The White House announced this week that new guest worker visas will be banned through the end of the year, and long-exploited loopholes in highly skilled worker visas will be permanently closed. It is welcome news, arriving squarely in the midst of our spring, now extended into a summer, of discontent.
The suspension of new guest worker visas will continue through the end of the year, as close to 30 million Americans remain out of work. The permanent changes to close the exploitation of the H-1B loopholes, however, are powerful remedies to what has become a cottage industry of exploitation by major corporations.
Thanks to a phalanx of lawyers and lobbyists who have spent years turning legal cracks into cavernous loopholes, it has become de rigueur for U.S. industries to lay off their qualified American workers in favor of cheaper imported labor.
This is in direct contravention to how the H-1B visa system is supposed to work. The program exists to perform an important function in our legal immigration system: to provide companies with a way to source highly-skilled labor if they cannot find it at home. Pursuant to this, however, federal requirements mandate that companies must prove American workers cannot do the job, and also that the visas should not “adversely affect the wages and working conditions” of Americans.
But a legal loophole passed in 1998—brought about at the behest of the booming tech industry—allows H-1B reliant companies to ignore the requirements about protecting American jobs as long as they pay the foreign workers at least $60,000 a year, or hire foreign workers who have at least a master’s degree.
“Considering the average IT worker in the United States makes far more than $60,000,” noted The Atlantic in 2016, “the exemption makes it lucrative—and legal—for companies to displace American workers with cheaper H-1B workers.” The congressional progenitor of the H-1B visa, former Representative Bruce Morrison (D-Conn.), called the change in 1998 “a dastardly deed . . . It licenses companies to displace American workers in a bill that purports to protect American workers.”
H-1B “Outsourcing” Firms and U.S. Tech Companies Exploit the System
Meanwhile, a cottage industry has sprung up around H-1B visas to help companies get around the rule that foreign labor cannot “displace” American workers. Contracting firms such as Infosys and Tata Consultancy Services bring foreign labor directly to these companies. The H-1B visa holders work for the consultancy, not the companies for which they are providing the labor. It’s a sleight of hand that allows major corporations to state they are “not hiring H-1B visa workers to replace displaced employees.”
And that is exactly what’s happening.
Companies like Disney, Verizon, Northeast Utilities, Bank of America, New York Life, Hertz, and Southern California Edison all laid off their American employees and replaced them with cheaper H-1B visa holders, generally from contracting firms. In many cases, the laid-off Americans were forced to train their foreign replacements—and some were forced to sign nondisclosure agreements about the experience as a condition of receiving severance pay.
The profit motive for major corporations is obvious. It nets large companies—particularly tech companies—billions in profits by compensating these foreign workers at reduced incomes. According to research from Daniel Costa and Ron Hira, 60 percent of H-1B visas are certified at the two lowest allowable wage brackets—some as much as 34 percent below the local median wage for the occupation. For example, in fiscal year 2013, H-1B consultancy firms paid contract IT workers an average of $71,000 and $66,000, respectively. According to the Department of Labor, the comparable wage for a Computer Systems Analyst in a similar location was $92,000 a year.
Southern California Edison, a California utility company, cut more than 400 American IT jobs in 2015, replacing them with contracted H-1B visa holders. “They told us they could replace one of us with three, four, or five Indian personnel and still save money,” one laid-off Edison worker told Michael Hiltzik at the Los Angeles Times, “They said, ‘We can get four Indian guys for cheaper than the price of you.’ You could hear a pin drop in the room.”
And it’s not just H-1B consultancy firms abusing the system. Major U.S. firms employ H-1B workers directly (as opposed to hiring through contract firms) including some of the biggest names in tech: Amazon, Google, Microsoft, Apple, Qualcomm, Salesforce, and Uber, according to Costa and Hira, “all pay a large share of their H-1B positions as Level 1 or Level 2, a wage below the local median wage.”
Perverse Incentives to Abuse Visa Holders
The model isn’t just hurting American workers. It also creates perverse incentives for mistreatment of immigrant labor, as well. H-1B visas are held in the employer’s name, meaning visa holders have to leave the country immediately if they lose their job. Regardless of how they are treated, if visa holders want to stay in the United States, they must put up with whatever work conditions confront them. A year-long investigation in the San Francisco Bay Area uncovered “body shops” of H-1B recipients treated like “indentured servants.”
In 2013, Tata Consultancy Services paid close to $30 million to settle a federal class action brought by 12,800 H-1B visa employees, who claimed Tata cheated them out of their wages and forced them to sign over their tax refund checks when they finished working in the United States.
That same year, Infosys paid $34 million to the Department of Justice to settle allegations that it had systematically defrauded immigration authorities—then the largest amount ever paid in an immigration case.
No Shortage of American STEM Graduates
But the system also works directly against other policies of the U.S. government, particularly when it comes to incentivizing students in science, technology, engineering, and mathematics (STEM) fields. Federal taxpayers pony up approximately $3 billion per year to ensure we are training American students to work in, among other places, the tech industry.
We do this, in part, because the tech industry complains that there is a shortage of American STEM workers—or that Americans are too dumb to do the job. This is, they say, why they have to rely on foreign talent.
But according to the most recently available Census data, there is far from a shortage of STEM talent in this country. A stunning 74 percent of U.S. STEM graduates, according to the Census, are working in fields other than STEM, perhaps because the STEM jobs they could be holding are instead occupied by cheaper foreign labor.
Moreover, wages in the field are suppressed—STEM wages have increased only modestly in over a decade, despite being a high-demand field.
It is a bizarre federal policy to spend taxpayer money pushing more students into STEM fields when our immigration policies incentivize U.S. firms not to hire them.
H-1B Reform Has Long Been Bipartisan
But it shouldn’t be. There has long been bipartisan support for addressing the H-1B exploitation in Congress. Senators Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.) have been teaming up every Congress since 2007 with a bill to tighten H-1B eligibility. Similar bipartisan legislation exists in the House.
The bipartisan outrage in 2015, when Southern California Edison laid off its American workers to replace them with cheaper H-1B contractors, led 10 U.S. senators to send a letter to the Department of Justice asking for an investigation. Senators ranging from Bernie Sanders (I-Vt.) to Jim Inhofe (R-Okla.), and Richard Blumenthal (D-Conn.) to Jeff Sessions (R-Ala.), all agreed action should be taken.
Trump’s executive actions won’t go as far as legislative action would go, but the steps he’s taking are far more than Congress has had the will to do. Higher salaried H-1B visa holders will be prioritized, ensuring that corporations who intend to compensate their guest workers in line with Americans will get the skilled labor they need. They’ll just do it without the incentives they’ve been abusing to displace and disregard American workers.