Date: Wed, 14 May 2008 00:30:53 -0700 From: Norm Matloff To: Norm Matloff Subject: more on the Heritage Foundation panel discussion To: H-1B/L-1/offshoring e-newsletter Yesterday I posted an article reporting on a Heritage Foundation panel discussion on H-1B; see http://heather.cs.ucdavis.edu/Archive/HeritageFound2.txt I noted that, according to the press report, the discussion focused on enforcement issues, which are, as I've explained many times, basically NON-issues. The factions supporting H-1B, e.g. the industry, the immigration lawyers and the general anything-business-wants-it-should-get crowd, love to use the enforcement (non-)issue to steer the conversation away from the real issue, which is the huge loopholes that allow employers to legally use H-1Bs as cheap labor. Accordingly, I expressed disappointment that a panelist who understands the H-1B issues quite well, George Fishman, chose to emphasize the enforcement issue, though I absolved him of blame under the "don't shoot the messenger" doctrine. (Fishman works for Rep. Smith, who in turn must answer to the Republican leadership in order to keep his committee chairmanship.) I also expressed disappointment and some bewilderment that even a representative of FAIR took the same route. After I posted my comments to this e-newsletter, I heard from Fishman and an analyst at FAIR whom I know. Both of them felt that the press report, and thus my analysis of it, did not tell the whole story. First of all, the "representative from FAIR" mentioned in the article turned out not to be a staffer with the organization, but rather someone from their advisory board. Second, it turns out that Fishman's presentation was indeed more diverse and nuanced than what was reported. He has kindly shared a copy of his remarks with me, and allowed me to quote it here. Here are his main points, with my comments: * "H-1B visas are both critical to the health of our economy and may be subject to abuses that can harm American workers." I disagree, and commented on this statement yesterday. * The main bad guys are the Indian body shops. This is another issue that I believe is not very relevant to the H-1B debate, as I've said often. First, the abuse--use of loopholes to avoid paying market wage, not recruiting American workers, etc.--is across the board, not just in the body shops. Second, you could eliminate all the body shops tomorrow and yet accomplish nothing; the current clients of the body shops would just hire more H-1Bs directly. * Rep. Lamar Smith, Fishman's boss, should get credit for the 1998 enactment of the H-1B-dependent rule, but it has not been enforced well. Fishman added, "I should note that in the Senate, Senators Grassley and Durbin propose to completely prohibit firms more than half of whose employees are H-1B aliens from using the H-1B program." Again, the enforcement issue. Also, unfortunately, no mention of the fact that Durbin/Grassley would extend the H-1B-dependent restrictions to ALL employers, a provision which would be much more useful than the "greater than 50" rule. * The prevailing wage requirement in H-1B law is full of loopholes. Yes! See for example my University of Michigan Journal of Law Reform, downloadable at http://heather.cs.ucdavis.edu/MichJLawReform.pdf * How can the H-1Bs be "the best and the brightest," as claimed by the industry, if they are just making average pay for their occupations? Good. This of course is from my recent CIS article, http://heather.cs.ucdavis.edu/CIS2008.pdf Note that Sherk continued to answer that the H-1Bs are "the best and the brightest" because they make more than butchers do, as you can see below. See my recent posting, http://heather.cs.ucdavis.edu/Archive/HeritageFound.txt * Microsoft is having to move work to Canada due to lack of H-1Bs. I've rebutted this point elsewhere. * "And much fewer than half of all H-1B workers have graduated from U.S. universities with master’s and doctorate degrees. These are the workers most highly sought after by American high-tech firms. These are the workers with the strongest claims on H-1B visas. As our technology firms rightly argue, why would we want to give foreign students graduate educations in high-tech fields in our premier universities and then send them back to work for our competitors abroad? Thus, might it make sense to limit any new supply of H-1B visas to just such workers?" This point of view is popular among a couple of influential analysts who have been critical of H-1B, but I completely disagree. First of all, I strongly dispute the notion that having a graduate degree makes an H-1B or for that matter a U.S. worker "better"; it's simply not true. Second, if we are so worried that they will carry their U.S. education back to our foreign competitors, why are we allowing them to come here for that education in the first place? * Enforcement by the DOL is poor because it is only complaint-driven. My point, of course, is that there really is not much for them to enforce, given the loopholes. * H-1B fraud in China, with fictitious addresses etc. Again, enforcement. The FAIR advisory board member also emphasized enforcement, as I reported yesterday. Given all of this, it is no wonder that the author of the second article on the panel discussion, enclosed below, came to the conclusion that everyone present agreed that H-1B is basically an enforcement issue. Hence the title of the article, "Congress Should Increase H-1B Visa Cap, Enhance Enforcement Efforts, Speakers Say." Through some elaboration given to me by the FAIR staffer, I now see where FAIR's board member "is coming from" on this issue. This makes his remarks stressing enforcement understandable--but he's still wrong. Enforcement is NOT the issue. This is absolutely basic. I've explained this in detail elsewhere, but again you can quite quickly see it by noting that the industry lobbyists love to steer the conversation to enforcement. So, I greatly appreciate the supplementary information by the FAIR staffer and George Fishman, both of whom I know and highly respect, but I do have to say I'm still disappointed. On the plus side, I wish to point out that FAIR, along with Programmers Guild founder John Miano, is mounting a legal challenge to the foreign student Optional Practical Training extension that was declared recently by executive branch fiat. This was an outrageous act, with significant adverse impact on U.S. citizens and permanent residents (see the Rob Sanchez op-ed I posted yesterday), so I say more power to FAIR and Miano. I look forward to seeing the outcome. Norm Congress Should Increase H-1B Visa Cap, Enhance Enforcement Efforts, Speakers Say The cap on the number of H-1B visas for highly skilled workers should be increased, but enforcement also should be increased to detect visa fraud, speakers said at a May 12, 2008 Heritage Foundation meeting. James Sherk, fellow at the Heritage Foundation, said admitting only 65,000 H-1B workers each year "hurts the high-tech industry in the United States and pushes the smartest people to work in competing countries like China." Some companies in need of highly skilled workers have moved branches to countries such as Canada and Mexico, Sherk said. By raising the H-1B visa cap, Congress would be "insourcing" jobs, allowing companies to fill vital positions and expand within the United States, Sherk said. H-1B visas are granted to highly skilled, college-educated, temporary foreign workers for a maximum of six years, but only 65,000 H-1B visas may be issued per year. On April 8, Citizenship and Immigration Services announced that it had received enough H-1B petitions to meet the fiscal year 2009 cap. The agency received 163,000 visa petitions in a five-day period, two-and-one-half times more petitions than available visas. Panelists also agreed that the current attestation-based H-1B visa process includes some "bad apple" employers that abuse the system. "H-1B visas are critical for U.S. prosperity, but may be subject to abuses that harm American workers," said George Fishman, chief counsel for the House Judiciary Committee's Subcommittee on Immigration, Citizenship, Refugees, Border Security, and International Law. The H-1B program has "never been properly policed by the Labor Department" and the current system that requires only attestations from employers includes "lots of program fraud from 'bad apple' employers," Fishman said. "Systemic fraud needs to be addressed," he added. "Although the H-1B program can and usually does operate to benefit companies and American workers, giving the Labor Department authority to conduct random checks may be one way to lessen abuse." Arguments Against H-1B Cap Increases 'Misleading.' Sherk said arguments commonly made against increasing H-1B visa caps are without merit, and on the "economic merits" an increase in the H-1B cap would be good for companies and U.S. workers alike. In a May 6 paper published by the Heritage Foundation, Sherk said the arguments that H-1B workers are not especially talented are based upon "a misleading metric of talent." Instead, Sherk wrote, the education and wage levels of H-1B visa holders demonstrates that they are needed, highly skilled workers. Sherk pointed to a study by the Center for Immigration