Analysis: H-1B Visa Issue in America

Below is an adapted version of a paper I wrote on an issue near and dear to us in the tech industry: H-1B visas.

This post will explore one aspect of the immigration debate in America: the temporary visas issued to high-skilled foreign labor. First, I will explain how H-1B visas work. Then I will present the positions of those who oppose and favor increasing the H-1B visa quota. I will conclude by evaluating both sides’ claims and offering my own perspective on the right way forward.

Each year the United States issues 65,000 H-1B visas to employers who can then employ a foreign worker, as a non-immigrant, in the U.S. for up to six years.  Candidates for this visa must possess specialized skills (medicine, technology, biotech, etc.) and at least a bachelor’s degree, preferably advanced degrees. The visa is highly coveted. In April of this year, 150,000 H-1B visa applications – the legal maximum in any year – were submitted within 24 hours of the submission opening. In other words, an entire year’s worth of applications arrived in a single day. Software companies receive the most H-1B visas out of any industry segment. The debate is whether the quota of 65,000 applications is too low. Proponents of raising the quota argue that American technology companies need more bright foreign talent to fill the ranks. Opponents argue that there is no such labor shortage and that foreign workers will harm an American technology worker’s job prospects.

Those pushing for expansion of the visa program include executives such as Bill Gates (Microsoft) and Sergey Brin (Google), and, less formally, venture capitalists such as Brad Feld (Foundry Group) and Jeff Nolan (formerly SAP Ventures). They do so in the spirit of competitiveness, for both their country (America) and their companies. Their primary claim is that American workers alone cannot fill their companies’ labor needs. Gates told Congress that America’s global leadership position is at risk if the 65,000 quota is not raised. Feld, an investor in dozens of software companies, has said: "I believe that we don’t have enough qualified software developers in the U.S."  Nolan, also an investor in software companies, said: "[U.S. companies] aren’t going through this expensive process because they want to avoid hiring Americans for these jobs…there simply aren’t enough Americans to fill these positions!"  The consensus view in the technology industry is that America should welcome foreign, skilled workers to fill gaps in the labor market. They might also point to Andy Grove (Intel) or Sergey Brin (Google) as immigrants who created great wealth.

The interest groups representing American programmers and engineers dispute these anecdotes. According to a congressional report: "Those opposing increases in temporary workers assert that there is no compelling evidence of labor shortages."  Norman Matloff of UC Davis, a forceful critic of H-1B expansion, says that U.S. companies do not import foreign workers to fill a labor shortage. If there were truly a shortage, starting salaries for grads with bachelor’s degrees in computer science or engineering would be rising (they are not), and technology companies wouldn’t hire only 2% of their job applicants as they wouldn’t have the luxury to be so picky.  And they don’t want more foreign workers in hopes of recruiting the best and brightest, according to Matloff. The average H-1B visa employee earns in the $65,000/yr range, far below what top talent commands. Rather, they want more foreign workers because they can pay them less to do the tasks currently done by domestic workers. (The law requiring employers to pay the "prevailing wage" is largely ignored in the industry.) In short, an increase in cheap H-1B talent would probably displace the American IT worker.

What to make of this debate? There isn’t agreement on whether there is a labor shortage in the IT industry. Even if there is not, I believe there are still compelling reasons to allow companies maximum flexibility to hire the "best" (that is, someone who delivers the most value per dollar). The technology industry should supplement its argument for raising the quota with two points. First, if a company wants to cut costs, it will cut costs. If its labor costs are too high, it will reduce them. Perhaps it will hire more workers overseas. Second, the philosophical claim: why should an American have preference over any other person, especially by today’s multi-national corporations? No one should get a job simply because of  citizenship status. The job should go to whoever can best fill it, wherever that person is from. Critics of H-1B expansion express outrage at a company’s desire for "cheap labor," but what’s wrong with cheap labor? What’s wrong with trying to maximize profit by minimizing labor costs? Also, why can’t non-criminals – PhDs, no less – flow freely over borders? Diverse societies tend to be more prosperous than monocultures. (Naturally, opponents of H-1B expansion hasten to say they’re not "anti-foreigner" just "anti-globalism" – something I don’t quite believe. )

Overall, the immigration debate is a hot potato where rational thought is subsumed by Lou Dobbs "patriotism". This makes smart immigration reform politically unlikely. Perhaps this is why the industry talks loudest about a labor shortage: it may or may not be the case, but the other reasons I outline above are not politically tenable.

14 Responses to Analysis: H-1B Visa Issue in America

  1. Anonymous says:

    First of all, your numbers on the tech immigration are very misleading.

    In addition to the 65,000 H-1b, there are exemptions for research and education, even if the worker is deployed there via a body shop.

