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The White House has taken numerous steps to sharply reduce the number of immigrant workers, with or without legal status, in the US economy. These policies, so far, typically target immigrants with less than a university education.
That may soon change. The US administration is under pressure to constrict or eliminate the largest single pipeline into lawful immigration for high-skilled, university-educated workers. This pipeline is called Optional Practical Training (OPT)—a temporary work permit given to some foreign graduates of US universities.
Economists have extensively studied the effects of eliminating OPT: It would cause permanent losses to US innovation, productivity, economic growth, and job opportunities for both less-educated native workers and more educated native workers. This is not a theory. It is the conclusion of decades of research on what really happened after past changes in policy.
The largest channel for overseas talent, under threat
Optional Practical Training is a federal program that allows most international students at US universities the choice to work in the United States for a limited period after they graduate. About 72 percent of foreign graduates use OPT. The permit generally lasts one year but extends to three years for graduates at any educational level in science, technology, engineering, and mathematics (STEM). It is a work permit attached to the student visa, a bridge between university enrollment and the workforce, granted under regulations starting in 1947.
OPT is by far the main route for highly-educated immigrants trained in the United States to remain and work in the country. In 2023–24, 242,782 new graduates stayed in the United States on OPT work permits, far more than via other lawful pathways, such as the H-1B visa, for university-educated immigrant workers. The other pathways are tightly constrained, making student visas a major conduit for high-skilled immigration to the United States. Roughly one third of OPT recipients later transition to high-skilled work visas.
But the days of OPT may be numbered. The officials who designed this administration’s immigration policy have declared their intent to “terminate” the OPT program. They have not offered a specific, politically feasible plan to replace OPT with anything. The president’s coalition has pressured him to terminate OPT for many years, asking the Supreme Court to eliminate OPT several times, most recently in February. In March, the vice president described international students as “bad for the American dream, for American kids who want to go to a nice university but can’t because their spot was taken by a foreign student.”
Advocates of terminating OPT rely on straightforward economic arguments: More university slots and job slots for international students, the argument goes, means fewer slots available to natives.
Abundant evidence: Slashing OPT would harm Americans
But that reasoning ignores where those slots came from in the first place. Heavy restrictions on high-skilled immigrants taking the slots available on any given afternoon, before long, slashes the number of slots available to natives too—several afternoons down the road.
I’m not talking about what is plausible on paper but about extensive American real-world experience. The economic arguments for killing OPT have been tested and found wanting by decades of highly vetted economic research.
The clearest evidence is that foreign graduates of US universities cause major increases in innovation. Economists study this effect leveraging how historical immigrant settlement patterns shape today’s immigration, to separate the pure effect of foreign graduates from the background noise of more recent and unrelated forces shaping innovation. A 10 percent rise in the number of foreign graduates from US universities causes a 2.0 to 3.6 percent rise in new patents in the average state, an effect that is even larger for increases in master’s or PhD students.
And innovation goes far beyond filing patents. Startup firms themselves manifest innovation. Twenty percent of all venture-capital-financed startups in the United States have an immigrant founder, and 75 percent of those immigrant founders first arrived on a student visa. One quarter of all the "unicorn" billion-dollar startup companies, engines of US job creation, have a founder who arrived on a student visa. Targeting those foreign graduates for exclusion from the United States would have harmed countless natives’ livelihoods.
Part of this is because foreign graduates are talented. Foreign students typically have stronger academic credentials, higher productivity, and higher rates of patenting than domestic graduates.
But the effect of foreign graduates goes far beyond their own inventiveness. Their work amplifies the talent and ideas of native-born Americans. Economists have used quirks of different US universities’ tuition policies as a “natural experiment” to isolate the pure effect of foreign master’s degree graduates on US startups. They don’t just find that those foreign graduates cause more startups. They show that over one third of those additional startups are founded by natives, not the foreign graduates themselves. That is, foreign graduates both found new businesses and empower natives to found their own.
All of this is why, at moments in the past when the OPT program was expanded, patenting in US metropolitan areas heavily affected by the expansion shot up relative to little-affected metropolitan areas. Terminating OPT now, the historical record implies, would do much to terminate American innovation.
