The Biggest Threat to the H-1B Cap

In the last couple of years, a number of proposals have surfaced in Congress to greatly expand the H-1B program, as much as tripling the yearly cap. Many people are concerned about the major impact this would have on U.S. tech workers. (Clearly, I share this concern, but would point out that my other major concern is the lower average quality of the H-1Bs.)

Yet it seems unlikely that those on GridLock Hill will enact such proposals, as they are tied to amnesty for unauthorized immigrants. Next year is a presidential election year, and what with the recent alleged murder of a young woman in San Francisco by an unauthorized immigrant, the murderous rampage in Tennessee by a legal immigrant, Donald Trump’s ill-considered yet apparently quite popular remarks, the SCE and Disney H-1B incidents, and so on, a direct increase in the H-1B cap looks unlikely for the next year or so.

But what IS likely is an indirect way to attain much the same effect as increasing the H-1B cap, in the form of an executive action extending the Optional Practical Training (OPT) portion of the F-1 student visa. OPT allows foreign students to work in the U.S. after graduation for 12 months in general, 29 months for STEM grads. For the latter, then, OPT would run up to 6 years. Unless you believe in wild coincidences, it seems pretty clear that the Dept. of Homeland Security (DHS) chose this 6 figure to coincide with the 6-year duration of the H-1B visa. Moreover, DHS has explicitly stated that that their proposed extension of OPT is motivated as a solution to the “problem” of there not being enough H-1B visas available. In other words, DHS is overtly stating that they intend the OPT extension as an end run around the statutory H-1B cap.

I would guess that DHS’ proposal will be adopted. The industry lobbyists will push hard for it, and sadly, there will not be much opposition. Senator Grassley has expressed concern, good, and of course there is still the lawsuit, which seems to be holding up fairly well so far. But OPT is not widely understood, nor is there sufficient understanding among critics of H-1B of the role of AGE in the whole mess. Review: Most H-1Bs are young, thus cheaper than older (35+) Americans. The legal wage floors for H-1B depend on experience, thus pretty much on age, so hiring young H-1Bs in lieu of older Americans is legal. As I’ve said, in the SCE/Disney cases, AGE was the key factor underlying the wage savings accrued by hiring H-1Bs. OPT workers, by virtue of being new/recent graduates, are almost all young. So, if the DHS proposal goes through, it will become a de facto expansion of H-1B.

In addition, there is my hobby horse, the incorrect assumption — even by many critics of the H-1B program — that the H-1Bs who are hired from U.S. university campuses, rather than imported from India by the Infosyses, are the “good” H-1Bs. Once again, I cannot emphasize enough that this is not just a misunderstanding, but one that is likely to have major consequences, the current OPT proposal being a case in point.

A number of critics of the H-1B program emphasize that the OPT workers enjoy a hiring advantage over Americans in that the OPTs are exempt from employer Social Security tax contributions. Yes, that makes OPTs cheaper to hire than American new grads, but the big savings come from hiring the young OPTs instead of the older Americans.

So, both the Googles and the SCEs will benefit if the DHS proposal is adopted, in almost exactly the same way as from an H-1B increase.

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35 thoughts on “The Biggest Threat to the H-1B Cap

  1. OPT employees are also not protected by the minimum salary requirement so that they can be even cheaper than H-1Bs subject to the labor certification protections. They can even work for free for a year; payment requirements do not begin until the extension period.

    This will make a US degree even more desirable. With the greed of the universities more US students will be pushed out of enrollment limited programs.

    This should also have an effect on the number of advanced degree candidates since much of that group is biding time to a green card.

    A family member today told me her son was studying CS and was surprised when I told her that might not be the best long term career choice. She indicated that the students were still of the belief that that major is one where jobs are abundant. My grandchildren are young but budding techies; I suggested to their mother that pharmacy might be a good career choice (it is hard to outsource abroad pill counting and drug compounding) rather than robotics or programming even though their dad (an engineer not in the field at the moment) is helping them with intro programming.

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    • Yes, the students and their parents are constantly bombarded in the press etc. with statements that jobs are abundant in CS, or for that matter in STEM in general. This is criminal.

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    • Pharmacists in many areas of the U.S. are predominantly foreign graduates who are free to take the “Foreign Pharmacy Graduate Equivalency Examination (FPGEE)” and get licensed. Although demand is fairly strong, salaries are not nearly what they would be otherwise, and working conditions for employed pharmacists are rather poor.

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      • Pharmacy is not a good job either? What is left?

        I try to push my young family members into something that is at least licensed. Healthcare seems like a good place to land. You can’t ship dying or sick people over to India or Mexico, and foreigners just can’t waltz in and take a nurse’s or pharmacist’s job without having a license to practice.

        The last pharmacy I walked into everyone looked like home grown Americans to me. The pharmacist actually had three interns visiting that day. You could see that they were young and excited to be there.

        Contrast that to the lunch group I saw just two days ago. I recognized one of the guys in the group. He is an IT manager where I used to work. He was surrounded by 7 Indians and 1 guy who was not Indian (a U.S. Citizen I suppose).

