H-1B Visas: Harming American Workers

April 2008

The H-1B visa program allows people in professional occupations to work in the United States on a long-term basis with the opportunity to convert to permanent residents. The program’s ostensible purpose was to supply American businesses with professional workers when there were shortages of qualified American workers. But, during the popping of the ‘high-tech bubble’ early this decade, with tens of thousands of highly skilled U.S. workers being laid off, the industry continued to hire tens of thousands of new H-1B workers. Thereby, they were able to cut labor costs by replacing American workers with foreign workers willing to accept lower wages.

Background

The “H” visa for temporary workers has existed in U.S. immigration law since 1952. In 1986, the H-1B category was created for professional nonimmigrant workers. A 1990 law made H-1B visas easier to obtain by removing the test used for other nonimmigrant visa applicants that required them to show that they have a permanent foreign residence which they have no intention of abandoning—in effect, tacitly establishing the H-1B temporary visas as a recruitment program for future immigrants.

In 1990, Congress established the number of H-1B visas at 65,000 each year. In 2000, the high tech industry pushed successfully to triple the number of available visas from the original 65,000 to 195,000 annually for FY 2001, 2002, and 2003. When FY 2004 began in October 2003, H-1B ceilings reverted to their original level of 65,000—a level high enough that it will continue to disadvantage American high tech workers.

In 2000, Congress effectively increased the number of H-1B workers by exempting from the ceiling any H-1B visas issued to persons employed at a higher education institution or affiliated nonprofit organization or by a nonprofit research organization of a governmental research organization. That effectively increased the H-1B entry allocation by tens of thousands. In Fiscal Year 2003, there were about 20,000 petitions for H-1B visas approved under the exemption. The pressure for this change came from universities which hire many foreign students as teaching and research assistants. Removing these foreign hires from the H-1B ceiling assured the universities a continuing unrestricted ability to hold down costs by hiring foreign students for these positions.

In 2004 another exemption was sneaked through Congress attached to an Omnibus Appropriations bill. This exemption applies to any H-1B visa issued to a foreign graduate with a masters or higher degree from a U.S. school. The number of exempt visas was capped at 20,000. This additional exemption effectively increases the ceiling for H-1B workers to more than 100,000 persons.

Since that last change, there have been continuous efforts in Congress to get the ceiling on H-1B visas increased again both directly and indirectly. One active proposal is to offer permanent residence (green card) to any foreign graduate of a U.S. university outside of any immigrant visa ceiling. Another proposal is to offer H-1B visas to any foreign worker with a foreign degree or to exempt some number of such workers from the H-1B ceiling.

Sham Worker Shortage

Industry lobbyists with Microsoft’s Bill Gates at the forefront have tried to convince Congress that there is a shortage of specialty occupation workers and American competitiveness will suffer if they are not able to hire more foreign workers. They have tried to convince Congress and the public that they only hire the ‘best and brightest’ foreign workers and do so only when comparable U.S. workers are unavailable. This propaganda campaign ignores the fact that there is no requirement in the H-1B visa program that employers have to hire available U.S. workers first. It also ignores the fact that nearly half of the foreign workers that they seek visas for have no more than an undergraduate degree.

Because H-1B visas allow employment for up to six years, the number of H-1B foreign workers in the country at any point is the sum of those who have been admitted and remained within the last six years. In 2002, there were an estimated 710,000 H-1B holders in the United States. Although the H-1B program is meant to provide companies with labor unavailable in this country, no evidence exists of a worker shortage; to the contrary, there are many laid off, unemployed and underemployed American high tech workers.

The Bureau of Labor Statistics reported that February, 2008 unemployment among professional and related occupations stood at 656,000 persons. This BLS report refers to official unemployment persons receiving unemployment benefits. Not included are those persons who have lost unemployment coverage, those who have taken part-time jobs because they could not find full-time jobs and those who have yet to find their first job. Generally, this more comprehensive focus on unemployment yields an estimate about twice as high as official unemployment.1

The advocates for increasing the admission of H-1B workers suggest that our ability to compete internationally depends on being able to employ the ‘best and the brightest’ professional workers from around the world. This claim is belied by the fact that nearly half of all of the approved petitions are for persons with undergraduate degrees rather than advanced degrees (see chart below). In addition, the rate of conversion of H-1B workers to green card holders indicates that most employers are not keeping their temporary workers after their temporary visa expires.

