Date: Tue, 3 Mar 2009 23:47:51 -0800 From: Norm Matloff To: Norm Matloff Subject: vested interest decry "protectionist" Grassley/Sanders To: H-1B/L-1/offshoring e-newsletter Enclosed below are an article from an HR magazine, and an editorial by the Washington Post, blasting as "protectionist" the recent legislation that placed restrictions on hiring of H-1Bs by TARP recipients. The "P-word" is always invoked in these contexts by the parties with vested interests, and thus might be dismissed as such, but still one should explain why really it's much ado about nothing. The fact is that any immigration policy of any major nation is protectionist. Moreover, that protectionist nature is fully accepted by the citizens of said nations. For example, U.S. immigration policy disallows the immigration into the U.S. of people with criminal records or with tuberculosis. To my knowledge, no organization promoting immigration--not even the American Immigration Lawyers Association (AILA), not even MALDEF, not even the Southern Center on Law and Poverty, not even the ACLU, not even the Cato Institute--has ever advocated changing this policy. There may be an individual case here and there in which these organizations get involved, but none of them has ever advocated dropping laws barring these categories of people from immigrating. My point is that these laws are protectionist--their purpose is to PROTECT the people who are already here (both natives and earlier immigrants). So we are all protectionists, yes, even the Cato Institute. There of course is a question as to where to draw the protectionist line. We protect people's safety and health, so we might wish to protect people's economic well being too--or we might not. After all, barring criminals from immigrating protects virtually all of us, whereas at least in theory employment-based immigration might have substantial numbers of both winners and losers. So yes, a discussion on employment-based immigration might be held--and in fact, it already has, with the conclusion that some protection for Americans' economic health is appropriate. That's why H-1B law, for instance, requires that employers pay the foreign workers prevailing wage. That law is riddled with loopholes, but the point here is that none of the above immigration-promoting organizations has argued that the prevailing wage requirement should be dropped. So we are all protectionists, even those who are now decrying the recent legislation on H-1B as protectionist. Indeed, those objections constitute rank hypocrisy. The industry lobbyists on H-1B (including, as always, the AILA), have repeatedly stated that the current worker protections in H-1B law are proper. Just today Microsoft, in answering a letter from Sen. Grassley regarding Microsoft's layoff policy for H-1B workers, included the by-now obligatory statement that fraud in the H-1B program must be stamped out. Again, the problem is gaping loopholes, not fraud or other violations of the law, but the point is that Microsoft is tacitly agreeing that U.S. workers ought to be protected. Indeed, every major entity lobbying Congress for a higher H-1B cap has made such statements on numerous occasions. Given that, how can they use the word "protectionist" now? (I'll comment on the Microsoft letter tomorrow.) Some in India have even claimed that the recent legislation violates international trade agreements. They may be surprised to know that the legislation, which merely applies the existing H-1B-dependent employer restrictions to TARP recipients, is actually part of the GATS, the world trade agreement reached in the 1990s. And that section in the GATS applies to ALL employers of H-1Bs. So Congress, by enacting the recent legislation, was not in violation of the GATS at all; on the contrary, the U.S. has been in violation of the GATS all these years, by not applying its rules to ALL employers. I've mentioned before that personally, I believe we should not bar foreign goods or services of higher quality than we have in the U.S. My wife and I have bought nothing but Japanese cars, throughout our entire working lives, because we believe the quality is better. Similarly, I have always supported bringing in "the best and the brightest" from around the world. But only a small percentage of H-1Bs are in that league, and I don't support bringing in foreign goods or services simply because they are cheap. And that is precisely the reason why the vast majority of H-1Bs are hired--for cheap labor. The enclosed article claims that the new law will in practice prevent the banks from hiring foreign "geniuses." Again, only a tiny fraction of H-1Bs are outstanding talents, but what about those few that are? Will the legislation effectively block the banks from hiring them? The answer is no. First of all, that hypothetical new Stanford PhD in the