Ministers say the system is fairer than a arbitrary cap
The new points-based immigration system is working well, but concerns remain about the time taken to process visas and the appeals process, MPs have said.
The Home Affairs Committee gave the system, introduced last year to better control migration levels, a "cautious welcome" but identified some problems.
It said more weight should be given to skills training and job experience rather than earnings in entry criteria.
Ministers have said the system is tough but fair.
The Conservatives accuse Labour of "floundering" over immigration policy and have called for an annual cap on non-EU migrants.
Under Labour's system, wealthy investors and most graduates under the age of 40 earning the equivalent in their country of £40,000 a year can come to the UK from outside the EU.
But unskilled workers are barred and firms can only recruit "skilled" workers from non-EU countries if they cannot fill a vacancy or the occupation is on a list of shortage occupations.
Officials assess gaps in the economy, publishing details of sectors where there are skills shortages, and recommend changes to the system.
In a new report, MPs gave the system a "cautious welcome".
They said it generally struck the right balance between requiring most employers to recruit first from within the UK while recognising that some organisations in specialist professions would need to look further afield to fill vacancies.
The use of transparent and objective criteria for deciding which skilled workers could enter the UK was correct, they added.
But the committee warned about the danger of "perverse outcomes", arguing more consideration should be given to someone's length of employment and abilities rather than earnings or degree qualifications.
"It seems spurious that a fresh master's graduate in their first job should qualify as a highly-skilled migrant where a businessperson of 25 years global experience earning hundreds of thousands of pounds without a master's degree does not," said its chairman Keith Vaz.
Among other concerns it highlighted was the length of time it took to process biometric visas, the speed with which the Border Agency responded to representations about individual cases and the "lack of an independent appeals process".
"It is imperative that the Border Agency considerably improves its performance in processing the backlog of undecided cases and in responding to MPs' representations," Mr Vaz added.
Immigration minister Phil Woolas welcomed the broad thrust of the committee's report, saying the system had also received support from many businesses and education colleges.
"The system is key part of a radical shake up of our immigration system, ensuring only those that the economy needs can come here to work and study," he said.
"It is a more effective system than an arbitrary cap, allowing us to raise and lower the bar in response to changes in Britain's economy and work force."
But Migration Watch UK, which campaigns for tighter controls on immigration, said the system was not filling gaps in the labour market or making UK workers more competitive and was open to abuse.