Home The Washington Diplomat October 2017 Trump Looks to Overhaul H-1B Visa System for Skilled Foreign Workers

Trump Looks to Overhaul H-1B Visa System for Skilled Foreign Workers

Trump Looks to Overhaul H-1B Visa System for Skilled Foreign Workers

The immigration debate that took center stage in the 2016 election was first built around President Trump’s proposed wall with Mexico, then shifted to his controversial travel ban and has now switched gears yet again to focus on so-called “Dreamers,” children brought to the U.S. illegally. But there’s a quieter, though no less consequential, debate about immigration and Trump’s “America first” agenda that is roiling the business world, members of Congress, American workers and foreign governments: the H-1B guest worker visa program, which presents a far more complicated policy picture that splits Democrats and Republicans into unlikely alliances.

a2.hb1.visa.statue.liberty.slideThe H-1B, a temporary visa that lasts three to six years, allows American companies to hire foreign workers with specialty skills, such as technology, science, engineering and math. Under the current program, visas are allocated by a lottery system. Congress has capped the number of H-1B guest worker visas that can be issued at 65,000 per year. The cap for H-1B visas granted to those studying for an advanced degree is 20,000.

On April 7, U.S. Citizenship and Immigration Services (USCIS) announced that the total 85,000 cap for new visas in fiscal year 2018 had been exceeded. This is the fifth consecutive year that demand for H-1B visas has outstripped supply, according to a report by Ananya Bhattacharya for Quartz. And it happened just four days after the application process opened.

U.S. companies, particularly tech giants in Silicon Valley, argue that H-1B visas are critical to keeping America at the forefront of global innovation and entrepreneurship — and that the program should be expanded, not curtailed, to meet growing demand. They say there simply aren’t enough qualified Americans to fill these type of high-skill job openings.

Critics argue that the companies are doing just the opposite — undercutting American workers by using the H-1B visa program to indiscriminately recruit low-skill, low-wage workers to boost profits. President Trump agrees. He’s directed the various Departments involved in doling out H-1B visas — Labor, Justice, Homeland Security and State — to review the program, which the president says is rife with abuse.

Trump wants to ensure that only the highest-skilled, highest-paid workers are awarded H-1B visas. The proposals being discussed reportedly include forcing companies who seek H-1B employees to prioritize the hiring of Americans over foreigners and lowering the cap and duration of the visas to make it more expensive to hire foreigners.

The administration also wants to essentially transform the program from a random lottery to a merit-based system, “raising the qualifying criteria for applicants so only top earners with specific skill sets are considered,” wrote Jonathan Easley in an April 17 article for The Hill. Easley noted that an administration official claimed that the “lion’s share” of H-1B visas is currently used for “entry-level positions.”

The White House has some unlikely allies in its corner. Sen. Bernie Sanders (I-Vt.), a 2016 candidate for the Democratic presidential nomination, is a longtime critic of H-1B visas, putting him at odds with some immigrant advocates in the party but in the same camp — on this issue — as Trump and many of his supporters.

a2.hb1.visas.signs.storyIn January, Republican Sen. Chuck Grassley of Iowa and Democratic Sen. Dick Durbin of Illinois reintroduced their bipartisan bill aimed at reforming the H-1B visa program. The bill, the H-1B and L-1 Visa Reform Act, would scrap the current lottery system and create a preference for foreign students who are or have been educated in the U.S. It would also prioritize advanced degree holders and those being paid a high wage, according to a report by Sara Ashley O’Brien for CNN. The two senators say their bill would dissuade tech firms from using Indian outsourcing companies, such as Tata Consultancy, that flood the system with H-1B applications to boost their chances of acquiring the visas. (Over 70 percent of H-1B visas go to Indians.)

Labor unions support the reform efforts, while the business community, especially the tech sector, is adamantly opposed. In April, Compete America released a statement praising the H-1B visa program. The coalition of corporations, universities, research institutions and trade associations describes itself as an advocate for immigration reform that ensures the U.S. has the highly educated workforce necessary to create American jobs and compete in a global economy.

“Each year, American companies spend millions of dollars to recruit and train U.S. workers, but high-skilled immigration programs continue to be necessary components for maintaining our country’s leadership and competitiveness,” Scott Corley, the organization’s executive director, said in the statement.

The U.S. Chamber of Commerce is a longtime advocate of the H-1B visa program and even argues that the 85,000 cap on visas is too low.

“It would be a mistake to close the door on high-skilled workers from around the world who can contribute to American businesses’ growth and expansion,” Neil Bradley, the chamber’s senior vice president and chief policy officer, said in an April statement.

