More H1B visas: bad policy and bad business

h1b visa

The panic among the US Chamber of Commerce types continues to grow in the aftermath of Eric Cantor’s epic defeat in the GOP primary. The primary concern is immigration and it seems clear now that Cantor had, in fact, reached some agreement to move comprehensive immigration reform forward.  Writing in the Wall Street Journal, Rupert Murdoch takes to task we small minded types who oppose the Senate immigration bill:

When I learned that House Majority Leader Eric Cantor had lost his Republican primary, my heart sank. Not simply because I think he is an intelligent and talented member of Congress, or because I worry about the future of the Republican Party.

Like others who want comprehensive immigration reform, I worried that Mr. Cantor’s loss would be misconstrued and make Congress reluctant to tackle this urgent need. That would be the wrong lesson and an undesirable national consequence of this single, local election result.

People are looking for leadership—those who stand for something and offer a vision for how to take America forward and keep our nation economically competitive. One of the most immediate ways to revitalize our economy is by passing immigration reform.

Some politicians and pundits will argue that this is not the time to bring immigration reform to the congressional floor—that it will frighten an already anxious workforce and encourage more extreme candidates, especially on the right. They may be right about the short-term politics, but they are dead wrong about the long-term interests of our country.

Expect to hear more of this and keep in mind that right now the Chamber is a wounded cape buffalo, incredibly dangerous and myopic as hell. When the senile Thad Cochran goes down in flames next week expect their anxiety level to rise.

I am not opposed to immigration reform. I think, speaking charitably, our current system is utterly unworkable not only because it is not enforce but because it is based on an amalgam of profoundly unwise and dysfunctional laws and priorities.  Take, for instance, the pet project of the Chamber: expanding the number of H1B visa holders. As most of you know, the H1B visa is a non-immigrant visa:

The H-1B is a non-immigrant visa in the United States under the Immigration and Nationality Act, section 101(a)(15)(H). It allows U.S. employers to temporarily employ foreign workers in specialty occupations. If a foreign worker in H-1B status quits or is dismissed from the sponsoring employer, the worker must either apply for and be granted a change of status to another non-immigrant status, find another employer (subject to application for adjustment of status and/or change of visa), or leave the U.S.

The regulations define a “specialty occupation” as requiring theoretical and practical application of a body of highly specialized knowledge in a field of human endeavor[1] including but not limited to biotechnology, chemistry, architecture, engineering, mathematics, physical sciences, social sciences, medicine and health, education, law, accounting, business specialties, theology, and the arts, and requiring the attainment of a bachelor’s degree or its equivalent as a minimum[2] (with the exception of fashion models, who must be “of distinguished merit and ability”).[3] Likewise, the foreign worker must possess at least a bachelor’s degree or its equivalent and state licensure, if required to practice in that field. H-1B work-authorization is strictly limited to employment by the sponsoring employer.

This visa is most closely associate with high technology companies. In Murdoch’s op-ed, cited above, he says this:

Next, we need to do away with the cap on H-1B visas, which is arbitrary and results in U.S. companies struggling to find the high-skill workers they need to continue growing. We already know that most of the applications for these visas are for computer programmers and engineers, where there is a shortage of qualified American candidates. But we are held back by the objections of the richly funded labor unions that mistakenly believe that if we keep innovation out of America, somehow nothing will change. They are wrong, and frankly as much to blame for our stalemate on this issue as nativists who scream about amnesty.

Likewise, Bill Gates has made eliminating the cap on H1B visas a personal goal, from Bill Gates to Congress: let us hire more foreigners.

Earlier in his remarks, Gates said Microsoft was unable to hire one-third of the foreign-born candidates it wished to hire because of too few H-1B visas.

Increasing the number of H1B visas is a central feature of the “comprehensive immigration reform” bill passed by the Senate:

A Senate immigration plan would dramatically increase the number of high-skilled foreign workers allowed into the country and give permanent legal status to an unlimited number of students who earn graduate degrees from U.S. universities in science, technology, engineering or math, according to people familiar with the negotiations.

