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What’s In It For Me?

27 Feb

By Gary Endelman and Ignacio Donoso

At a time when comprehensive immigration reform has moved from a devoutly wished for possibility to a bipartisan consensus with the wind at its back, it may seem small potatoes to suggest a new path forward for our old friend the H-1B temporary worker visa. Why settle for incremental change when greatness is upon us? Even in such moments, indeed especially at such moments, enduring progress rests upon the steady accumulation of small victories. If, as the ancient Chinese proverb reminds us, the journey of a thousand miles begins with a single step, finding a way to make the H-1B create jobs for American workers may be an unexpected way to begin the journey.

The H-1B is the workhorse visa for the entire employment-based immigration system. It is the typical entry-point for temporary skilled workers, and frequently is the jumping off point towards pursuit of the green card. Because of this, it has become a symbol for all sides on the immigration debate. Critics point to the H-1B visa as a tool for exploitation and giving skilled jobs in the US to foreign workers. Its defenders argue that it is a pillar to be secured against all assault because it plays a necessary role in the US economy.

At present, the H-1B is governed by two features neither of which is based in economic reality: (1) an arbitrarily chosen numerical cap set entirely by political considerations and (2) a prevailing wage sanctioned by the Department of Labor. Neither do the job that Congress and DOL intended them to do. It does not have to be that way.

We make a confession at the start, namely that we are pro-immigration and not pro -immigrant. Our advocacy stems from a core conviction that more immigration is good for America, not out of a primary concern to help the individual immigrant. We are at a precious moment in our national debate over immigration. Now is the time to make fundamental structural choices. If not now, when? We who believe that more immigration is essential to realizing the full promise of American life must be willing to explore unorthodox positions and join in open and honest conversation with those who do not agree with us. It is the national interest, not the personal one, which we seek to promote. That is precisely the source of our profound dissatisfaction with the H-1B as it now exists. We object to the numerical cap and DOL’s prevailing wage methodology — not because they are difficult to understand or satisfy, but because they do not benefit the very American workforce they were intended to protect. Indeed, the goal of hiring more Americans is squarely a goal we share with Congress and the DOL.

Let’s look at the cap first. Until now, the H-1B controversy has been all about numbers, focusing on whether the cap should be raised or lowered, and wages, focusing on whether the prevailing wage set by the Department of Labor (DOL) is accurate. In practice, for about a decade, the cap has been set at 65,000 new H-1B visas each year, and the DOL’s prevailing wage has in the past been consistently higher than what is regularly paid by employers in their target labor markets. Yet, no matter how many H-1B numbers the cap did not allow nor how inflationary or inaccurate the DOL’s wage data was, nothing about the H-1B today will have direct impact on encouraging the employment of American professionals.

Underlying these concepts are assumptions that H-1B workers take jobs away from U.S. workers and/or lower wages for US worker. Essentially, the fear is that each foreign worker hired in the US is taking a job away from an American worker. It would follow that protection of the domestic labor market can only be accomplished through a numerical limit on the number of skilled foreign workers authorized to obtain work visas in the United States. It is the one-sided vision of immigration and its supposedly negative economic impacts that that arouses our fundamental opposition. American workers and the American economy are ill -served when immigration is understood and administered as a problem to be controlled rather than as an asset to be maximized. Our question about the H-1B cap boils down to: Is the fear that skilled worker jobs are a zero-sum game between American workers and foreign workers accurate in today’s economy? We have yet to see an empirical argument in favor of the H-1B cap or prevailing wage that establishes, for example, that the cap and prevailing wage requirements of the H-1B program actually create or preserve US skilled jobs, or, similarly, that wages in industries with a high percentage of H-1B employees are lower or stagnant for US workers because of the hiring of those same H-1B employees. Only rarely is thought given to how the H-1B can be transformed into an engine of job creation for US workers.

We think there is a better way.