Studies, which found that most H-1B employers pay workers market wages, instead substantially more than other workers in their occupations. The group concluded that if the foreign workers were outstanding talents, they would be paid accordingly, and therefore H-1B workers are only "average." "This claim relies on a highly misleading measure of ability," Sherk said. "The fact that H-1B workers earn wages comparable to those of their highly skilled co-workers does not mean that they are average workers or lack advanced skills." In fact, Sherk argued that H-1B workers have much more education than the typical American worker. H-1B workers must have the equivalent of a bachelor's degree or higher to qualify under the visa program. "Virtually no H-1B employees have less than a bachelor's degree, and 31 percent have a master's degree," Sherk said. "This compares to 6 percent of American workers with a master's degree." H-1B workers also earn high wages because of their increased skill level, Sherk said. The median H-1B worker earns $74,250 a year, 90 percent more than the median private sector salary of $39,100, he said. In addition, Sherk said, the advanced skills of H-1B workers enable companies to grow. When a company cannot hire a highly skilled foreign worker, American workers who would have been hired as part of a business expansion are not hired, he said. For example, if a company wants to develop a new product, it may seek out a highly skilled H-1B software engineer. In turn, American workers with "complementary skills" such as sales staff, technical support staff, and others, also will be hired, he said. This helps American workers, Sherk argued. Raising the H-1B cap also would generate tax revenue for the government, Sherk said. "Because H-1B workers are highly compensated, they pay high taxes," he said. Sherk's calculations estimate that raising the H-1B visa cap to 195,000 visas per year would raise $69 billion in new tax revenue over eight years. This figure focuses on federal taxes, and does not include the tax revenue that would be generated by these workers for state and local governments, he said. Cap Increases Should Address Market Changes "The H-1B program is important for the prosperity of U.S. companies, and most of the time the program is used properly," said Kelly Krieger Hunt, senior manager of immigration policy for the U.S. Chamber of Commerce. "These visas are going to more than just computer programmers and high tech engineers, they are given to all sorts of highly skilled immigrants in a variety of industries," Hunt said. "The chamber thinks the cap is just too low to meet market demands." Currently, among workers holding a bachelor's degree or higher, the unemployment rate is about 2.1 percent, Hunt said. "That is more than full employment, so there is a definite need for these highly skilled, foreign workers," she said. "Though the chamber has supported a variety of cap increase measures, we would ideally like to see a cap that responds to market needs," Hunt said. Several proposals have specified that the H-1B visa cap would increase automatically if the cap was hit within a certain amount of time during the year. "Visa caps set by Congress usually remain unchanged for 20 years or more, so we want a cap that would respond to the demands of the market and employers," Hunt said. Several Cap Increase Bills Pending in Congress Fishman, who works for Rep. Lamar Smith (R-Texas), said Smith's bill, the proposed Strengthening United States Technology and Innovation Now Act (H.R. 5642), or SUSTAIN Act, would be a "good solution" to the immediate need for highly skilled workers. The SUSTAIN Act, introduced March 14, would raise the annual cap for H-1B visas to 195,000 for 2008 and 2009. Additionally, Rep. Gabrielle Giffords (D-Ariz.) March 13 introduced the proposed Innovation Employment Act (H.R. 5630), which would raise the H-1B visa limit to 130,000 for fiscal year 2008 and each subsequent year. Additionally, the bill provides that if the 130,000 cap is reached in the 2009 fiscal year, the number would be increased automatically to 180,000 annually for fiscal years 2010 through 2015. In the Senate, legislation that would temporarily increase H-1B visa caps and "recapture" previously unused H-1B visas was introduced April 10 by Sen. John Cornyn (R-Texas). The proposed Global Competitiveness Act (S. 2839) would give U.S. employers access to approximately 150,000 previously unused H-1B visas and would temporarily increase the level of H-1B visas from 65,000 to 115,000 for fiscal years 2009 through 2011. By Amber McKinney Daily Labor Report 13 May 2008