Do we need more skilled foreign workers?

March 21, 2013

Few industries more adamant about immigration reform than the tech sector. CEOs from Microsoft, Google, Cisco, and Yahoo are among the executives who've been lobbying the White House and Congress to make it easier for high-skilled workers to come work temporarily in the U.S. and gain a path to citizenship, arguing that it's essential to fueling innovation and growth.

"Our experiences here at Google and in the tech sector show us that immigrants to the U.S. are a powerful force for entrepreneurship and innovation at every level, from start-ups to multinational corporations," writes Laszlo Bock, senior vice president of Google. "Still, at a time when the U.S. economy needs it most, our immigration policies are stifling innovation."

Currently, there's a hard annual cap of 65,000 for what are known as H1-B visas distributed to foreigners in "specialty occupation" that typically require a bachelor's degree or specialized skill (e.g. fashion models, athletes). Foreign graduates of master's and PhD programs are granted 20,000 additional H1-B visas. Corporate America says that's not nearly enough.

The tech industry points out that there's been far more demand for  H1-B visas in recent years than supply: The cap was reached more quickly every year between 2004 and 2008—reaching a new record that last year, when the 65,000-visa cap was hit in just a single day. Demand for H1-B visas dropped sharply during the financial crisis and the recession, but it's bounced back over the last two years: In 2012, the government stopped accepting petitions for H1-B visa after just 72 days.


(Migration Policy Institute)

Tech companies and their allies say that such ceilings are hindering growth and pushing jobs overseas, "preventing tech companies from recruiting some of the world’s brightest minds," as Google's public policy shop puts it. They also believe that the enormous backlog for green cards is driving away those who want to stay in the U.S. permanently.

Ideally, they'd want to see something akin to the Immigration Innovation Act, a bipartisan bill co-sponsored by Sens. Amy Klobuchar (D-Minn.) and Sen. Orrin Hatch (R-Utah) that would raise the cap from 65,000 to 115,000—with the potential of reaching a maximum 300,000 H1-B visas if the demand were there; the bill would also make as many as 300,000 green cards available to foreign nationals.

But there is a big pushback from both legislators and outside groups who believe that companies have abused H1-B program to depress wages and displace native-born workers. "The buildings of State Farm Insurance in Bloomington are filled with Indian engineers because it continues to be the most expedient and cost-effective way for them to get work done," Neeraj Gupta, CEO of Systems In Motion, testified in a recent Senate hearing. "If the H1/L1 visas did not exist, these organizations would have innovated with local partners and figured out alternate options."

The critics argue, moreover, that companies have exploited the H1-B program to fuel outsourcing, bringing in foreign employees into the U.S. to train them and then sending them back their native countries to run their offshore operations: They point out that the top 10 companies that petitioned for H1-B visas in FY 2012 were all outsourcing giants.

Their preferred course of action is anti-fraud and anti-abuse legislation just introduced by Sen. Chuck Grassley (R-Iowa), which would require companies to do more to hire native-born workers, raise wages for foreign-born workers, and make it more difficult to use the program to fuel outsourcing. The underlying message is, "don't think about expanding the H1-B before examining the problems," explains Ross Eisenbery, vice president of the Economic Policy Institute and a vocal critic of the visa program.

So what's the consensus in Washington on the issue—and what's likely to happen? Neither party wants to keep the status quo for high-skilled immigration, with leaders of both parties promising to make green cards more readily available for STEM graduates. And there's fairly widespread agreement that the current H1-B system isn't working very well for the industries that rely on them.

"It creates this extraordinary unpredictability for employers," explains Madeleine Sumption, a senior policy analyst at the Migration Policy Institute. "They can't plan ahead—they have no idea if the cap is going to be gone in five days or three months." Sumption believes, moreover, that the evidence that the visas depress wages and fuel offshoring is mixed: Generally, H1-B workers are well-compensated (with an average salary of $74,000 in 2010). While there are certain jobs that tend to pay H1-B workers less than native-born workers, it's atypical. Moreover, it's unclear whether the offshoring linked to the visas is something that would have happened anyway, she says.

(Source: Government Accountability Office)
(Government Accountability Office)

But Sumption acknowledges that there is a "certain level of fraud" within the system and that concessions to both sides of the H1-B debate will have to be made for a deal to get passed. A 2011 report from the Government Accountability Office recommended both a more flexible, efficient H1-B program, as well as more accountability for employers—including those that exploit the program by going through third-party staffing companies to hire foreign workers.

While there's a broad desire to make it easier for high-skilled workers to come to the U.S.—particularly in the STEM industries—any agreement will have to go through the Judiciary Committee, where Grassley is ranking member, and pass muster with Sen. Dick Durbin (D-Ill.), who shares Grassley's concerns with the H1-B visa program. My colleague Peter Wallsten reports that the Senate's Gang of Eight is considering a bill that would double the number of visas for high-skilled workers—in line with the Klobuchar-Hatch proposal. But that's likely to have some significant strings attached—higher wages, higher employer application fees, and more oversight.

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Neil Irwin · March 21, 2013