Fear, anger and America’s real immigration problem

Vivek Wadhwa
Contributor, Innovations July 30, 2012

One of the most contentious issues in the skilled-immigrant debate is the H-1B visa, which allows qualified immigrants to work for U.S. tech companies on a temporary basis. Proponents of raising the H1-B visa cap say the nation faces a dire shortage of engineering talent and needs more of these visas to stay competitive. Detractors insist that there is no engineer shortage and that America should close its doors to foreigners because they take jobs away from citizens. Battles break out in Capitol Hill over the number of visas allocated because there are no hard data to back either side.

A July 18 report by The Brookings Institution, titled “The Search for Skills,” provides these data.

Vivek Wadhwa is a fellow at Rock Center for Corporate Governance at Stanford University, director of research at Center for Entrepreneurship and Research Commercialization at Duke, and distinguished fellow at Singularity University. His past appointments include Harvard Law School, University of California Berkeley, and Emory University. View Archive

The report analyzes the demand for H-1B workers at the metropolitan level, region by region. It finds there is no national shortage or glut of skilled workers and that supply and demand vary by region. The report determines that demand for H-1B’s is highest in tech centers such as New York, Silicon Valley (San Francisco and San Jose), Los Angeles, Washington, D.C., Virginia, Chicago, and Boston. Not coincidentally, these places are among those with the lowest unemployment rates for bachelor’s-degree holders. It’s the same in regions that house America’s research centers. Places such as Columbus, Ind., where engine manufacturer Cummins is based, and Rochester, Minn., home of medical giant Mayo Clinic, are among the regions with the highest demand for H-1Bs and lowest unemployment rates for bachelor’s degree holders (3 percent in Columbus and 1.5 percent in Rochester for 2010). In other words, where there is demand for skilled workers, there is also the most innovation economic growth, whether they come from the U.S. or abroad.

Report authors, Neil Ruiz, Jill Wilson, and Shyamali Choudhury, concluded that the government could be stifling innovation by limiting H-1B visas and not taking into account local demand for highly-skilled workers. Demand for these visas has far exceeded supply nearly every year for the last decade. Additionally, the government has been indirectly taxing U.S. R&D and innovation by imposing hefty visa fees, which range from $1,575 to $4,325 depending on employer size — plus $1,225 for expedited (read: timely) processing, according to the report.

The visa fees are meant to fund training for American workers and for science, technology, engineering and mathematics education. But, according to Brookings, that’s not how the majority of this money is spent. The metro areas most in need of skilled workers receive the least funding. The average funding per working-age person in high demand areas is a little over $3. But Wichita, Kan., for example, receives nearly $23 per worker. Portland, Maine gets roughly $21, and El Paso, Tex. about $15. These are hardly booming tech centers with severe shortages of engineering talent. And research centers fare even worse: Columbus and Rochester both receive no funds from the H1-B grant program.

One would expect that such conclusive data would put the debate to rest. But this isn’t the case, as was evidenced by the heated discussion that ensued between Vice President Joe Biden’s former economic advisor Jared Bernstein and me. Brookings requested we review the report and comment on it at a public event on July 18.

Bernstein, who is now a senior fellow at the Center on Budget and Policy Priorities, agreed that high-skilled immigration is important for the economy. He was right in stating that the H-1B program is flawed because it ties the employee to the employer. There is a massive backlog for permanent-resident visas and the wait times, for most workers, stretch beyond a decade. While they wait, these immigrants cannot change jobs without losing their turn in line and, if they get laid off for any reason, they are required to leave the country immediately. So, these workers are trapped in limbo—their careers stagnate, they usually make less than what they would if they were allowed to shop around for better jobs, and they can’t become entrepreneurs.

But, like many people outside the research and tech centers, Bernstein showed a lack of understanding of the innovation process and global competitiveness. He questioned the need for employers to hire foreign workers in the first place. He said that we should “not confuse H-1B demand with labor demand,” because “the H-1B is kind of scratching an itch that isn’t even there.”

And he went on, likening visas to “subsidies” for industry, and argued that these were just a way of lowering industry salaries, therefore the government needed to step in. “It’s a horrifying thought,” Bernstein said, “but wages should go up. Wages should adjust upward when there is a demand, a shortage. “The idea would be to have a real labor market test,” Bernstein continued later, “and to have some mechanism to avoid this downward pressure on wages.”

But if Bernstein spent any time talking to Silicon Valley executives or reading tech blogs, he would learn that wages are indeed going up and that there is, in fact, a war for talent. These are already some of the highest paying jobs in the country—with salaries commonly in the six figures. Our immigration policies are strangling the innovation sector.

During the event, I explained these difficulties, outlining that money was not an issue for companies such as Google and Facebook. Instead, competitiveness, speed-to-market and getting the best and the brightest were at the core of the problem. Additionally, the bluest of American companies, such as Cummins are getting the majority of their revenue from abroad. They need to hire a diverse set of workers that understand global markets. America, today, graduates only 4 percent of the world’s undergraduate engineering pool. Forcing American companies to hire only from this pool would greatly restrict their competitiveness.

Compare it to limiting the NFL’s recruitment to one state.

I explained that the tech world thrives on competition, which is why America leads the world in innovation. Indeed, 52 percent of Silicon Valley startups are founded by immigrants. Protectionism will weaken the tech industry.

But Bernstein repeatedly mentioned the need for a “labor market test” and advocated a government commission to regulate how many skilled immigrants American companies could hire, saying, “The problem is there is not a standard — a work test ... and I think there should be.”

His prescriptions were flawed. Even the moderator, NPR Ombudsman Edward Schumacher-Matos stepped in to say, “There are so many studies that it’s probably impossible to develop a good standard, particularly one that’s timely.” He floated the idea that, perhaps, the government commission Bernstein advocated for could be considered “un-American,” going on to say, “It sort of … smacks of central planning.”

I likened it to Cuba.

The dark side of the debate also surfaced with a tirade against Indian companies such as TCS, Infosys, and Wipro, and, of course, outsourcing. These companies use 12 percent of the H-1B visa pool for their operations in the U.S., but are the focus of the anti-H-1B debate as if they were the sole recipients.

Like our political leaders do in election years, Bernstein tried to steer the debate into protectionist banter. “I think that there have been some linkages made between that,” said Bernstein of companies based in India that apply for H-1B visas while outsourcing jobs, “and then offshoring back to the home country. And I think that that is a matter of concern.”

This is the sad state of our competitiveness debate: anger, protectionism, and emotion are trumping logic, data, and common sense.

Washington Post Co. Chairman and chief executive Donald E. Graham is a member of Facebook’s board of directors.

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