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.

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