Four Ways to Tackle H-1B Visa Reform

Experts reflect on whether proposals in various bills in Congress right now could work to improve the H-1B visa program

5 min read

Illustration: iStockphoto
Illustration: iStockphoto

Update 19 April 2017: Yesterday, U.S. President Donald Trump signed an executive order instructing government agencies to suggest reforms to the H-1B Visa program. Analysts say that real reform will require Congressional action.  In February, IEEE Spectrum interviewed experts about what Congress could do. The original article follows:

U.S. tech companies love the H-1B visa program. The temporary visa is meant to allow them to bring high-skill foreign workers to fill jobs for which there aren’t enough skilled American workers.

But the program isn’t working. Originally intended to bring the best global talent to fill U.S. labor shortages, it has become a pipeline for a few big companies to hire cheap labor.

Giants like Amazon, Apple, Google, Intel, and Microsoft were all among the top 20 H-1B employers in 2014, according to Ron Hira, professor of political science at Howard University who has testified before Congress on high-skill immigration. The other fifteen—which include IBM but also consulting firms such as Tata Consultancy, Wipro, and Infosys—used the visa program mainly for outsourcing jobs.

Typically, U.S. companies like Disney, FedEx, and Cisco will contract with consulting firms. American workers end up training their foreign counterparts, only to have the U.S. firm replace the American trainers with the H-1B visa holding trainees—who’ll work for below-market wages.

Problems with this setup abound. First, talk of a tech labor shortage in the U.S. might be overblown. Then there’s the issue of quality: More than half of the H-1Bs at a vast majority of the top H-1B employers have bachelors degrees, but not advanced degrees. Hira argues that in many cases such as Disney and Northeast Utilities, the jettisoned American workers were obviously more skilled and knowledgeable than the people who filled those positions, considering the fact that they trained their H-1B replacements.

Plus, the H-1B is a guest-worker program where the employer holds the visa and isn’t required to sponsor the workers for legal permanent residency in the United States. So if the worker loses the job, he or she is legally bound to return to their country of origin. This gives the employer tremendous leverage, and can lead to abuse.

“It’s a lose-lose right now for the country and H-1B workers,” says Vivek Wadhwa, distinguished fellow and professor at Carnegie Mellon University Engineering at Silicon Valley.

Lawmakers have for years tried to revamp the H-1B program. Four bills attempting to reform the program have been introduced in Congress in 2017. President Trump has talked about H-1B reform as well. A draft executive order leaked last week contains an order for the Secretary of Homeland Security to “consider ways to make the process for allocating H-1B visas more efficient and ensure that beneficiaries of the program are the best and the brightest.”

Here are four ways, some proposed in the bills, that experts believe could help American workers, stop job offshoring, and stop the exploitation of foreign workers.

1. Raising Wages

U.S. companies like hiring H-1B workers for a simple reason: they are cheaper than American workers. Law states that companies can set an H-1B worker’s wage based on the job, geographic location, and one of four skill levels. So companies can, and routinely do, define an H-1B hire’s position at the lowest skill level, meant for beginners or trainees.

The Level 1 wage for a computer systems analyst in Pittsburgh, for instance, is around US $49,000, while the Level 3, or average, wage is about $81,000 according to the Foreign Labor Certification Data Center. So a company can legally get away with paying foreign workers $30,000, or about 40 percent less than their American counterparts. There have been cases where employers have paid roughly half of the average wage for a particular position. “About 40 percent of all H-1B applications are at Level 1 now, and another 40 percent are at Level 2,” says Hira.

Hira says that raising the H-1B wage floor is the most critical reform needed right now. It could keep thousands of American jobs from being shipped offshore, fight wage depression, and keep the job market competitive.

But whether it works will depend on how high the wage floor is raised and how that’s done, Hira adds. “The cleanest way is to get rid of Level 1 and Level 2 wages and turn to average wages,” he says.