article could be hired for 29 months--immediately, no questions asked--under the OPT program. Second, the bank could hire that Cardinal Einstein under the O-1 visa, which is specifically for those of outstanding talent. Third, PhDs and other top professionals have their own fast-track green card program. Both the HR article and the editorial in the Post (a newspaper whose board includes Mrs. Bill Gates) are chock full of all the industry lobbyists' favorite lines, every single one of them false or misleading. As I've addressed all these lines many times in my writings, I'll limit myself to just one here--the claim that H-1Bs are not used for cheap labor. Here is an excerpt from the HR article: # "Congress buys the idea that these employees are brought in to work # for lower wages," Paparelli says. "That's a false perception. # "The vast majority of employers using these visas are law-abiding # employers who incur high fees and costs and additional risks and # subject themselves to criminal liability because they need these # workers and cannot find suitable employee here." Yes, the employers are indeed law abiding--but the law itself is full of huge loopholes that allow the employers to pay the H-1Bs lower wages in full compliance with the law, as even a GAO report found. Just as any firm, from the tiniest startup to the giants like Intel, will make aggressive use of loopholes in the tax code, they do the same for H-1B. And the employers pay Mr. Paparelli big bucks to exploit those loopholes. And of course there is no criminal liability for using a loophole, which is by definition legal. And the American Immigration Lawyers association, through their lobbying of both Congress and the executive branch, put those loopholes in the statutes and regulations. Mr. Paparelli, a very well-dressed man with a CEO-smooth personality, is dissembling to the n-th degree here. As Sen. Grassley said, "No one should be fooled." Norm http://www.workforce.com/section/06/feature/26/20/13/ Protectionism Sweeps Over H-1Bs as Recruiters Sort Out Stimulus Regulations New restrictions cut into the talent supply at a time when economic recovery depends on innovation and specialized skills. By Fay Hansen Harvard Business School's Class of 2010 will send 900 new MBAs out into the job market, but one-third who are non-U.S. citizens will be effectively off limits for recruiters from Bank of America, JPMorgan Chase and Goldman Sachs. All three companies recruit on Harvard's campus but now fall under new restrictions on H-1B visas, the primary vehicle for hiring foreign students graduating from U.S. universities. The new H-1B restrictions, which are part of the American Recovery and Reinvestment Act of 2009 signed into law on February 17, apply to any company receiving Troubled Assets Relief Program funds. If Citigroup, for instance, wants to hire Stanford University's top Ph.D. computer science graduate and that graduate happens to be an Indian nonresident, Citigroup's recruiters will find that their hands are tied because the company is covered under the new law. Still, Harvard's 297 non-U.S. citizen MBAs likely will find work elsewhere; so will the 274 non-U.S. citizen MBA graduates from MIT's Sloan School and the 320 non-U.S. citizen graduates from the University of Pennsylvania's Wharton School--40 percent of its MBA class. The foreign companies that routinely recruit at the top U.S. business schools will welcome these MBAs, while some of the largest and best-known U.S. companies will lose their first-choice candidates to overseas competitors. "Most employers receiving federal funds will not take the risk of filing H-1B petitions because the new requirements are almost impossible to comply with," says Jim Alexander, managing partner at Maggio & Kattar, an immigration law firm based in Washington. The jobs filled by H-1B visa candidates each year represent less than one-twentieth of 1 percent of total U.S. employment, but were singled out for special protection under the $787 billion stimulus act. In fact, the congressional debates about this minuscule number of jobs unleashed a wave of anti-immigrant sentiment that could threaten the entire H-1B category and deter the most talented students and workers worldwide from looking for or accepting employment in the United States. The anti-immigrant wave has been duly noted by the mainstream and business press in India, which closely tracked the passage of the H-1B visa restrictions, warning readers that fewer U.S. firms would be able to recruit Indian science, engineering and computer specialists for work in the United States. H-1B visa holders at U.S. companies blogged about the anti-immigrant sentiments that fueled the restrictions and the insults they routinely endure from those who view H-1B visa workers as "underpaid" and "subservient." With companies