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H1-B Visas: Clever Trick for Cheap Tech Talent?

It's a highly unpopular view in Silicon Valley, where big tech companies are lobbying Congress to up the visa quota. So, is there anything to it?
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It's an unpopular position in Silicon Valley to question the value of the H1-B visa--the legal document that every year allows some 65,000 foreign technical workers with "exceptional skills" to come work in the United States. Many of these people, as you probably know, end up working for major tech companies like Google, Microsoft, IBM, and Facebook.

But as the House gears up to deliberate on a bill with the potential to nearly double the number of available visas each year to 110,000, it's worth asking if the H1-B actually does what it's supposed to do. Do the visas really attract the "best and brightest"--or, as some allege, are they simply a mechanism to attract cheap foreign technical labor at the expense of out-of-work skilled American IT workers?

One man is sticking to the unpopular view. 

The Unpopular Findings 

There's no doubt that recruiting exceptional talent from the around the globe is a boon for U.S. tech companies. The problem, as Norman Matloff describes it, is that it's unclear if the H1-B is actually successful at a) attracting legitimately highly-skilled foreign workers and b) putting them to use in any positions of research and development where their skills could actually be leveraged.

Matloff is a professor of computer science at the University of California, Davis, and no stranger to being criticized as a xenophobe in some Silicon Valley circles as a result of his unpopular positions on the high-tech labor force. 

In February 2013, Matloff published a report through the Economic Policy Institute, which came to two somewhat controversial conclusions about foreign students that graduate through U.S. programs.

First, he found that "on a variety of measures, the former foreign students have talent lesser than, or equal to, their American peers." Second, he found that "skilled-foreign-worker programs are causing an internal brain drain in the United States." He explains:

Though the United States should indeed welcome the immigration of "the world's best brains," are the foreign students typically of that caliber? The tech industry has put forth little to support such assertions. It has pointed to some famous immigrant success stories in the field but, in most cases, the people cited, such as Google cofounder Sergey Brin, never held foreign-student (F-1) or work (H-1B) visas (Brin immigrated with his parents to the United States at age 6). And more importantly, neither the industry nor any other participant in this national debate has offered any empirical analysis documenting that the visa holders are of exceptionally high talent.

...For some readers of this report, perhaps the most surprising result here will concern work in research and development (R&D). The industry has emphasized that it needs foreign workers in order to keep its innovative edge over other countries, yet the data show that the former foreign students are significantly less likely to work in R&D than the Americans.

In other words, H-1B and related programs are not raising U.S. levels of talent and innovation in the tech fields, and are in some ways reducing them.

...Are the immigrant tech workers more prone to patenting on a per capita basis, after education and other variables are taken into account? If the United States is indeed facing an internal brain drain, the critical question is: Are the immigrants of higher quality than those they are displacing?

Highly Skilled but Underpaid

One of the most interesting parts of Matloff's analysis shows that H1-B workers--who are theoretically the "best and brightest"--don't actually make much money. Or at least they don't make as much money as you would expect, given their proven pedigree as a highly-skilled worker. 

By law, tech companies are forced to pay H1-B workers the prevailing wage for a similar positon--but Matloff asserts that "loopholes enable underpayment of the foreign workers relative to their true market value." 

According to Matloff's analysis, foreign workers with degrees in computer science and electrical engineering make about 6 percent less than comparable Americans. In this report, Matloff extends his research a bit further, and comes to some surprising conclusions. At a few U.S. tech firms that take a large share of the H1-B visas available each year--including Google, Microsoft, Intel, and eBay--foreign "highly skilled" workers are hardly that, based on the wages they are being paid.

Compared to the rest of the company's workforce based on wage rates, Matloff found that "the solid majority of their foreign software and electrical engineers do not meet even the mildest of the three thresholds for best/brightest."

This, of course, is at odds with the general sentiment of the Valley, which buys into the notion that there's a major talent shortage in the United States, and that we need policy to allow highly skilled foreign workers to plug the gaps. 

"Why do we offer so few H-1B visas for talented specialists that the supply runs out within days of becoming available each year, even though we know each of these jobs will create two or three more American jobs in return?" Facebook CEO Mark Zuckerberg wrote in April.

The way Zuckerberg puts it, you would expect that there would be incredibly low unemployment rates for high-skilled, workers in the science, technology, engineering and math (STEM) fields. The only problem is that the data reveals just the opposite. 

Just last month, a report published by Georgetown University showed that recent graduates in information systems are dealing with an unemployment rate of 14.7 percent. Computer science majors face an unemployment rate of 8.7 percent. In other words, the claims about the "supply running out within days" just seems a bit false. 

Another Way to Solve the Talent Gap?

This is nothing new. The tech industry has been making this claim for over a decade, but Matloff says it's now reached a new level of exaggeration. "When the tech industry lobbied Congress to raise the yearly H-1B cap in 1998, the industry claimed a major STEM labor shortage, and it has continued to make such claims in the years since," he writes. "Yet no study, other than those sponsored by the industry, has ever confirmed a shortage." 

Zuckerberg may indeed believe the answer to the talent shortage is to recruit more foreign workers. And that may serve his purposes as a CEO of a large public tech company that must keep costs low and answer to his shareholders. But others believe there's a more rational--and economically sound--way to find talent within the United States. And that's to raise wages.

As Bernie Sanders, the independent senator from Vermont (and another man known for holding unpopular positions) said recently:

I have a hard time understanding the notion that there's a severe need for more workers from abroad when wages for these jobs rose only 4.5 percent between 2000 and 2011. You see stagnant wages for high skilled workers, when these companies tell you that they desperately need high skilled workers. Why not raise wages to attract those workers?

There will always be a need for highly-skilled workers--and that's a good thing. But it's clear that the United States cannot simply continue to increase the number of H1-Bs, ad-infinitum.

As pointed out by Brookings, the proposed legislation includes measures to decrease reliance on the program: "Companies will be banned from employing more than 75 percent of their workers on an H-1B or L-1 visa in 2014, decreasing to 65 percent in 2015, and 50 percent in 2016."

Otherwise, bringing on more foreign workers is a slippery slope. The real fix for the H1-B program, says Matloff, would be to close all the loopholes that encourage abuse.

Legal loopholes involving the definition of what constitutes a "qualified" worker for purposes of permanent labor certification must be closed. The laws should not force an employer to hire an American who cannot perform the job well, but it is commonplace for employers to narrowly tailor job requirements so that only the desired foreign applicant qualifies.

IMAGE: iStock
Last updated: Jul 2, 2013




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