Workers—Or Cheap Workers?

Simply having a large influx of workers into the industry floods the labor market and drives down wages.2 Study after study shows that H-1B workers are paid lower wages than their American counterparts, driving down the prevailing wage: A UCLA study found that H-1B engineers were paid 33 percent less than comparable U.S. citizens. 3 A Cornell University study found that H-1B programmers and engineers were underpaid by 20 to 30 percent.4 An INS report found that the computer-related H-1B employees were paid a median salary 25 percent less than the national median for their field. 5 A National Research Council report found that “H-1B workers requiring lower levels of high tech skill received lower wages, less senior job titles, smaller signing bonuses, and smaller pay and compensation increases than would be typical for the work they did.”6 It also found that H-1Bs have an adverse impact on overall wage levels.7 The Independent Computer Consultants Association reports that the use of cheaper foreign labor has forced down the hourly rates of U.S. consultants by as much as ten to 40 percent. 8

The effect of depressing wages by increasing the available pool of qualified workers is not an innocent by-product of the H-1B visa program. Statements by Alan Greenspan, former Chair of the Federal Reserve Board make the point that this wage lowering effect is intended.

“Our skilled wages are higher than anywhere in the world. If we open up a significant window for skilled [foreign] workers, that would suppress the skilled-wage level and end the concentration of income.” 9

“Significantly opening up immigration to skilled workers solves two problems. The companies could hire the educated workers they need. And those workers would compete with high-income people, driving more income equality.” 10

Displacing American Workers

Nothing in the law regulating H-1B visas requires employers to hire U.S. citizens first or lay them off last. As a result, legions of high tech workers report receiving pink slips while the H-1B workers in the cubicles next to them kept their jobs. Only a few employers, basically those termed ‘body shops’, and classified as “H-1B dependent,” must certify that American workers have not been and will not be displaced within a 90-day period.

The AFL-CIO contends that companies are actively choosing to lay off U.S. workers instead of H-1Bs.11 U.S. workers are now filing formal complaints charging that foreign guestworkers are replacing Americans during the downturn of the high tech industry.12

Inadequate Protection for U.S. Workers

A frequent claim in defense of the H-1B program is that protections are built in to prohibit employers from engaging in practices that will harm American workers. In reality, the protections are either very weak or nonexistent, as is enforcement of these rules. Instead, the system relies heavily on the honor system, merely trusting companies to be good corporate citizens.

An audit of the H-1B program by the Department of Labor’s Office of the Inspector General found that “DOL’s role amounts to little more than … a ‘rubber stamping’ for LCA [labor condition applications] program applications.”17

Fraud and Abuse

The temporary worker program has been found to be exploited by fraudulent applications. The INS conducted a study of 3,247 H-1B applicants who applied at an American consulate in India (Indians account for about half of all H-1B visas issued13) and were unable to verify the authenticity of almost 45 percent of the claims made on the petitions. Twenty-one percent of the work experience claims made to the INS were confirmed to be fraudulent.14

A Department of Labor (DOL) audit found that 19 percent of H-1B workers were being paid below the salaries promised by their employers on their labor application forms (which must be filed with the DOL in order for companies to receive permission to use H-1B workers). The audit found that employers use H-1B employees to get around prevailing wages and personnel costs and that the large-scale use of H-1B workers lowers the level of wages in the affected professions.15

Job shops abuse the system and workers.

The DOL found that six percent of H-1B aliens were contracted out to other companies. These ‘body shops’ typically treat workers as indentured servants, giving the alien enough money for living expenses and keeping the rest as a “fee.” Employers also abuse workers through the use of non-performance agreements. Typically these entail the payment of a large sum of money in return for allowing the alien to seek work with another employer. Combined with the ability of employers to sponsor aliens for their permanent labor certification (a “green card” that allows the alien to remain in the U.S. for good instead of the three-to-six-year period of the temporary visa), the leverage of employers over these temporary workers reduces them to indentured servitude.

Among the largest employers of H-1B workers are Indian-based body shops that act as employment agencies and furnish foreign workers to American companies. Three Indian firms Infosys, Wipro, and Satyam, collectively had more than 8,600 H-1B visa approvals in 2007, and each had many more approvals than did Microsoft.16