‘Best and Brightest,’ or Just Cheaper?

Companies, often tech firms like Facebook and Google, argue that the H-1B visa is critical for hiring the “best and brightest” workers in specialized fields like computer engineering, a field in which American graduates lag behind their foreign counterparts.

These companies say there is a shortage of IT workers in the U.S. — with over half a million unfilled IT jobs in sectors like cybersecurity, coding and data analytics. In 2015, the Obama administration agreed, launching a $100 million TechHire Initiative to promote accelerated tech-training pilot programs across the country.

But Ron Hira, an associate professor of public policy at Howard University, challenges the assumption that foreign workers are filling a skills gap in the American labor force.

a2.hb1.visas.trump.goods.storyWe should be skeptical of companies’ reasoning for defending the guest worker program, Hira told The Diplomat, because “employers have a financial incentive” to hire cheaper workers.

In congressional testimony in March, Hira noted that firms that rely mostly on H-1B visa holders are able to generate net profit margins of 20 percent to 25 percent in the IT services sector, where typical profit margins range between 6 percent and 8 percent.

“Every CEO in every company sees the business opportunity: Will I earn higher profits by replacing my American staff with cheaper H-1B workers? The answer is an obvious yes,” said Hira, who is also a research associate at the Economic Policy Institute. “The CEOs are not villains. They are simply acting rationally to the opportunities that government is handing them.”

That gets to the fundamental criticism of the H-1B program: Companies are taking advantage of it to hire foreign workers at lower wages than what American workers make.

The administration points out that the majority of H-1B visa holders are paid at below-market rates. “Right now, H-1B visas are awarded by random lottery and many of you will be surprised to know that about 80 percent of H-1B workers are paid less than the median wage in their fields. Only 5 percent to 6 percent, depending on the year, of H-1B workers command the highest wage tier recognized by the Department of Labor,” a U.S. government official told reporters in April.

But a recent Pew Research Center analysis suggests that the issue is more nuanced, with H-1B visa applicants earning a median salary that was higher than some U.S. workers in similar high-skill occupations. The study showed that U.S. employers planned to pay high-skilled foreign workers with H-1B visas a median annual salary of $80,000 in fiscal year 2016, up from about $69,000 a decade earlier.

So do H-1B visa holders make more or less than Americans? It depends on the field. Certain fields such as business, finance and architecture do, in fact, pay higher than what U.S. workers would normally earn, but computer science positions — which make up the bulk of H-1B visas — pay less.

An April analysis by the Associated Press found that “computer science hires — which make up three-quarters of the H-1B program — receive about 9 percent less, on average, than U.S. workers with similar positions, while foreign workers in non-computer science occupations receive an average of 58 percent more,” wrote the AP’s Youyou Zhou.

By law, employers are supposed to pay guest workers no less than “the prevailing wage,” an amount set by the government based on experience level, location and occupation, Zhou wrote. This stipulation is meant to safeguard job prospects for U.S. workers. But employers have found loopholes to get around this requirement.

“Right now, it’s set up so that it’s very easy to bring in H-1B workers at below-market rates,” Hira told The Diplomat. That’s because “employers tend to define the positions as low as they can, in terms of experience levels,” Hira explained to the AP.

In his congressional testimony, Hira pointed out that in fiscal 2015, over 40 percent of H-1B workers were approved for the lowest possible wage level (level 1), which typically pays 40 percent below the average wage for Americans in the same jobs. Another 40 percent were approved at the second-lowest wage level, which pays 20 percent below the average.

To combat this problem, in March, USCIS issued a policy memo that rescinded the status of entry-level computer programming as a “specialty occupation.” The decision was in keeping with a long-held policy that to be considered a H-1B “specialty occupation,” a position must require a specific bachelor’s degree, which USCIS said is no longer the case with computer programming.

Fixing the System

Politicians are stepping up to offer solutions of their own. Both Sanders and Trump backed an increase in the prevailing wage during the 2016 campaign.

“If there is a true labor shortage, employers must offer higher, not lower, wages,” Sanders’s platform argued.

For Trump, raising the prevailing wage would benefit American workers.

“Raising the prevailing wage paid to H-1Bs will force companies to give these coveted entry-level jobs to the existing domestic pool of unemployed native and immigrant workers in the U.S., instead of flying in cheaper workers from overseas,” according to his platform.

 Trump and some lawmakers also want to force U.S. companies to certify that they could not find Americans to fill open slots before giving the job to an H-1B applicant.