    Also, there are 20,000 ‘Masters only’ H-1b in addition to the 65,000. Even in the first year, they ‘retro-categorized’ previously issued masters degreed cadidates out of the first 65k into the new 20k, and then let in more bachlor’s degrees under the 65k. Then, there are the unlimited ‘L1′ visas.

    There’s also cases, where the cap is simply ignored, as in 2004-2005 by more than 10,000. There’s also the 7th year extention giver to those who’ve used the 6 years, and havent gotten the green card yet.

    OK, then, how about the ‘best’? Well, I’ve trained many of these H-1bs, and they’re far below the average of the new American tech workers of 15 years ago, and I had to do it when I knew many who far better proven Americans who were unemployed. The key is that the foreigners can be INDENTURED.

    This isnt about bringing in the’ best and the brightest’, or even more for that matter. It’s about replacing free people with indentured.

    But what do I know, I just have real life experience from America’s top firms. You’re 19 and know it all

  2. Anonymous says:

    Also, probably the best H-1b I ever worked with, a decent guy, had his prospects dry up the day that he obtained his ‘green card’ and was a free man. What does that tell you? I knew him from the ks company featured in one of your books listed

  3. Ben Casnocha says:

    Anonymous, you have real life experience from America’s top firms, but won’t even sign your name?

    You are right that with exemptions and other things the actual number of H-1B visas is higher than 65k. It still doesn’t resolve the question of whether there should be a limit in the first place, or what the right limit should be if there is one.

    I’m confused why you use the word “indentured.”

    Philosophically, I believe companies should hire who they want to hire from wherever — the fact that there are unemployed Americans doesn’t mean a company should hire those Americans before someone else.

  4. Anonymous says:

    if you dont understand that h-1bs are indentured, then you dont understand the issue at all

    they’re indentured because their right to be in the country is owned by their employer. if they quit, they can be deported. they cant change jobs. this gives the employer enormous leverage over them, and that’s why they’re prefered

    just google ‘h-1b indentured’

  5. Krishna says:

    Is this a debate still?

    American workers’ real problem is not about their loss of jobs from increasing H-1B quota; it just stoked their worst fears. Off-shoring exposed them to their own redundancies, the extent of their relative insignificance, the fact that they have been grossly, grossly overpaid. If American companies achieved productivity gains because of off-shoring, the flip side is that they no longer pay $10 for a job that deserves to be paid just $1. American workers should do well to use that data intelligently, and resort to voluntary cut down on indulgences – that were mistaken for culture that instilled a wrongful sense of entitlement, disproportionate to value returned – waking up to global realities.

    Add to it a fast depreciating dollar that makes American contracts unattractive even to American businesses. Even if US increase its H-1B quota now, I doubt whether it will attract so much talent like it used to. Globalization is no longer the catch phrase. It’s – decoupling – now doing rounds. The whole world is now racing to `decouple’ to insulate themselves from the ripple effect of devastating financial mess created by American banks.

    If anything, there’s so much demand outside for talented, employable American workers, in countries with much stronger currencies. Smart American entrepreneurs will not wait for US government to solve their talent shortage; they will set up shops outside US where talent is available and earn in smarter currencies. Look at Intel, Microsoft, IBM, HP, Google – the list is endless. Soon we will see America facing brain drain, while other countries have already begun to see reverse brain drain, much to their delight.

    Lou Dobbs may have to find another theme soon. How about doing a show that argues against Americans for taking up jobs abroad? His brand of patriotism, may be.

  6. H1BEmployee says:

    I am on a H1B visa right now. I was born in a third world country, received scholarship to attend a top school in US, and have been working for past two years in a top-notch biotech company. I would like to shed some thoughts on this issue since obviously it affects me and many people I know.

    First, I would like to dispute two comments made previously.

    1) The law requiring employers to pay the “prevailing wage” is largely ignored in the industry.

    I don’t think this is true. In applying for the visa, one has to fill out a whole list of forms. One such form pertains to salary paid and is submitted to US department of labor for approval. The DOL then cross checks the specified salary to the average salary of the position in the geographical area and rejects the application if it is not comparable. A friend of mine actually had his pay increased because when he applied for H1B visa, because he was being paid less when he was previously working on student visa. I have many friends on H1B visa and I have not met anyone who has ever said he is underpaid due to his visa. Now, I can’t guarantee that there is no misuse ever in the entire United States, but given that there is a mechanism to ensure salary parity, it would be unlikely for many employees to exploit employees. Also, remember that these are not uneducated people; these are people who have at least college education and usually are skilled in their field – and skilled enough that companies go through significant bureaucratic and financial hurdles to hire them.

    2) “they’re indentured because their right to be in the country is owned by their employer. if they quit, they can be deported.”