relying on global talent pools to fuel growth, some anti-immigrant forces have created a poisonous atmosphere for recruiting. "With the H-1B restrictions in play, some jobs will go unfilled, some will be filled with lesser candidates, and more U.S. companies will move work overseas," says Ted Ruthizer, partner and business immigration co-chair at Kramer Levin Naftalis & Frankel in New York and a lecturer at Columbia Law School. `Dependent' company restrictions The current cap on the number of H-1B visas granted each year is 65,000, which includes 5,400 set aside for candidates from Singapore and 1,400 for candidates from Chile. An additional 20,000 H-1B visas are available for advanced-degree students graduating from U.S. universities. The new H-1B restrictions contained in the stimulus act require any company that receives money under TARP to comply with onerous rules that previously applied only to "H-1B dependent" companies, defined as those with 15 percent or more of their workers on H-1B visas. Under the new stimulus act restrictions, the 15 percent threshold does not apply to TARP recipients. Any company that receives federal funds and petitions for even one H-1B visa is now covered by the dependent employer rules. Those rules require employers to make various attestations about their recruiting, hiring and layoff practices. A no-displacement attestation requires the employer to state that it has not and will not lay off a U.S. worker in a similar position within 90 days before or after filing an H-1B petition. "In addition to the required attestation that there have been no layoffs in similar positions, the employer must retain paperwork on any employee in a similar position who left the company for any reason, including voluntary quits and those fired for cause," Alexander says. The new no-displacement requirement means a company that laid off employees in January, before the restrictive provisions were added to the stimulus bill, is essentially barred from filing H-1B petitions in the current round, which begins April 1. If the employer places an H-1B worker at a customer site, the employer must attest that the customer has not laid off a U.S. worker in a similar position within 90 days before or after the date of the placement. "This means that the employer must be aware of any layoffs at the customer's site and must basically micromanage the customer's labor activities--not the best scenario for positive business relations," says Angelo Paparelli, business immigration partner at Seyfarth Shaw, who maintains a bicoastal practice in Irvine, California, and New York. The new restrictions also require any employer receiving federal funds to make a recruitment attestation that it has made a "good faith" effort to recruit a U.S. worker for the position to be filled by the H-1B candidate. The recruiting effort must meet industry standards, including standards for posting and advertising the job, and must include salary offers that are as high or higher than the salary offered to the H-1B candidate. "The `good faith' recruiting attestation requires affirmative labor market testing on an ongoing basis," Paparelli notes. The new restrictions also eliminate two important exemptions from the original dependent rules. The original rules include exemptions for jobs paying at least $60,000 a year in cash compensation and for jobs that require a master's degree or higher in a specialty related to the intended employment and generally accepted by the industry as a necessary credential for the job. These two exemptions cover many H-1B positions, but are not allowed for employers receiving federal funds. "The dependent employer provisions add a cost of compliance in an already financially stressed business environment," Paparelli notes. "The attempt is to add additional costs and hardships for employers." Employment decision consequences Anti-immigrant advocates continue to claim that employers can adequately fill all H-1B jobs with available U.S. citizen employees. For years, this claim has been undercut by labor market studies and extensive data on university enrollments. Additional studies have documented the central role of immigrant talent in U.S. startup companies, patent filings, technological advancement and job creation. Deep, long-term shortcomings in the U.S. education system have left the country dependent on foreign-born scientists, engineers, computer specialists and other highly skilled workers to fuel the research and innovation that drive economic growth. "H-1B visa costs average $10,000 per candidate in government fees and attorney costs, and employers would certainly avoid these costs if they could," Ruthizer says. Experts agree that solving the outright labor shortage for some jobs and addressing the acute mismatch in skills for others will require substantial