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        • I’ve been trying to figure that out for nearly a decade now.

          Today I stumbled on some interesting data that the census bureau maintains that compares “Foreign Born” against “Native Born”

          http://keepamericaatwork.com/who-has-the-jobs-between-foreign-born-and-native-born-citizens/

          I have also included the link above showing the data as I found it.

          Yesterday I noticed that the 3rd qtr LCA Application data (H-1B, H-1B1, & E-3) had been released, so I updated this spreadsheet as well

          As you can tell, it is our highest paying jobs that they are going after IF we only look at the LCA data.

          But as the first picture shows, we are getting hammered in all areas and I believe this shows up here because I am NOT YET tracking the L-1, J-1/OPT, H-2, B-1, etc. data

          Folks, make no mistake about it.

          We are in a war for our jobs, not just a few of them, but all of them

          And it is time that we come to grips with that and make the decisions that are necessary to put an end to this crap so that our children might one day have jobs like we had before we were displaced.

          If you look at that second chart, 31% of our jobs in America are the best paying ones which nowadays appear to require a degree.

          I’m not up to speed on this part, so if you know it, please share it.
          How many Americans have degrees?
          18% ?
          More, Less?

          India has over 1 billion people that want our jobs yesterday.
          If 31% of them have college degrees, that is a little over 300 million and we only have about 140 million jobs all told.

          Do the math.
          If we open the floodgates, we will be flooded and since our government does not currently have our backs, we will get the short end of the stick.

          Which is why we must change the conversation about temporary workers on temporary nonimmigrant visas on a nationwide basis, preferably both in print, and on tv.

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  2. Senator Grassley is absolutely correct and valid in his comments. The OPT program especially the STEM extensions are nothing short of a SCAM. I know students every year who work for $40K post their graduation until their H1B is filed. A Six year extension would be a nightmare… The worse will be when the congress actually increases the H1B cap and the executive branch still continues with the 6 year OPT program.

    Proposals like these brings a clear distinction between what the businesses want and what the immigrants want. When I read other forums I come across many Americans who believe that immigrants are ALSO lobbying for OPT and H1B increase which is incorrect. In the media, people come across a lot of sob stories about how a foreign PHD/Master’s student did not get an H1B and now he/she has to go back home. In all honesty, the student is actually complaining about the uncertain and unfair Lottery system and not the H1B limit. However the Businesses and Media use this situation as an opportunity to demand an H1B increase.

    A very straightforward bill is currently in the house HR 213 (to remove per country limits in EB based Green cards) which is very intensively being discussed in immigration forums. Surprisingly they even managed to get close to 50 co-sponsors for the Bill (https://www.congress.gov/bill/114th-congress/house-bill/213/cosponsors). However history suggests that the bill wont even come up for a vote because it has nothing for politicians to make noise about and neither does it have any prominent gains for businesses. If they ever pass this bill, All the noise from Legal immigrants will certainly die down to a great extent.

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    • You make a very good point about the likely permanence of the OPT extension, even if H-1B is eventually expanded.

      But whatever the merits a bill might (or might not) have to remove the per-country caps, it’s really irrelevant to the goals of the industry, thus the goals of Congress.

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    • Pharmacists have to pass a non-trivial licensing exam, so they probably won’t be affected by imported labor as much as some other professions.

      However pill-counting machines and computer checking for drug interactions will take out the profession anyway pretty soon.

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  3. Another end run around U.S. congress. Sigh.

    Did I detect your switching [for the first time I think] to the more pc terminology “unauthorized immigrant” ?… Still – not as pc as “undocumented” immigrant.

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    • I’ve been using the term unauthorized immigrants for many years, at least as far back as 2006, when I taught a freshman seminar on immigration; see the projects list for the course.

      I’ve discussed this issue before. The term undocumented is silly, and the slogan “No person is illegal” irks me, as does the companion slogan, “Being here illegally is only a civil offense, not a criminal one.” Nevertheless, I did make a conscious decision long ago to minimize my usage of the word illegal, as a gesture of respect to the activists on that side of the issue, many of whom I admire.

      I would also add that I don’t make such a sharp distinction between legal and illegal immigration. For example, an engineer who got his green card via an employer is here legally, yes, but in all likelihood that green card was due to the employer falsely (though again legally) claiming that no U.S. citizen or permanent resident was available for the job. See my 1994 LA Times op-ed.

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  4. Good point about the green card certification being likely fraudulent.

    I would say that while crossing the border without authorization may only be a civil offense, failing to register within 30 days as an alien IS a misdemeanor (criminal) offense – a fact often overlooked.
    INA §262(a), (c).
    INA §266(a), (b).

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    • Well, again, the green card applications are not technically fraudulent; they comply fully with the law. But they are NOT consistent with the putative goal of the law to resort to hiring foreign workers only if qualified Americans are not available.