The agreement would be a major victory for the tech industry, which has backed an intense lobbying campaign on Capitol Hill in recent months arguing that Google, Facebook, Microsoft and other companies are having trouble finding qualified workers because of visa limits.

The expansion of the visas, known as H1Bs, is one element of talks amonga bipartisan group of eight senators, whose legislation is expected to serve as the basis for a deal between Congress and the White House to retool the immigration system. The number of visas available would approximately double from the current limit of 65,000 per year.

The H1B program was created in 1990 to attract high-skilled workers from around the world, but it has become a way for outsourcing firms to bring lower-paid employees to the United States.

Reat that last paragraph again. A couple of times.

This is one of those arguments that must be carefully parsed to get to the real goal. Note that none of these worthies is advocating allowing people with high tech skills to immigrate, they are advocating bringing them here as guest workers. The distinction is important. Firms are limited in the number of H1B visa holders they can hire. But it has been shown time and again that, in fact, there are more than ample numbers of qualified Americans to fill the jobs being held by H1B visa holders. A month ago I posted on the subject in Chamber of Commerce and Obama agree cheap foreign labor is a great idea:

Steven Camarota of the Center for Immigration Studies (note– group is in favor of very restrictive immigration policies) writes in National Review What STEM Shortage?

The idea that we need to allow in more workers with science, technology, engineering, and math (“STEM”) background is an article of faith among American business and political elite.

But in a new report, my Center for Immigration Studies colleague Karen Zeigler and I analyze the latest government data and find what other researchers have found: The country has well more than twice as many workers with STEM degrees as there are STEM jobs. Also consistent with other research, we find only modest levels of wage growth for such workers for more than a decade. Both employment and wage data indicate that such workers are not in short supply.

Reports by the Economic Policy Institute (EPI), the RAND Corporation, the Urban Institute, and the National Research Council have all found no evidence that STEM workers are in short supply. PBS even published an opinion piece based on the EPI study entitled, “The Bogus High-Tech Worker Shortage: How Guest Workers Lower U.S. Wages.” This is PBS, mind you, which is as likely to publish something skeptical of immigration as it is to publish something skeptical of taxpayer subsidies for the Corporation for Public Broadcasting

So if there is no shortage of US workers for high tech jobs, why the agitation to remove caps on a visa that isn’t needed?

A key argument for H-1B has always been that there’s a shortage of technical talent in U.S. IT. This has been taken as a given by both major political parties. But it’s wrong. Here are six rigorous studies (123456) that show there is no shortage of STEM workers in the U.S. nor the likelihood of such a shortage in years to come.

You may recall a recent column here where the IT community in Memphis, TN proved there was no labor shortage in that technology hotbed.

The whole labor shortage argument is total hogwash. Yes, there is a labor shortage at substandard wages.

Can all of this be just about money? Yes.

There are any number of dodges businesses use to get around the legal requirements. Here I’ll quote at length from What Americans don’t know about H-1B visas could hurt us all:

 Note that section (p) requires that the Department of Labor set up four prevailing wage levels based upon skill but section (n) only requires a prevailing wage for occupation and location. There is no statutory requirement that the employer pick the skill level that matches the employee.

Let’s see this in action. According to Bureau of Labor Statistics data, the mean wage for a programmer in Charlotte, NC is $73,965. But the level 1 prevailing wage is $50,170. Most prevailing wage claims on H-1B applications use the level 1 wage driving down the cost of labor in this instance by nearly a third.

What data is available comes from the initial employer applications for H-1B slots These Labor Condition Applications, called LCAs, include employer estimates of prevailing wages. Because there are always more H-1B applications than there are H-1B visas granted, every employer seeking an H-1B may file 3-5 LCAs per slot, each of which can use a different prevailing wage. But when the visa application is approved, it is my understanding that sponsoring companies can choose which LCA they really mean and apply that prevailing wage number to the hire.

