers at lower wages. The issue is wages, not a shortage.

There are a couple of issues worth mentioning here. While it's clear that increasing the supply of highly skilled workers should slow wage growth, it's also pretty obvious that increasing the nation's stock of human capital should increase long run growth, increasing the earning potential of all workers. In the real world, technology and productivity growth aren't exogenously determined, but depend on the economy's knowledge base (among other things). In this sense, the gains from the immigration of highly skilled workers go beyond cost reduction or resource reallocation.

Mr Baker is also dead wrong in saying that there is no skilled worker shortage. For one thing, employers are limited in the extent to which they can increase wages by worker productivity. At some point there is a trade-off between increasing wages to attract new workers and operating profitably. There is good reason to believe we are near that point.

Why? Because according to compelling research [PDF] by Claudia Goldin and Lawrence Katz, growth in the domestic supply of skilled workers has slowed dramatically. Let's quote the authors:

The majority of the increase in wage inequality since 1980 can be accounted for by rising educational wage differentials, just as a substantial part of the decrease in wage inequality in the earlier era can be accounted for by decreasing educational wage differentials...



Since 1980...a sharp decline in skill supply growth driven by a slowdown in the rise of educational attainment of successive U.S. born cohorts has been a major factor in the surge in educational wage differentials.

Wages for skilled workers have soared while wages for the unskilled have stagnated, because too few young Americans are obtaining undergraduate and graduate degrees. So sure, Microsoft would probably love to pay its workers less than it does. That doesn't mean that the competition for skilled workers hasn't become so intense that business and economic growth now suffer.