In January, Rep. Darrell Issa (R-Calif.) reintroduced a bill, along with Rep. Scott Peters (D-Calif.), that would require companies with more than 15 percent of H-1B employees to “attest” that they could not hire Americans for the positions.

Issa reintroduced his bill after a number of major U.S. companies such as Disney and Toys ‘R’ Us were sued for replacing American workers with foreigners on H-1B visas.

a2.hb1.visas.indian.workers.storyIn January 2016, Disney was sued in two separate class action lawsuits alleging that American workers were illegally replaced by foreign workers. They were told they had 90 days to train their replacements and if they refused, they were no longer eligible for bonuses or severance packages, according to CNN.

Hira says the fact that Americans are being asked to train their replacements debunks the myth that there’s a shortage of skilled American workers. “In dozens of cases — Disney, The Fossil Group, Toys ‘R’ Us, New York Life, Northeast Utilities, etc. — American workers trained their replacements. The American workers were obviously more skilled. The American worker was the trainer, possessing more knowledge and skills, and the H-1B worker was the trainee.”

Bridging the Skills Gap

Tech companies, however, argue that the skills gap is very real, and hinders their work.

Recent studies by the New American Economy (NAE) found that last year alone there were over 3.3 million open science, technology, engineering, and math (STEM) jobs posted online,” wrote Karolina Filipiak in an April 7 commentary for TechWonk Blog. “Moreover, today, it is estimated that there are over half a million open computing jobs across the country. However, in 2015, U.S. universities only graduated 92,172 computer scientists and a quarter of those, 24 percent, were foreign students.”

Meanwhile, there is a huge supply of foreign workers trained in computer science.

“Job seekers requiring sponsorship showed five times the concentration of interest in tech positions compared to the average U.S. job seeker,” Grace Donnelly reported for Fortune, based on data from the National Center for Education Statistics.

New American Economy, a coalition of business leaders and mayors launched by Michael Bloomberg and Rupert Murdoch, says there simply aren’t enough American STEM workers to go around, and that the U.S. is expected to face a shortage of 1 million STEM workers by 2022.

“This lack of manpower has real consequences for the economy — making it difficult for firms to expand and create jobs for American workers at all skill levels,” the coalition says on its website. “In several specialized fields, like physical science and software development, the unemployment rates of U.S.-born STEM workers are particularly low, indicating there are simply not enough U.S.-born workers to meet the needs of employers,” it adds, noting that the unemployment rate of U.S. citizen STEM workers in 2016 was just 2.8 percent.

New American Economy also contends that even when STEM jobs are filled by foreigners, it has a ripple effect on the U.S. economy that generates additional jobs for Americans.

“Research shows that when a state gains 100 foreign-born STEM workers with graduate-level training from a U.S. school, an average of 262 jobs are created for U.S.-born workers there in the seven years that follow,” according to the coalition.

Meanwhile, Compete America, a coalition of mostly tech companies, argues against wholesale change of the immigration system, noting that 27,000 U.S. employers rely on H-1B visas.

Like New American Economy, Compete America says the current immigration system is broken — but the solution lies in opening the system up, not closing it shut. They say immigration has helped make the U.S. a global entrepreneurial leader, with some 40 percent of Fortune 500 companies founded by immigrants, including Boeing, McDonald’s, Google and General Electric.

Immigration advocates complain that U.S. employers must navigate a costly, byzantine legal system to bring in much-needed international talent. They also point out that many H-1B university graduates with advanced degrees are forced to leave the country — and take the know-how they learned in the U.S. back with them — once their visa expires. For many H-1B visa holders hoping to get permanent residency, obtaining a green card can take a decade or longer, even if they’re sponsored by their employer — a backlog that discourages many from applying. And those who do apply cannot be promoted to another job while they wait because that would alter their status, leaving them in career limbo.

Yet finding a more permanent solution to America’s patchwork of immigration policies is nearly impossible in today’s hyper-polarized political landscape.

The current [immigration] system is really backlogged and slow,” Julia Gelatt, a senior policy analyst at the Migration Policy Institute (MPI), told The Diplomat. “So I think those delays are why employers have turned to the H-1B visa.”

MPI supports a permanent body that would study labor market gaps in the U.S. and adjust immigration policies accordingly, Gelatt said. “We should have an understanding of our needs before setting [a points-based system].”

a2.hb1.visas.apple.storyThe Merits of Reform

The controversy over H-1B visas parallels the larger question about immigration that Trump’s presidency has sparked: Who is entitled to come to the U.S.?

Trump’s vision is to shift America’s immigration system away from accepting people based on family ties to one that attracts highly skilled immigrants who, in theory, can better contribute to the economy.

