If you follow the news you will see many stories on hot-button issues surrounding the H-1B visa program; they include claims regarding the shortage of qualified American technical workers, foreign workers replacing, or freezing out, American workers by outsourcing or companies abusing the program. However, the key issue – the long-term impact on America’s workforce – is rarely, if ever addressed.
In some ways the overseas brain-drain, with the U.S. receiving the majority of the world’s highly-educated, mobile workforce, puts us and our commercial enterprises at a great advantage. If you’re selling Microsoft Office in China you need native Chinese to program the language modules. If you’re building a bullet train it makes perfect sense to hire a design engineer with successful experience building a similar system even if it was in another country.
On the other hand, outsourcing routine work to firms that use H-1B temporary non-immigrant workers is a much chancier proposition. While good companies appreciate their workers as assets, more and more employers also see them as potential major liabilities. One way to limit that liability is to place a buffer between the employer and employee in the form of an outsourcing firm, just like a labor contractor in Ag work. If you can also cut costs that’s another immediate benefit, but what’s the long-term impact on the nation’s workforce?
To even discuss the long-term effects of the H-1B labor program, you have to at least understand the basics and how it’s actually working; the concept and the reality of government programs are often two entirely different things.
What is the H-1B via program? In short an H-1B visa allows U.S. employers to temporarily employ foreign non-immigrant workers in “specialty occupations.” Simple enough until you start listing all the rules and regulations and how the system is actually used; after that it gets very complicated. I recommend full dose of Wikipedia for those who want the gory details.
What is a specialty occupation? Specialty occupations are those (with some notable exceptions) that involve technology and require a bachelor’s degree. While they are overwhelmingly computer related, a review of more than 500,000 applications shows they touch many other areas, for example; more than 9,700 applications for accountants and auditors, 3,000 for architects and architectural engineering managers, 1,900 for chemists, 2,800 for civil engineers, 3 percent for teachers and university researchers, airline pilots, film and video engineers, and on and on. Altogether, the applications covered more than 900 unique job descriptions.
How long is an H-1B visa good for? The duration of the visa is three years, extendable to six years, but there are exceptions; I’m not going into them.
How many H-1B visas are granted every year? Current law limits the number of foreign nationals who may be issued a visa each fiscal year (FY) to 65,000, but that is misleading. Laws exempt up to 20,000 foreign nationals holding a master’s or higher degree from U.S. universities from the cap and there are other cap limit exclusions. “Due to these unlimited exemptions and roll-overs, the number of H-1B visas issued each year is significantly more than the 65,000 cap” (135,991 in FY2012). When the exempt visas are rolled in, that is more than twice the cap.
How many H-1B visa holders are working in the U.S. at any time? Nobody knows! Remember the visas are good for at least three years and for as much as for six years. The Center for Immigration Studies that advocates low immigration estimates that the number is between 650,000 and 750,000; this appears to be reasonable.
How much are H-1B visa employees paid? One of the most contentious issues regarding the program is pay. Legally, employers must attest that they will pay wages to the H-1B workers that are at least equal to the wage paid by the employer to other workers with similar experience and qualifications or the prevailing wage for the occupation in the area of employment – whichever is greater.
Displaced American workers often claim that companies find ways around that requirement especially for outsourcing. The prevailing wage average for H-1B positions are high, $73,000 annual minimum, but the average is boosted by the extremely high pay for certain occupations such as physicians and surgeons. Overall, these are good paying jobs on paper, but outsourcing specialists pay about half what the larger direct-hire companies pay.
Problems and Issues: The system is enormously oversubscribed and highly concentrated. Remember the limit is, supposedly, 65,000 workers a year or twice as many counting exemptions. However, a potential employer can ask for more than one position. In FY 2014, OFLC processed 605,368 employer applications for 1.3 million positions for both temporary and permanent labor certifications. Applications have to be certified before entering the lottery.
More than 900,000 applications were “certified” in FY 2014. Six of the top 10 employers by certified applications were for California locations and those six alone accounted for more than 195,000 (20 percent) of the certifications. The six were consulting and professional services firms; Price Waterhouse Coopers, LLP, Wipro Limited, Tata Consultancy Services Limited, Infosys Limited, Deloitte & Touche, LLP and iGate Technologies, Inc.
According to the San Francisco Chronicle, “Tata, Wipro, Infosys and HCL America are some of the largest outsourcing companies based in India. Some have accused them of gaming the H-1B visa system by flooding the Department of Labor with LCA applications, thus increasing their odds of obtaining H-1B visas via the computerized lottery used to distribute them.” And “Wipro, Tata and Infosys have been the subject of labor and discrimination lawsuits. The latter two were the subject of a Senate inquiry. All three firms tend to seek lower-paid and less-skilled workers than other major companies.”
Outsourcing has been the most contentious issue related to H-1B visas. By outsourcing work to firms that specialize in using a large number of H-1B workers, American workers can be replaced wholesale, department by department. This is only possible when the H-1B worker pool is highly concentrated, which it is.
One potential problem almost never addressed is the long-term intergenerational impact on American workers’ families. A family’s economic condition is known to be a primary determinant of the educational achievement by their offspring.
Middle-aged workers who are typically better paid often have a more difficult time finding new jobs while the firms outsourcing to organizations that specialize in H-1B labor can take the long view, paying those replaced separation bonuses to keep their mouths shut. The business will make that extra cost back in a short time.
It’s hard to believe that the H-1B program was meant to incubate outsourcing manned, to a great extent, by foreign workers. This is a significant problem. There is both good and bad in the H-1B program and if we were smart we would promote the good and fix the bad before it’s too late.