Senate Committee Debates Whether to Allow H-1B Guestworkers to Replace U.S. IT Workers
The Senate Judiciary Committee explored important economic questions this week. Should businesses be able to lay off qualified U.S. tech workers and replace them with lower paid foreign workers? Is there a shortage of skilled Science, Technology, Engineering and Math (STEM) workers—or an oversupply? And even if there is such a shortage, should we import temporary non-immigrant labor from abroad, or would it be better to let the free market work long enough for wages to rise and more students to be attracted to these fields?
The committee’s Republican and Democratic members disagreed with each other without regard to party labels. No senator, in fact, seemed more concerned about the rights of U.S. workers and their economic outcomes—and more skeptical of claims made by the business community—than Sen. Jeff Sessions of Alabama, a conservative, anti-union Republican. Two Democrats, Sen. Amy Klobuchar (D-MN) and Sen. Chuck Schumer (D-NY) took the side of big business, along with Sen. Orrin Hatch (R-UT), Sen. John Cornyn (R-TX) and Sen. Jeff Flake, while Sen. Dick Durbin (D-IL) and Sen. Chuck Grassley (R-IA) defended the interests of U.S. workers.
Most Americans probably think it is illegal to lay off an U.S. worker and replace him with a temporary foreign worker. Yet Prof. Ron Hira and several other witnesses testified that this is not just a common practice, it is the primary use of the H-1B visa program. (Hira points out that most of the top 10 users of the H-1B visa are firms that outsource and offshore U.S. IT jobs.) When Ben Johnson of the American Immigration Council said replacing U.S. workers should not be prohibited, Sens. Hatch, Klobuchar, and Flake all agreed; in fact, they voted in 2013 to remove language from the immigration bill that would have made it illegal to use the H-1B visa to replace U.S. workers. And all three are sponsors of the “I-Squared” bill, which would triple the number of temporary non-immigrant foreign workers replacing Americans.
Witnesses testified that Southern California Edison (SCE), which recently fired 500 U.S. workers and made them train their H-1B replacements (as a condition of receiving any severance pay), is only the tip of an iceberg of job displacement. They named Disney World, Cargill, Northeast Utilities, and Harley-Davidson as other prominent examples, and estimated that 40,000 U.S. workers lose their jobs each year and are replaced by H-1Bs supplied mostly by Indian staffing companies like Tata and Infosys. One witness worked at Infosys, which had an internal prohibition against supplying American workers to its customers, and which imported thousands of young Indian college graduates to replace U.S. workers because the Indians could be paid far less. SCE, for example, replaced its skilled American workers, who earned $110,000 a year, with less skilled Indian workers paid only $70,000.
Despite the testimony and numerous news stories that recount the facts, Sen. Schumer stubbornly insisted that, “Plain and simple, it’s a myth that the H-1B visa program takes jobs away from Americans.” And Sen. Cornyn stated flatly—and incorrectly—that it’s illegal to replace an American worker with a cheaper foreign worker. It’s impossible to say whether Sen. Cornyn believes what he said and is just misinformed, or whether he knows it’s untrue but is deliberately obfuscating. He certainly has had plenty of opportunity to learn the truth. (And if it’s already illegal, why do Sen. Hatch and the others oppose changing the law to make clear that it is illegal?)
Sen. Hatch was more honest. He knows that as long as a company pays at least $60,000 to its H-1B employee it isn’t required to recruit any Americans before hiring the H-1B and is allowed to fire an American to make room for the H-1B. His solution was to raise the minimum pay to $95,000, but Jay Palmer, the former Infosys employee, said the outsourcing companies would violate the law, making it seem on paper that they paid $95,000 when in fact they keep most of the salary and pay the H-1B workers little more than they would make in India.
The debate over whether the U.S. needs more temporary guestworkers had two sides: those who simply parroted business claims about not having enough skilled workers and those who looked at the objective evidence, such as whether wages are rising in response to the supposed shortage. (Spoiler alert: wages aren’t rising, which is strong evidence that there’s no shortage of skilled workers.)
Businesses often say that the demand for H-1B visas is so great that all of the available visas are taken within hours of their being made available. It’s true that they get taken quickly, but economist Hal Salzman explained that it has nothing to do with skill shortages. Rather it is all about price. If Walmart has a 40 percent-off sale on color TVs and they all get bought within hours, it isn’t proof that there’s a shortage of TV sets, but only that there’s a shortage of really cheap TVs. The same is true for H-1B’s, who are nothing more than young IT workers at 40 percent off the going price.
Of course businesses want cheap labor, but shouldn’t we let the free market work a little while before having the federal government intervene to tilt the playing field against workers? If the skills supply really were too low, businesses would have to pay more to attract engineers and IT workers back from the financial services industry. And if the IT industry starts paying more for IT workers, more U.S. STEM students will go into IT instead of getting MBAs or taking jobs on Wall Street.
In fact, however, there is no shortage of skilled U.S. science, technology, engineering or math (STEM) workers. As Prof. Salzman testified, “The U.S. supply of top performing graduates is large and far exceeds the hiring needs of the STEM industries, with only half of new STEM graduates finding jobs in a STEM occupation (and only a third of all STEM graduates in the workforce hold a STEM job).” U.S. guestworker policies that allow businesses to substitute foreign workers for skilled Americans will in the long run undermine U.S. innovation and competitiveness because they steer U.S. students away from STEM fields, and especially from IT. Salzman testified that “U.S. colleges graduate far more scientists and engineers than find employment in those fields every year—about 200,000 more—while the IT industry fills about two-thirds of its entry-level positions with guest workers.”
Increasing the availability of H-1B visas, as Sen. Klobuchar and her cosponsors propose, would help IT companies cut their wage costs and increase their profits, at the expense of U.S. graduates with STEM degrees. It’s a recipe to worsen inequality and undermine the faith of average Americans in their government. I agree with Sen. Sessions: “We have no obligation to yield to the lust of big businesses… They all want more profits and lower pay for workers.”
Enjoyed this post?
Sign up for EPI's newsletter so you never miss our research and insights on ways to make the economy work better for everyone.