H1B visas are not slavery. However, they place their recipients in an inferior, immobile tier of the labor force that by preventing them from moving freely between employers, allows employers to exploit them at wages below the U.S. market level. In this respect, they serve the same economic function as antebellum slavery, providing a non-market rent to their users, reducing employment opportunities for the domestic “free” population and incidentally raising the capital values of the properties where they are used. Whatever one’s views on the optimum overall level of immigration, the H1B program should be abolished, as should its H2 and H2B sisters. President George H.W. Bush, who introduced them, was an economic illiterate.

I have written several times on the H1B/H2B visa scandal, but my most direct exposition of its follies appeared in this column nearly six years ago, so needs considerable updating.

A central tenet of capitalism is a free labor market. Labor markets in the Middle Ages were unfree, because of serfdom and chattel slavery, both of which existed in most societies. Serfdom arose because in a society where small-scale warfare was endemic and money was almost non-existent, the only viable way of survival was to attach oneself to a feudal lord, receiving the use of a small part of the lands he had seized in return for services in planting and harvesting crops. Slaves also existed; they were generally foreigners captured in the endemic wars. With almost all labor unfree, regulated by these “feudal” relationships, and forbidden to move from their home village, markets could not emerge and society remained at a subsistence level. Shakespeare’s “Titus Andronicus,” more than his more renowned and less bloodthirsty plays, set in the late Roman Empire assailed by murderous Goths, in its universal gore and decay gives an accurate picture of life before about 1200 – nasty, brutish and short, indeed!

After 1200, money began to be more widely used and a modest urban, or rather village middle class emerged, of small traders and artisans such as blacksmiths, tailors and coopers. Then the Black Death of 1348 and subsequent outbreaks of plague killed feudalism in Western Europe by giving ordinary people more bargaining power, since labor had become scarce and land relatively plentiful. This enabled ex-serfs to choose where to sell their labor or to purchase land on which they could farm for themselves. However, it was only in western Europe that a freer labor market emerged. In central and eastern Europe serfdom was only partially defeated and returned in the inflationary, overpopulating, religious warring sixteenth and early seventeenth centuries. It was indeed intensified in Russia around 1600 and remained common in Austria and eastern Germany until 1848, and in Russia until its staged abolition after 1861.

That is one major reason why Britain got the Industrial Revolution first. With a free labor market and a free market in land (instituted by the Earl of Clarendon’s Tenures Abolition Act of 1660) there were workers available for new enterprises, freedom to pursue new businesses and capital available to finance them (since land was the main source of wealth).

In the American colonies, there were two types of unfree labor. Initially, the main form was indentured servitude, under which prisoners and debtors would be sent from England to work under indenture for a master in the colonies, typically for 7 years, after which they were free. This was the major source of British emigration to North America until at least 1650 and by far the major source of unfree labor even in the Southern tobacco plantations until around 1680, when the slave population of the United States was 7,000 of a total non-Native population of 152,000. Slave labor was increasingly used thereafter, as indentured servitude relatively declined, though it remained important until the Revolution.

After the Revolution, indentured servitude died out (the new Republic was strangely reluctant to accept British convicts, so they had to be sent to Australia, founded in 1787). However, slavery continued to expand, helped by the cotton gin and the Louisiana Purchase which brought huge new possibilities of cotton agriculture to supply the fast-growing newly mechanized textile mills of the world (for which end-product prices were sharply declining and usage per person increasing – a crinoline with trimmings used about eight times as much fabric as the “Empire” style of 1800). With unfree labor to call upon, the South was artificially price-competitive against other cotton-growing areas such as India and Egypt.

With the slave trade to the U.S. restricted after 1808 (by being technically illegal) the prices of slaves rose, as did the price of Deep South plantations. Whereas a “prime field hand” cost around $250 at the time of the American Revolution and $500 in 1800, his price had risen to around $1,500 in 1860. As in the tech sector today, artificial suppression of labor costs caused artificially high profits and a huge asset bubble, with slaves and prime Alabama cotton land giving their owners excellent capital gains over a period in which overall prices remained stable. The analogy is close; there would be a similar bull market in H1B permits if their supply was limited and they were auctioned as slaves were.

Needless to say, with so much money to be made, slavery developed a cheering section. The Founding Fathers, even the Southern ones, had been distinctly sheepish about it, but after 1830 and the rise of fanatical Abolitionists who proposed abolishing slavery without compensation, the reaction came in John C. Calhoun, Senator, former Vice President and future Secretary of State, who in 1837 declared slavery to be “a positive good.” With such authoritative support and such fanatical opposition, the propaganda war between slavery’s defenders and its opponents then escalated over the next two decades until civil war was inevitable. The possibility of a peaceful, compensated Abolition as Britain had undertaken with the Slavery Abolition Act of 1833 completely disappeared; no politically significant figure on either side proposed it.

It would not matter if H1B visas were all awarded to handsome blond-haired Nordic Icelanders, their effect on the U.S. labor market when issued in such profusion would be the same as was chattel slavery, albeit in a less severe degree. As with slaves, their recipients cannot change employers, and have very limited rights compared to domestic workers, with the visas time-limited so there is always the possibility of being sent home. With 134,210 H1B beneficiaries selected for fiscal 2025, and H1B visa holders in tech paid on average 32% less than equivalent US workers, according to an Economic Policy Institute survey reported in Breitbart, the bottom-line benefit to tech companies is substantial, as is the cost to U.S. tech workers. The benefit to tech companies’ billionaire owners when the bottom line benefit is capitalized at today’s absurd tech multiples is of course correspondingly greater.

With the annual flood of H1B visas, it is unsurprising that entry-level salaries for U.S. computer programmers are far below their 1998 level in real terms, with the gap widening since 2019 as inflation has outpaced rises and the AI boom has resulted mostly in more jobs for imports. Entry-level lawyers, whose profession largely bars those trained abroad, have done far better in recent years, with $200,000 salaries paid at some firms on qualification.

With U.S. STEM graduates so financially disadvantaged compared to lawyers, it is unsurprising that most of the best and the brightest kids, capable enough to do well in either arts or science, choose to focus on the humanities and a law degree. Why indeed should anyone but the most knuckle-dragging socially inept nerd subject himself to such an unfair financial disadvantage?

Calhoun told the world that his slaves were happy. Elon Musk says the same about his H1B workers. One can hear them working their 80-hour weeks in their cubicles and singing the company song, to the tune of “Ol’ Man River:

“Tote that chip, Lift that byte
Ol’ Man Musk is Always Right”

One would hope that the Trump Administration will come to its senses, abolish the H1B program and its sisters, and restore a free labor market in the United States.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)