From our point of view, there is no inherent contradiction between more H-1Bs and more US hiring. We reject the notion that tightening the screws on the H-1B system simply by capping the number of H-1B visas available each year will help either frustrated employers or disappointed Americans. We are also motivated by the idea that skilled worker immigration actually helps the US economy grow, and consequently contributes to generating employment in the US.

This is not simply an idle aspiration. It is a fact. Essentially, the ‘zero-sum’ vision of the impact of skilled worker immigration on hiring of US skilled workers appears to be simply wrong in today’s economy. A recent study by the American Enterprise Institute found that skilled immigration has positive effects on employment of US workers (see American Enterprise Institute, “Immigration and American Jobs”, 2011). In fact, the multiplier effect was most pronounced in cutting-edge scientific and technological occupational categories:

  • Immigrants with advanced degrees boost employment for US natives.
  • The data comparing employment among the fifty states and the District of Columbia show that from 2000-2007, an additional 100 foreign-born workers in STEM fields with advanced degrees from US universities is associated with an additional 262 jobs among US natives. (AEI Report at p.4)

This study is further supported by research on the H-1B visa finding that this visa program may increase innovation in our economy (see William Kerr and William Lincoln, “The Supply Side of Innovation: H-1B Visa Reforms and US Ethnic Invention” (2008, HBS Working Paper 09-005)).

These studies are not aberrations in recent research in immigration. Another study from 2007 found that 25% of engineering and technology companies started in the US between 1995 and 2005 were founded by immigrants. These companies represent $52 billion (with a “b”) in sales and employed 450,000 workers nationwide (see Vivek Wadwha, Ana Lee Saxenian, Ben Rissing and Gary Gereffi, “America’s New Immigrant Entrepreneurs: Part I” (2007, Duke Science, Technology & Innovation Paper No. 23).

We thus support more immigration from skilled workers and advanced degree holders not out of idealism or altruism, but as one of the federal government’s most effective programs to combat unemployment and promote the hiring of qualified Americans. The numbers tell us that, from 2000-2007, even outside of STEM fields, “each additional 100 foreign-born works with an advanced degree created about forty-four additional jobs for US natives>” (AEI Report at p.10) The stimulus provided by H-1B sponsorship was even more direct and dramatic: “The estimates show that a 10 percent increase in H-1B workers, relative to total employment, is associated with a 0.11 increase in the native employment rate. During the sample period of 2000-2010, this translates into each additional 100 approved H-1B workers being associated with an additional 183 jobs among US workers.”(AEI Report at p.11).

Thus, we suggest that there is strong evidence that the H-1B cap should be at the very least reconsidered and, we proposed, eliminated and replaced with a rule that better serves the US economy. However, we recognize that our critics may not accept such studies but instead counter them with contrary studies of their own. While our argument is based on evidence not rhetoric, skeptics take refuge in Mark Twain’s famous saying: ” There are three kinds of lies: lies, damned lies and statistics.” So, let us go beyond statistics and make the link between the H-1B and the hiring of a qualified US worker a matter of fact not debate. If the cap does not protect US workers, how about the DOL approach to prevailing wages based upon the OES wage methodology. Does the prevailing wage system make sense from the point of view of creating US jobs, or as the last line of defense keeping employers from paying fast-food wages for skilled workers?

There is no black and white evidence that H-1B visas are the cause for any wage stagnation or lower wages in tech jobs and STEM fields (if any). Studies find both positive and negative effects on wages in relation to college level natives. (see, for example, George Borjas & Lawrence Katz, “The Evolution of Mexican-Born Workforce in the United States” (2007, NBER)) The best argument in favor of the prevailing wage is that it is a good system for avoiding exploitation of foreign workers (though not as good as the market itself would be if the H-1B was truly portable and foreign workers had the benefit of genuine occupational mobility).

The Immigration & Nationality Act (“INA”) requires that the hiring of H-1B non-immigrants will not adversely affect the wages and working conditions of US workers comparably employed. The Prevailing Wage system, managed by the DOL, is intended to require US employers hiring an H-1B skilled worker to apply to the DOL for determination of the prevailing wage for similar occupations in the geographic area where the foreign worker will be working. The Prevailing Wage is thus intended to be a floor which prevents the US employer from offering unacceptably low wages that would harm the wages of American workers and cause foreign workers to be hired for a pittance.