That’s what a bipartisan bill introduced by Senators Chuck Grassley (R-IA) and Dick Durbin (D-IL), first introduced to Congress in 2007 and reintroduced in late January as the H-1B and L-1 Visa Reform Act of 2017, hopes to do. It seeks to redefine the H-1B wage floor by requiring firms to pay the higher of two: the market salary for the job or the median wage.

Hira calls it the “best reform bill” in Congress right now. Whether or not it passes is another matter.

2. No More Lottery

Every 1 April, a lottery system doles out H-1B visas. Last year, there were three times as many H-1B applications as the annual limit of 85,000. Top H-1B employers like Tata Consultancy, Wipro, Infosys, and Cognizant apply for thousands of visas, knowing that a portion of the applications will approved.

Some lawmakers propose replacing the random lottery system with a preference system.

California Representative Zoe Lofgren, who represents Silicon Valley, introduced a bill (High-Skilled Integrity and Fairness Act of 2017) that seeks to award visas based on highest offered salary.

Such a wage-based lottery system could be implemented easily. But how it’s implemented will be key. Mainly, it needs to factor in job, location, and skill level for the wages, Hira says. Because if ordering is done purely by salary numbers, and not taking jobs and locations into account, approvals would skew towards high-cost areas like Silicon Valley and New York City, or towards high-wage occupations at the expense of others.

Grassley and Durbin’s bill proposes a system that prioritizes foreign students who have earned an advanced degree in the United States, have a well-paying job offer, and preferred skills.

This could have a broad, meaningful impact if implemented, Wadhwa says. “Students who come to the U.S. to study are competing with people from all over the world, so we’ve educated people who’re top notch,” he says. “Then the market becomes competitive. If companies hire them, the free market would rule, and the graduates would accept jobs from the highest bidder.”

3. Stop Replacing U.S. Workers

There are a few ways lawmakers want to ensure that firms don’t replace American workers with cheaper H-1B workers.

The Grassley-Durbin bill requires employers who seek H-1Bs to make a good faith effort to recruit American workers. At present, companies are not legally required to show that they can’t find talent domestically before they hire a guest worker. Of course, much will depend on how these rules are enforced. “None of these provisions can’t be scammed,” says Hal Salzman, professor of public policy at Rutgers University.

California Representative Darrell Issa introduced a bill (Protect and Grow American Jobs Act) in January that aims to make it more complicated to hire H-1B workers. 

In 1998, Congress had approved an increase in visas that prohibited companies from displacing American workers if over 15 percent of their workers were on the H-1B; these companies are called H-1B dependents. But there was also a loophole in the law that said the company didn’t need to make that promise as long as it hired someone with a masters degree or paid the visa worker at least $60,000. Issa’s bill raises that threshold to $100,000.

Could such reforms indeed make it harder to hire H-1B visa holders? Critics have called Issa’s bill worthless. “There’s no enforcement of the H-1B dependency rule, so they are pretty meaningless,” Hira says. He adds that to really have an impact, a bill should make it illegal for all companies to replace American workers with H-1Bs.

4. Easier Immigration

A much harder change to implement, but one that could clean up the H-1B pipeline, is making it easier for H-1B workers to immigrate.

Lofgren’s bill, as well as one introduced by Representative Jason Chaffetz (R-Utah), the Fairness for High-Skilled Immigrants Act of 2017, seeks to lift the cap on the number of people from one country granted permanent resident status each year. Right now, there are long green card backlogs for workers, most of them Indian, who are in the United States on the H-1B. While they wait for their permanent residency, which can take more than five years, they can’t switch jobs. Lifting per-country permanent residency caps would give the workers more job mobility.

“Tech companies kept lobbying for H-1B visas and policymakers limited immigration,” Wadhwa says. “People on these visas cannot create companies and create more jobs.” One approach could be to fast-track green cards for those creating jobs, he says.

The risk here, again, might be unwittingly squeezing out people from smaller countries that don’t export much tech talent. 

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