H-1B: Ripe For Reform

20% of H-1B petitions granted last year went to just four firms, all outsourcers. That's just one of several proofs that the controversial visa program is hurting U.S. tech.



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What to do about the H-1B? It's either abuse of immigrants not seen since The Jungle or it's the only thing keeping our innovation economy from falling apart.

That's how people seemed to react to the H-1B visa program hitting its cap a mere week after petitions were opened.

The H-1B lets U.S companies bring in immigrants with special skills, and should serve as a leading indicator that U.S. companies want to lift all their boats. But in a time of anemic job growth, people question whether we need immigrants with special skills.

[ Is the U.S. talent pool really that dangerously shallow? Read IT Talent Shortage Or Purple Squirrel Hunt? ]

John Miano, who founded the Programmers Guild and now is a fellow at the Center for Immigration Studies, wrote me in an email that "the economy is in the toilet. Job creation sucks. Yet the H-1B cap gets hit." Miano's not against talented immigrants coming to the U.S., but thinks they can cost talented Americans their jobs. Although the tech industry is the most aggressive lobby in favor of the H-1B, Miano documented that in 2011 we hit the H-1B cap despite substantial net job losses in the computer science, engineering and scientific fields.

Besides evidence of unemployed American tech workers who might be losing out to this program, there's also evidence that the typical H-1B recipient isn't particularly talented. Other numbers show wages as a share of U.S. gross domestic product are at the lowest they've been since the Great Depression, as is the percentage of Americans working, despite record corporate profits.

Those are ugly economic numbers. We humans expect they'll continue, a phenomenon called recency bias, which makes them extra scary. Fear drives a lot of the heat around the H-1B.

That heat will almost certainly forge a new H-1B system in the current push for immigration reform on Capitol Hill.

How many jobs are we talking about? There are only 85,000 H-1B visas issued each year. Of those, 20,000 go to newly minted holders of advanced degrees from U.S. universities, presumably the best and brightest of immigrants. We want these 20,000 people here, although they should get green cards, not H-1Bs.

Of the other 65,000, more than half the jobs given to H-1B workers go to not-so-high-tech jobs, such as pharmacist, architect and nurse. So let's say on average 45% of H-1Bs go to high-tech workers. That's 29,250 a year. An H-1B holder can stay in the U.S. for three years, plus up to three more if extensions are requested and granted. If every high-tech H-1B visa holder stayed for six years, that'd be a rolling average of 175,500 jobs a year.

One hundred and seventy-five thousand jobs doesn't even make a good monthly jobs report.

Even so, "companies such as York Solutions and thousands of other IT based companies would simply not exist was it not for the fact we had access to a pool of overseas based resources that were able to work on U.S. soil," Richard Walker, managing partner at IT service provider York Solutions, said via an email interview. He also raises the question of why American companies would hire workers from overseas if they could hire American talent.

There's no way thousands of IT-based companies exist solely because of the H-1B, but let's forgive Walker some hyperbole. He seems like a good guy; he's also chairman of a Minneapolis non-profit called Think IT, which develops U.S. IT talent through mentoring programs. I'm sure he would hire only Americans if he could.

But less trusting folks might note that one obvious potential reason to hire H-1B workers is that they are chained to their sponsoring company until they get a green card. Nor do H-1B workers have to be paid the same wage as comparable U.S. workers. An unscrupulous company, or one focused on the short-term numbers, might want to play labor arbitrage.

Here's another reason: not being a U.S. company, you want to staff up in America with people from your base of operations. For instance, an outsourcing firm. Those workers should get L-1B visas.

But outsourcers and companies with outsourcing units, such as IBM and Amazon.com, dominate the list of companies receiving H-1Bs. In fact, Farah Stockman made a strong case in the Boston Globe that the H-1B process has been "hijacked" by outsourcers.

Stockman found that 20% of H-1B petitions granted last year went to just four firms, all outsourcers. Her analysis is worth paying for. She reviews some examples of outsourcers abusing the H-1B system, both proven and alleged (that is, still in the courts). She talks to the congressman who crafted the 1990 Immigration Act that gave us the H-1B, who told her the visas should be replaced with automatic green cards to reduce the potential for abuse.

Not every H-1B recipient gets abused, displaces an American or goes to work at an outsourcer. But the H-1B is ripe for reform.

No matter what you think of the H-1B program, we don't outsource to innovate. We outsource to cut costs. Cut enough, and eventually we can't innovate without outsourcing, as has happened in vast parts of what used to be our manufacturing economy. (See Producing Prosperity: Why America Needs A Manufacturing Renaissance, by Gary P. Pisano and Willy Shih.) It can happen to our IT economy, too. True, reformers rarely get what they hope for. When Upton Sinclair wrote The Jungle, he wanted labor reform, and instead got the Pure Food and Drug Administration. He rued, "I aimed for the public's heart and by accident hit them in the stomach."

The H-1B isn't supposed to aim at our wallets, except by boosting our collective brainpower. That's gone off track. Let's make sure we change the H-1B so it's no longer the outsourcing visa, but the innovation visa.

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