Magazine

It's Time to Overhaul H-1B Visas


We need to build a skilled-immigrant policy that will help our economy thrive

Reading the editorial pages of America's major dailies, you'd think the economic recovery depended on granting plenty of temporary work visas to skilled foreigners. After Congress voted in February to limit the use of these H-1B visas by financial firms getting taxpayer bailout money, The Washington Post called the provision (part of the 2009 American Recovery & Reinvestment Act) "antithetical to innovation and domestic prosperity." The Wall Street Journal criticized the move in an editorial headlined "Turning Away Talent." In The New York Times, columnist Thomas Friedman simply called it "S-T-U-P-I-D."

Such advocacy presents a false choice: Keep the program as it is or risk losing exceptional foreign workers.

As employers are sending off their H-1B visa requests for fiscal year 2010—and with some in Congress considering an overhaul of the program—it's time to dispel the myths about H-1Bs. We need to mend this troubled program and look beyond it to create a comprehensive skilled-immigrant policy that helps our economy thrive.

What myths distort the H-1B debate? The biggest may be that employers can hire H-1B visa holders only when there is no American for the job. The program, run by the U.S. Labor and Homeland Security Dept., has no such constraint. Nor do employers getting the visas have to demonstrate a shortage of U.S. workers in their field.

Indeed, they can opt not to recruit American candidates and to give preference to foreign workers. As the Labor Dept. states in its 2006-2011 Strategic Plan: "H-1B workers may be hired even when a qualified U.S. worker wants the job, and a U.S. worker can be displaced from the job in favor of the foreign worker." This is not just a hypothetical possibility. According to news reports, a number of major U.S. companies require American employees, as a condition of their severance pay, to train H-1B workers to do the work they do. This process, often called "knowledge transfer," is a key step in offshoring the tasks to a low-cost country.

Another myth: H-1B workers are the world's best and brightest. While some are truly exceptional, they make up a small share of the visa holders. The minimum degree required to hold an H-1B visa is a bachelor's degree or equivalent experience, hardly a rare commodity. Instead, companies frequently turn to H-1Bs because they can be paid below-market wages. This contradicts the visa program's intent (and helps push wages down for American employees). But it is a common practice, given the gaping loopholes in the regulations.

In 2008 the Labor Dept. certified more than 5,000 applications for H-1B positions paying less than $15 an hour. In 2005, the latest year for which there are demographic statistics for the program, the median yearly wage for new H-1B recipients working in computers, including the many with master's degrees and years of experience, was $50,000. That's comparable to the $51,000 median salary paid to entry-level U.S. workers with only a bachelor's degree in the field.

Then there's the mistaken belief that granting H-1B visas helps prevent the outsourcing of American jobs. In fact, the program is expediting that offshoring, and not just because of "knowledge transfer." Offshore outsourcing firms with U.S. operations, including Infosys (INFY) and Wipro Technologies (WIT), now dominate the top ranks of employers getting H-1B workers. In 2008, such firms accounted for 7 of the top 10 H-1B visa recipients, getting almost 12,000 of the 85,000 quota. They use their U.S. operations to train their foreign workers, who learn more about U.S. clients and then rotate back to their home countries to provide service more effectively.

Perhaps the most dangerous myth of all is that the H-1B program has the same advantages for foreign workers—and the economy—as permanent immigration does.

High-skill immigrants who stay permanently in the U.S. make enormous contributions to the economy through their work, research, and entrepreneurialism. But the H-1B is a temporary work permit, one that allows participating foreigners to be mistreated. The visa, remember, is held by the employer, not the worker. That considerably diminishes the H-1B holder's bargaining power for better wages and working conditions.

Some H-1B workers are eventually sponsored for permanent residency, but, again, this is at the discretion of their employers. Because the number of guest workers far exceeds the number of available employment-based green cards, H-1B workers can get stuck where they are for as long as 10 years, with no ability to switch employers or even get a promotion.

The H-1B program can be cleaned up by closing loopholes and increasing oversight. Senators Richard Durbin (D-Ill.) and Chuck Grassley (R-Iowa) are expected to reintroduce a version of last year's bipartisan reform bill in the coming weeks. Passed into law, it would require employers to try to hire Americans first and to pay H-1B workers market wages. It would also bar employers from replacing American workers with H-1B holders. Perhaps most important, it would create a random-audit process to ensure compliance with the rules.

Such common-sense fixes would provide employers with access to top foreign talent while treating the workers in a way that encourages them to settle in the U.S. But it's not enough.

We must also work on a comprehensive approach to permanent skilled immigration. This should include a merit-point system like the ones used in Canada and Britain, where immigrants working in needed occupations can move up the queue. It should also involve the creation of an independent board to gauge, at regular intervals, how many immigrants we can absorb without hurting the job prospects of American workers.

Then, just as the Federal Reserve oversees the supply of money, we could rationally regulate the flow of workers being welcomed primarily for economic reasons.

Ron Hira, an assistant professor of public policy at Rochester Institute of Technology, is co-author, with Anil Hira, of Outsourcing America.

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