Because the visa has already been granted of course they’ll tend to take the lowest prevailing wage number, because that’s the number against which they match the local labor market.

Remember that part of this business of getting H-1Bs is there must not be a U.S. citizen with comparable skills available at the local prevailing wage. If we consider that exercise using the data from Charlotte, above, a company would probably be seeking a programmer expecting $73,965 or above (after all, they are trying to attract talent, right?) but offering $50,170 or below(the multiple LCA trick). No wonder they can’t get a qualified citizen to take the job.

Based solely on approved LCAs, 51 percent of recently granted H-1B visas were in the 25th percentile for pay or below. That’s statistically impossible under the intent of the program.

Lest you think this is being overly cynical and painting with too broad a brush, the government of India does not:

The Government has termed as “economically irrational” the provisions that debar US companies from hiring people holding H-1B visas if they take help under $ 787-billion economic bail-out package, which President Barack Obama has signed into law.

“I think it is an indication of protectionism and interestingly it is an extremely bad decision,” Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters last night even as several MPs demanded that the government take up the matter with Washington.

“The decision says that if you have a company that needs assistance it must not hire H-1B visa workers, which really means if you have a company that is weak and you want to assist it you are going to deny it the opportunity to hire cheaper labour. [italics mine] To my mind it is economically irrational,” Ahluwalia said.

Here you have the government of India touting H1B visa holders as cheap labor when the law specifically forbids this. But wait, there’s more. Back to What Americans don’t know about H-1B visas could hurt us all:

I wish this was the extent of abuse, but it isn’t. A 2011 Government Accountability Office (GAO)study found that approximately 21 percent of H-1B visas are simply fraudulent — that the worker is working for a company other than the one that applied for the visa, that the visa holder’s identity has changed, that the worker isn’t qualified for H-1B based on skills or education, or the companyisn’t qualified for the H-1B program.

H-1Bs, even though they aren’t citizens or permanent residents, are given Social Security numbers so they can pay taxes on their U.S. income. A study by the Social Security Administration, which is careful to point out that its job doesn’t include immigration monitoring or enforcement, found a number of H-1B anomalies, the most striking of which to me was that seven percent of H-1B employers reported no payments at all to H-1B visa holders. This is no big deal to the SSA because these people qualify for no benefits, but it makes one wonder whether they are under-reporting just Social Security or also to the IRS and why they might do so? Those H-1B employers who do report Social Security income do so at a level that is dramatically lower than one might expect for job classifications that are legally required to pay the “prevailing wage.”

And you always encounter the spectacle of American workers being fired, en masse, to make way for H1B visa holders, primarily by off-shore staffing companies which take about 50% of all H1B visas:

The IT workers at this firm first learned of the offshore outsourcing threat through rumors. Later, the IT staff was called into an auditorium and heard directly from the CIO about the plan to replace them. It would take months for the transition to be completed, in part because of some new system installations.

Many younger IT workers found jobs and left. Mainframe workers were apparently in demand and also able to find new jobs. But older workers with skills in open systems, storage and SAN faced a harder time. About half the IT staffers, mostly the older ones, would stay to the end.

The H1B visa is a truly bad idea unless justified by a demonstrable lack of skills in the American workforce. The top tier talent in the world has access to an uncapped visa called the O, for “outstanding,” visa. What the H1B does is provide entry level and journeyman skills and it does so at wages significantly lower than those demanded by Americans.

Immigration is an issue of immense importance to this nation being, as we are, a nation of immigrants. It is much to important a subject to be subjected to slapdash “comprehensive” reform plans and the whims of our moneyed and political classes. Polls show that there is no great enthusiasm in the nation for immigration legislation. The demand for immediate action on immigration is being driven by an unholy alliance of Democrat politicians in search of captive communities of voters and the US Chamber of Commerce which is in search of a cheap and captive labor force.


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