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It’s Time to Lose the H-1B Visa Program

January 5, 2013

Ever since the H-1B visa was established in 1990, the largest tech companies have continually lobbied Congress for increases in their quotas – and generally both parties have been happy to oblige. Unfortunately, this type of visa has two problems: first, the technology labor market doesn’t need it, and second, the system has been badly abused and is destroying US jobs as a result.

Lobbyists for the tech giants are always claiming that employers can’t find qualified US job applicants. This claim is untrue for a variety of reasons. First of all, the H-1B is never used for bringing in the truly top talent. The State Department already has another class of visa for this purpose: the O (called “Alien with Extraordinary Ability”). Foreign engineers and scientists who can do things that their American counterparts simply can’t are always welcome to move to the states and be hired by companies like Microsoft, Apple, or Google under this visa class without much red tape, because there are no quotas for the O visa program. There don’t need to be because, sadly, the human race doesn’t breed all that many geniuses. So the H-1B program is used almost exclusively for journeyman-level technical workers.

Is there a shortage of such technical workers in the native US labor market? Apparently not. This rather rigorous study directly states that “Purported labor market shortages for scientists and engineers are anecdotal and also not supported by the available evidence.” Another study argues that “Apart from spot shortages that exist in any production process, longer-term labor shortages can only exist if there is some artificial mechanism that prevents wages from rising to a market-clearing wage.  None of these mechanisms seems to be present in today’s competitive labor markets.”

Defenders of the H-1B visa will quickly point out that there’s no need to worry, because these workers make up only a small percent of the labor force, and besides, the program explicitly states that visa holders must be paid the prevailing wage. Let’s examine each of these claims.

The H-1B quotas set by Congress have varied from 65,000 to 190,000 per year. Each visa is good for three years, and can be extended for another three years after that. So conservatively, the math works out to approximately 700,000 H-1B workers in the US at any given time. Considering that there are about 2.5 million IT workers in the US, you can see that the H-1B holders make up a significant percentage of the technology labor force (at least in IT).

What about the prevailing wage? It turns out that there’s an amazingly devious little loophole that employers have been abusing for many years, now: there are actually two statutory definitions of “prevailing wage.” Before I explain the loophole, let me show you the two definitions:

From USC 1182(n)(1)(A):

  1. The employer­

(i) is offering and will offer during the period of authorized employment to aliens admitted or provided status as an H–1B nonimmigrant wages that are at least­

(ii) the actual wage level paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question, or

(iii) the prevailing wage level for the occupational classification in the area of employment,

 

And from USC 1182(p)(4):

(4) Where the Secretary of Labor uses, or makes available to employers, a governmental survey to determine the prevailing wage, such survey shall provide at least 4 levels of wages commensurate with experience, education, and the level of supervision. Where an existing government survey has only 2 levels, 2 intermediate levels may be created by dividing by 3, the difference between the 2 levels offered, adding the quotient thus obtained to the first level and subtracting that quotient from the second level.

 

Now for the fun part! Section (p) says that the Department of Labor has to set up four levels of wages based on skill. However, section (n) sets a prevailing wage based only on occupation and education. So what, you ask? What this means is that there is absolutely no legal requirement that the employer pick the skill level that matches the employee. As an example, if the average salary for a programmer in a particular metro area is $70K, but the level 1 wage is only $50K, then it’s no wonder that the company “can’t get a qualified US citizen to take the job.” Based solely on approved applications, 51 percent of recently granted H-1B visas were in the 25th percentile for pay or below. This number would be statistically impossible under the intent of the program.

Not to mention that the prevailing wage does not include any kind of benefits, which H-1B visa holders are never paid, either. Plus, there’s a 2011 study from the GAO which found that about 21 percent of H-1B visas are simply fraudulent. The Social Security Administration also found that 7 percent of H1-B employers reported no payments of any kind to H-1B visa holders.

The United States spent decades learning how to treat workers fairly and with respect. We don’t need to throw this progress down the drain with a corrupted and ineffective guest-worker program like the H-1B.

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