    While it is true that their right to be in the country is granted due to their company, ‘owned’ is going too far. People do get fired, and once that happens, they have some grace period (like 60 days or something) to find a new company. The H1B is transferable, that means, if I was originally hired by a company A, and if I don’t like it I can transfer to company B on my own volition without any legal consequences. I can’t remain unemployed in this country forever, but that is a good thing. I know many friends who have transferred multiple companies during those H1B years, and I definitely don’t think they are indentured.

    Also, the ‘ownership’ concern would apply for other visas as well. For example, when I was on student visa (F1), my right to stay in this country was ‘owned’ by my university. If I failed to take the required number of classes, for example, I could be deported. But that does not mean that I am indentured to my university (I am allowed to transfer to any other university). Would you suggest removing all international students then? Why is there no cry against this?

    Who are the people on H1B visa?

    All the people that I know who are on the visa are people who have skills and years of education to be qualified to be in the respectable positions in corporate America. They are very mindful of the opportunity they have got and are very careful to ensure that they maintain their legal status. They are doctors, researchers, scientists, engineers who have devoted their lives to serious intellectual/professional pursuit and are here because this is where the opportunities in their field are. This is one neat program that allows talented people to work in this country and give their best here. Given the globalized world we live in, H1B program allows US to attract talent from around the world and gives it a competitive edge.

    How do I see the opposition to H1B expansion?

    I believe that at the core of this opposition is the desire of some Americans to avoid having to compete in their own turf. Americans in general agree that competition is good overall and that the most qualified person should get the job, but when their own job is being threatened, or when their own career is being affected, some of them find it hard to remain objective.

  7. Jude says:

    There is no country in the world called “America.” The country I live in is called the United States. To be more specific, you can call it the United States of America, to distinguish it from the United States of Mexico, for example. I know one H1-B visa holder. He’s a high school Spanish teacher. Yes, there is a shortage of high school Spanish teachers.

  8. The whole first paragraph is redundant and screams “college student” at the top of its lungs. You were forced into that, right? I hope? It’s way below your usual writing standards.

    I hope you’re consciously aware of the difference, and will throw this artificial awfulness out the window as soon as you leave college. Just reading it from you is scary.

  9. Mike says:

    I could not agree more with you! Our startup, http://www.MindValley.com is one example of what happens when the US is too stingy with the H1-B visas.

    My friend and I both lived in the US for 7 to 15 years and when it started our own company post 9/11 it was harder and harder to get foreign worker visas.

    So, what did we do? We packed our bags and headed to South East Asia where we are now building our startup http://www.MindValley.com

  10. Anonymous says:

    Mike, I just checked your website. You don’t employ a single American. So if you pack up and move to India or Malaysia (or whatver 3rd world country you can find cheap labor in), 0 American jobs will be lost.

  11. Anne Berlin says:

    Ben and Mike, thank you for reinforching the “a career in IT sucks” paradigm that’s haunting the offices of high school career counselors all across the US.

    BTW, do your parents know you’re using a computer?

  12. Anonymous says:

    Ben, you’ve got an impressive CV for your age. You have some learning to do on this issue.

    I am amazed how you spin corporations in a way that portrays them as having the good of our nation in mind when it comes to this issue. Their interest is cutting costs. Nothing more. Have you no shame?

  13. R. Lawson says:

    “Critics of H-1B expansion express outrage at a company’s desire for “cheap labor,” but what’s wrong with cheap labor? What’s wrong with trying to maximize profit by minimizing labor costs? ”

    What you are describing is a labor subsidy. At least you (and Greenspan) are honest enough to be open about the explicit desire to lower labor costs.

    Your honesty doesn’t make you right on this issue.

    Subsidizing labor and thus reducing salaries in an occupation will discourage American workers (and students) from pursuing that occupation. This is counter-productive because it will further diminish our skill base in this country.

    If your desire is to encourage American workers to avoid careers in technology – in this case Information Technology – then your ideas will be quite effective.

    I find your ideas to be destructive when it comes to building up our nation and enabling competition from within.

  14. N says:

    Very eloquent arguments, H1BEmployee and R. Lawson!

    “What’s wrong with trying to maximize profit by minimizing labor costs?”

    Tell me you can’t see the ethical flaw in this possibly well-intentioned bit of speculation. Worker exploitation begins at the place where $$$ is valued over the well-being of employees. Companies that take care of their workers reap the benefits of high morale and fierce loyalty, though their CEOs may make a pittance in comparison with the CEOs of Fortune 500 companies. At least they can go to bed at night with a clear conscience, snug in the knowledge that they’ve made it possible for their employees to put healthy food on the table for their children, a decent roof over their children’s heads, reliable transport in their garage, not to mention the capability to pay for medication and any surgeries that their family may need.

    Baby, you need to go out and grab yourself a copy of “Nickel and Dimed” before you turn into one of the soulless profit-mongering vultures our culture of greed is producing by the thousands every day.

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