The Department of Labor, Bureau of Labor Statistics (BLS) has provided wage data collected under the Occupational Employment Statistics (OES) program for use in the Foreign Labor Certification process since 1998. The wage data is available on the Foreign Labor Certification Data Center Online Wage Library (OWL), found at the following website:

Since September 1999, the Standard Occupational Classification (SOC) has been used by the OES program to classify occupational wage information. The SOC provides a common language for categorizing occupations. It also serves as the framework for information being gathered through the Department of Labor’s Occupational Information Network (O*NET). The O*NET provides the general public information on skills, abilities, knowledge, tasks, work activities, and the specific vocational preparation levels associated with occupations. O*NET information can be found at Wage data from the OES survey and occupational information in O*NET are both classified by the SOC, reducing the need to use crosswalks to connect wages to occupational requirements.

O*NET is based on the SOC system. It is the compressed nature of this system in its occupational categorization that often produces distorted wage surveys.. The OES is not neutral. From the time of GAL 2-98 to today, those who seek to choke off employment migration to this country have consistently sought to expand its reach and impose ever more onerous conditions so that employers who had the temerity to file an application would think twice. Moreover, when one thinks of OES, it should be in concert with the replacement of the DOT by O*NET with a dramatic collapsing of occupational categories and a downgrading of SVP quotients for many technical and scientific occupations that are the frequent subjects of labor certification. The end result of all this is artificially inflated wage determinations that must be paid by employers for less experience. Moreover, the OES accepts discretionary compensation which employers cannot count so that the inflationary character of occupational compression is severely reinforced.

We now have two forms of immigration restriction: numerical quotas set by Congress and qualitative restrictions applied by the DOL through the targeted deployment of administrative systems whose combined effect is to render successful immigration sponsorship more expensive, tedious and difficult. It would then be a mistake to believe that the world has not changed absent passage of CIR. In fact, the immigration calculus has shifted to a much less favorable posture so that legislative inaction has given way to administrative restraint.

Our goal is not to tax H-1B employment but promote American employment. Again, this is a goal that we share with the Congress and DOL.

The way that this goal is approached by DOL, however, is rooted in the fear that each foreign worker hired is taking a job away from a local American worker. We already cited recent studies confirming that – even if this was ever true – it is not true today. The times they are-a-changing.

So, what’s our solution? Employers hate the cap and DOL is angered by a visa that it feels steals jobs from US workers. Let’s make everyone happy. Eliminate the cap and substitute in its place a healthy dose of economic literacy. Exempting small employers with fewer than say 25 employees and with adequate safeguards to prevent avoidance, we propose that any H-1B sponsorship must be matched by the hiring of a US worker in the same occupational category: an H-1B petition for a geophysicist is thus linked to the employment of a US geophysicist. The training fee that accompanies every H-1B petition will be used to underwrite the job offer to this American worker. For the first time, the American public and the employers who pay the H-1B fees will be able to see where these training funds are going. The H1B system will thus become more transparent than it has ever been. This is bound to assuage public anxiety and generate sustained public support. What if the talent level of the US worker is below that of the H-1B beneficiary? US employers must accept this discrepancy and use the training fee to bring these skill sets into rough equilibrium. What is now a tax on employers to punish them for their H-1B audacity will be transformed into underwriting a jobs program for US college graduates and other degreed professionals who desperately want jobs but often are unable to find them. The outcome will be more immigration of skilled immigrants, and this added immigration will have clear and verifiably positive impact on the hiring and training of skilled US workers (and job creating impacts throughout the US economy). If we have to have an H cap, which we do not support, then make it a soft cap that can be pierced when doing so will promote the hiring of US workers. If an employer hires an American who has been unemployed for over 12 months, they get an H1B job credit that can be used to hire an additional H1B worker free of quota restrictions. One caveat: the employment of such US worker must be on a full not part-time basis and must not be a phantom hire. It must last for a reasonable period of time, perhaps one year. In this way, the H-1B can be targeted to alleviate the plight of the long-term unemployed.