reforms in U.S. secondary schools, the university system and training programs. The U.S. companies that are heavy users of H-1B visas have poured billions of dollars into trying to improve the supply of qualified U.S. workers. The Bill and Melinda Gates Foundation, funded by the sale of Microsoft stock, has invested more than $2 billion to improve U.S. secondary education, with a focus on science and technology, plus an additional $1.7 billion for college scholarship programs. Intel, Oracle and other H-1B users have pumped billions more into the U.S. education system. In addition, by law, $1,500 of the fee that employers pay for every H-1B petition goes to scholarships and training programs reserved for U.S. students. In recent months, anti-immigration forces in Congress have seized on the very limited cases of H-1B fraud as a vehicle for reducing or banning H-1Bs. "Congress buys the idea that these employees are brought in to work for lower wages," Paparelli says. "That's a false perception. "The vast majority of employers using these visas are law-abiding employers who incur high fees and costs and additional risks and subject themselves to criminal liability because they need these workers and cannot find suitable employee here." Employers have worked for years to increase the cap for H-1B visas from its current level, which experts agree is inadequate. The new H-1B restrictions signal a serious setback for this goal and for the broader call to let labor markets and business needs drive recruiting decisions. "Cap removal will now be an uphill battle," Ruthizer says. "We've heard discussions about applying labor certification requirements for all H-1B visas," Alexander says. "That would greatly reduce the number of H-1Bs." The Department of Labor certification process now entails long waits for a review with additional delays stretching into years if there are any questions. "By that time, the business opportunity has evaporated," Alexander says. The new H-1B restrictions will remain in effect for two years. "Employers need to make sure that they are in contact with their congressional delegation and that Congress understands that limitations on foreign workers will simply mean that more jobs will be moved offshore, for example, to Canada, where the immigration restrictions are not as tight," Alexander says. http://www.washingtonpost.com/wp-dyn/content/article/2009/03/01/AR2009030101619.html A Wall Built With Visas How a move to protect American workers could instead cost U.S. jobs Monday, March 2, 2009; A16 THE ECONOMIC stimulus package signed into law last week by President Obama contains a provision antithetical to innovation and domestic prosperity. That provision makes it even harder -- some say impossible -- for companies that receive government bailout money to hire foreign employees for specialized work. The chief sponsors of the initiative, Sen. Charles E. Grassley (R-Iowa) and Bernard Sanders (I-Vt.), say that they are concerned about the plight of laid-off Americans. And they are rightly critical of companies that abuse the H1-B visa -- meant for highly skilled foreign workers in specialized fields -- to hire low-skilled workers who accept a fraction of the pay commanded by Americans. Those employers should be and are being held legally accountable; last month, executives of a company in Mr. Grassley's home state were indicted in connection with fraudulent H1-B applications. But erecting even more hurdles to the already rigorous H1-B hiring process could backfire in more ways than one. Even before the Grassley-Sanders proposal, companies had to make a case that a would-be foreign hire had unique skills or expertise that made him the best candidate for the job. The stimulus provision would add to the hoops companies have to jump through. For example, a company that accepted bailout dollars would be prohibited from hiring a foreign worker within 90 days of a layoff -- even if the foreign worker is not a candidate for a vacancy created by that layoff. The company would have to certify that it made a "good faith" effort to hire an American for the position and that it considered training a U.S. worker to fill the spot. The new requirements would expire in two years. Shutting out top talent from overseas will do nothing to help the U.S. economy or American workers. Making it harder for U.S. companies to hire the best and brightest when they are most in need of cutting-edge technology and true innovation is nonsensical. Such a move would discourage bright foreign students from elite universities from even seeking jobs here; that is a loss to the students, their prospective employers and to the country. Companies who see their opportunities to hire such students evaporate may outsource even more jobs, especially those that can be done on a virtual or consulting basis.