In August, Trump announced his support for the RAISE Act (Reforming American Immigration for Strong Employment Act), sponsored by Sens. Tom Cotton (R-Ark.) and David Perdue (R-Ga.). The bill would slash legal immigration by half within a decade but, its proponents argue, make the country more competitive. While it does not alter the cap on employer-sponsored green cards, the bill would eliminate preference given to extended family members and replace the current diversity lottery with a merit-based points system. Prospective immigrants would earn points for, among other things, having a high-paying job offer, high English test scores, degrees earned in the U.S. with additional points for degrees in a STEM field, or investing at least $1.35 million in the U.S.

At the same time, the RAISE Act would make deep cuts to family-based immigration, allowing only spouses and minor children to apply and halving the number of family-sponsored immigrants granted permanent residency. The RAISE Act would also lower the cap on green cards issued to family members from 226,000 to 88,000.

Supporters of the bill say the current family-based system favors low-skilled immigrants who push down wages for American workers. Critics counter that the bill would cause serious labor shortages that would hurt U.S. businesses and weaken economic growth.

Notably, the RAISE Act’s proposed points system would favor those who already have H-1B visas.

“Under the RAISE Act’s allocation of more points for a higher-paying job offer, English skills, and a U.S.-based STEM degree, those already studying in the United States or working on an H-1B visa would remain at a strong advantage for an employment-based green card,” Gelatt wrote in a recent report on MPI’s website.

“The countries that have the most H-1B workers — India and China — and those that send the most students to the United States — China, India, Saudi Arabia and South Korea — would thus likely dominant the points-based visas system,” she added.

Perdue’s office did not return requests for comment and a spokesperson for Cotton declined to provide a statement, saying the RAISE Act “doesn’t impact H-1B visas at all.”

While the bill ostensibly would bring more skilled immigrants to the U.S., tech companies have come out against it. The Information Technology Industry Council — whose members include Amazon, Apple, Facebook and Google — released a statement opposing the RAISE Act.

“[N]ot only can we not find enough STEM-skilled Americans to fill open roles, our broken system stops us from keeping the best and brightest innovators here in the U.S. and instead we lose out to our overseas competitors,” the statement reads.

Likewise, Compete America says the bill does nothing to address the fact that the U.S. needs more, not fewer, foreign workers.

“This legislation fails on two fronts,” Corley of Compete America said in a statement. “First, the RAISE Act doesn’t ‘raise’ the number of highly skilled-worker green cards necessary to ensure that the U.S. can in fact compete in a global economy. It doesn’t take into account the shortages businesses are currently facing and will lead to unfair competition and downward pressure on wages for U.S. workers.

“Second, this legislation shifts our immigration system to a big government, top-down, bureaucrats-know-best approach, with Washington, D.C. telling American employers who they should hire,” he added.

Dick Costolo, the former CEO of Twitter, agreed that tech companies — not D.C. bureaucrats — should be the arbiters of who earns an H-1B visa.

“We go through ridiculous interview processes to try to find precisely the right people,” Costolo told CNBC, arguing that immigration officials aren’t as qualified to determine who will be the best hire for a tech company.

“The kinds of engineers we’re looking for are getting more and more specific,” he said. “Folks are looking for specific kinds of machine-learning expertise, specific kinds of natural language processing expertise, specific kinds of experience with backend technology stacks.”

The RAISE Act faces a very uncertain future in a jam-packed Congress, but the vocal debate over immigration that Trump has stirred already seems to be having an effect. Since Trump took office, interest in American jobs from those who qualify for H-1B visas has declined, according to data from the job site Indeed.

While Indians have made up 70 percent of H-1B visa recipients in the last 10 years, visa applications from India declined in fiscal 2017 for the first time since 2009.

And those who are already here may be looking to leave.

According to analysis by Deloitte, a consulting firm, the number of Indians in the U.S. searching for jobs back home in India increased tenfold from 600 in December 2016 to about 7,000 in March 2017.

Meanwhile, other nations are hoping to step in to fill the void. Canada recently launched a Global Skills Strategy to expedite visas for foreign workers with specific technology or business skills. An earlier program, Go North, is designed to entice workers from Silicon Valley to come to Canada, home to 71,000 tech companies. The efforts may be paying off. According to Indeed, for the first half of 2017, Canada was the most searched destination for H-1B visa jobseekers on the site, with 44 percent of traffic directed there.

About the Author

Ryan R. Migeed (@RyanMigeed) is a freelance writer based in Boston. Anna Gawel (@diplomatnews) is managing editor of The Washington Diplomat.