Even bigger effects downstream
OPT by itself is a major source of the high-skilled workforce in the US states where they graduate. That’s because OPT is a precursor to other immigration channels, especially the H-1B high-skilled work visa. Thirty-four percent of all workers who get first-time H-1B visas are transitioning from student visas. So we can learn even more about the effects of terminating OPT from evidence on the effects of past changes in access to the "next step" H-1B visa.
Congress has at times greatly expanded and at others restricted the national quota on H-1B visas. Economists use those changes to isolate the pure effect of high-skilled foreign workers from background noise. They do this by statistically comparing a “treatment group” of US cities or firms that thereby got ample high-skilled foreign workers versus a “control group” of otherwise similar cities or firms that did not.
This research shows that additional high-skilled foreign H-1B workers per se cause both firms and cities to generate more patents. Those workers also cause firms to introduce new products and retire older products, a sign of dynamism and innovation. So it is not surprising that additional H-1B workers at a US firm cause that firm to be more likely to stay in business and more likely to invest in expanding. This is why sudden restrictions on hiring H-1B workers in 2020 caused Fortune 500 companies’ market value to immediately drop by $100 billion.
Most striking is the effect on US workers. Those same big, force majeure increases in H-1B workers cause higher earnings for less-educated native workers in US cities. They even cause rises in the productivity and wages of high-skilled native workers. Far from being “cheap labor,” H-1B workers who graduate from US universities earn 38 to 48 percent more, not less, than comparable natives—in the same industry and field of training. Restrictions on H-1B visas simply cause high-skilled workers to take their talents, and resulting benefits, to other countries.
Concerns are reasonable, but don’t miss the big picture
All of this research doesn’t imply that competition in the labor market is imaginary. It certainly does not “prove” that “natives won’t do these jobs.” A limited number of jobs that immigrants do, in general, could and would have been done by natives if immigrants were systematically excluded.
But that would also mean a more meager and less specialized economy, generating fewer jobs overall. What these findings mean is not that immigrants never substitute for any native; they mean that high-skilled immigrants and natives working together create so much growth and opportunity that more than offsets any substitution.
For example, the 2008 extension of OPT for STEM graduates caused more foreign students to enter STEM majors. And when a university admits more foreign STEM majors, all else equal, this causes modestly fewer natives to major in STEM. But this does not banish those natives from economic opportunity. The later earnings of the few natives who changed majors did not suffer as a result. And the 2008 OPT extension caused wages for native STEM graduates overall to riserelative to the wages of native non-STEM graduates.
Instead, each group of students simply became more likely to specialize in what they were best at, reflected in their productivity as workers. And the increase in foreign STEM students caused US universities to expand their STEM training capacity and quality, creating more opportunities for natives and immigrants to complement each other.
Jobs ultimately come from innovation
The big picture is that US jobs do not come from barring foreign workers. They ultimately come from innovation. About 60 percent of all workersin the United States today do jobs that did not even exist in 1940. Those jobs had to be created by people doing new things in the economy—mostly natives, but massively amplified by high-skilled immigrants.
This is the consensus of essentially all leading economists. When three of the top economists who study policies to raise US innovation rated all the options, they chose high-skilled immigration as the one that is both most effective and most proven. When a project at the University of Chicago asked 80 of the world’s top economists if “the average US citizen would be better off if a larger number of highly educated foreign workers were legally allowed to immigrate to the US,” zero disagreed. When asked if they thought that “if the US significantly lowers the number of H-1B visas now, employment for American workers will rise materially over the next four years,” zero agreed.
And this is not an area where economists are out of step with the public or the law. Overwhelming majorities of US voters, across the political spectrum, support not just maintaining but increasing high-skilled immigration to the United States. So terminating OPT has no public mandate. It has been soundly rejected by the courts, and the Supreme Court has refused to even consider the legal foundation for OPT termination.
Some fields of economic research are difficult to summarize. This one is not. Immigration policy that broadly seeks ways to entice foreign graduates of US universities to remain in the United States, the overwhelming mass of evidence suggests, would serve the national interest. Terminating OPT would do the opposite.
Data Disclosure
This publication does not include a replication package.