We do not ask the employer to prove a negative. We do not insist upon a showing of unavailability before H1B submissions can be brought forward. These are proposals intended to make the immigration labyrinth even trickier to navigate, and thereby reduce skilled immigration. Again, the fear that skilled workers take jobs away from American workers is at the heart of such proposals. Our focus is a positive one. We are not asking for proof that Americans cannot be hired but for evidence that they have been. The objective we have is to get real skilled jobs for real US workers. We do not need to discourage H-1B hiring or make it more unduly burdensome. We do not want to levy a tax on employers or otherwise penalize them for taking actions contrary to the public interest. Quite the contrary. Hire all the H-1B temporary workers the market will bear, so long as an equal number of American professionals share in the bounty. Americans who look for work but cannot find it will finally stop blaming H-1B employers and alien beneficiaries for their troubles. The artificiality of proving unavailability, whether in the H-1B or the PERM context, fails to help US workers precisely because it does not encourage or require these same employers to do anything positive but rather to demonstrate that it cannot be done. We reject the notion of punishment; our spotlight shines only on job creation. The American economy is not static and neither should our immigration laws be. The focus of both should always be on the creation of new jobs and the expansion of economic opportunity. We ask only that the responsibilities of being an H-1B employer should go beyond the four corners of the labor condition application. We do not want to make the H-1B more difficult but more productive and profitable- for everyone.

We are confident that such an H1B will enjoy an unprecedented degree of public and political acceptance leading not only to more H1B visas but to a willingness by all Americans to entertain an expansion of other immigration options that, like the H-1B, will henceforth be viewed and administered in an entirely new light, one that is manifestly in the national interest. A new and improved H-1B cannot do the job alone. There must be other incentives that work along with it to keep good paying US jobs at home, such as a simplification of the tax code, repair of our aging infrastructure and revival of our educational system. Yet, at a time when multinational companies are increasingly shifting hiring overseas , the H-1B is a very valuable tool that, if properly deployed, can help make the United States more attractive to investment capital.

What we are dealing with is a global battle for talent. More than any other single immigration issue, the H-1B debate highlights the growing and inexorable importance of a skilled entrepreneurial class with superb expertise and a commitment not to company or country, but to their own careers and the technologies on which they are based. They have true international mobility and, like superstar professional athletes, will go to those places where they are paid most handsomely and given a full and rich opportunity to create. We are no longer the only game in town. The debate over the H-1B is, at its core, an argument over whether the United States will continue to embrace this culture, thus reinforcing its competitive dominance in it, or turn away and shrink from the competition and the benefits that await. No decision on H quotas can or should be made separate and apart from an answer to a far more fundamental question: How can we, as a nation, attract and retain that on which our prosperity most directly depends, namely a productive, diverse, stable and highly educated work force irrespective of nationality and do so without sacrificing the dreams and aspirations of our own people whose protection is the first duty and only sure justification for the continuance of that democracy on which all else rests? This is the very heart of the H-1B maze.

An immigration system that restricts the importation of human capital hurts American competitiveness every bit as much as high tariffs or artificial subsidies. In each case, the controlled but predictable flow of capital across national boundaries is the lubricant of economic activity. Our proposal unites industry and labor behind the banner of immigration reform. Preserving the H1-B as an instrument of job creation for Americans while enhancing the ability of foreign professionals to make our cause their own is an essential and irresistible component of comprehensive immigration reform. It is the absence of such an ingredient that scuttled CIR in 2007 and on all prior attempts as well. For far too long, when confronted with the constant cry for more H-1B numbers, the understandable reaction of many Americans has been to ask one very simple but insistent question:” What’s in it for me?” Now, at long last, they will have an answer.