      Another example of this theme is immigration via the Fourth Preference, which allows (in most cases naturalized) U.S. citizens to sponsor their adult siblings for immigration. It is very often the case that the sibling settles in a location hundreds or thousands of miles from the sponsor, and they see each other only once every few years or so. This is totally counter to the “family reunification” intent of the law.

      Again, that is why I think the legal/illegal distinction is often so pointless. Besides, if their being here illegally (or alegally, as some insist), hey, just legalize them! Solves the problem, right?

      I believe the vast majority of Americans support the idea of immigration in concept, and are welcoming to immigrants. But they would want a sensible immigration policy, a matter in which they have NO say; it’s all a tussle between the special-interest groups and selfish politicians on all sides.

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  5. The green card certification that no U.S. citizen was available for the job in most cases is being made in bad faith. It is a matter of the degree of enforcement, and the strictness of regulatory interpretation that determines what constitutes a “good-faith” effort and hence what is “legal”.
    It does not necessarily need a change in the law, only a change in enforcement interpretations (we have seen how much that can change in the other direction…).
    Unfortunately, there is no political will in the DHS to be more stringent in enforcement and in protecting the jobs of American citizens – quite the opposite.

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    • While I agree that there are some gray areas in the law and regs, and deft exploitation of the ambiguities, it’s not primarily a problem of lack of enforcement. The biggest single problem with H-1B and green cards, as I constantly point out, is AGE. Younger workers are cheaper. So as long as the employer tags the position as entry-level, with a corresponding salary, they will able to legally hire the foreign worker. The employer can, for instance, recruit extensively but only at college campuses. They can say (maybe even sincerely) that they made a good-faith effort to find an American new grad.

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    • If as the result of the green card labor certification process a qualified candidate is found, there is no rule requiring that the foreign potential immigrant be replaced by the US worker wanting the advertised position. This should certainly be a requirement otherwise the advertisement for the position was fraudulent.

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  6. Yes, the tiered wage classifications are definitely a major means of manipulation.
    But still, I think there would be quite a few Americans willing to take many of the jobs even at the lower wages. Just they tailor the ad (and publish it obscurely) to the green card person they already have selected for the job. Dangling the promise of a green card is a major way of getting and keeping good H-1B candidates. If the employer is seen not to follow through on targeting the green card to the H-1B staff, the employer loses this powerful tool.

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    • Yes, in many cases a more experienced American would be willing to take an entry-level job. But he/she may not be aware of the job, as in my example of the employer only recruiting on college campuses. Since the job is entry-level, it would be perfectly legal to publicize the job in venues of workers at that level.

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  7. Prof. Matloff,

    Your information about OPT extension is incorrect. Current law allows a 17 month OPT extension for STEM majors working in a related field after initial 12 month work authorization. This extension, however, can only be used once. Getting a higher degree makes one eligible for another 12 month OPT, but not the extension.

    President Obama’s executive action allows OPT extension once per degree level. To get 58 months of OPT (It’s not 60 months) one needs to get a BS, go on OPT, work for 29 months then get a Masters and work for 29 months again, hardly a “de facto expansion of H-1B”.

    Also, not all H1B visa holders are cheaper. I am 25 years old and make over 250k per year. I gradated from MIT EECS with a SB and a SM with near perfect GPA. I know plenty of other H1B visa holders who make much higher than industry average.

    You assumption about Google hiring cheaper workers is also incorrect. Anyone familiar with Google’s hiring process can easily tell you that visa status is not even factored in while making hiring decisions, it is based purely on merit.

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    • Please go back and look at the details of the proposed OPT expansion.

      Also, you are misquoting me, in several ways. First, I don’t say that firms hire H-1B because they are cheap. What I say is that besides cheap labor, another big appeal of H-1B to employers is immobile labor. In fact, the higher the pay, the more important it is to keep the worker immobile. The employer can’t keep an American worker from leaving, but through green card sponsorship they render the foreign worker effectively immobile. I’ve said many times that for a lot of employers, the immobility is much more important than wage savings.

      Second, when I talk about cheap labor, I’ve always explained that cheap means relative to the compensation that that foreign worker would command on the open market, NOT relative to the “industry average.” Nice try.

      Finally, I have always strongly supported bringing in “the best and the brightest” from around the world, and facilitating their getting green cards etc. Although I am NOT impressed by your claimed “near perfect GPA” — I often find that the ones with the best grades aren’t necessarily the smartest, the most creative etc., and indeed some avoid taking “risky” classes — the mere fact that you say you have a degree from MIT suggests to me that you might be in that B/B category, in which case again, I think policy should favor people like you.

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  8. As a South Korean your posts about the H1b visa are shockingly eye opening. Recently, top tier university grads here are nearly obsessed with this “American Dream”: either stay in the country for a short time while frantically applying for American companies in the hopes of getting H1b and eventually PR, or leave the country first to get an advanced degree mostly in economics, finance, any STEM fields… and then get hired by American startups or big corporations.

    They all rave about the visa and the “trustworthy, rational and not greedy(unlike Korean ones) at all” employers who support it, claiming that it is a godsend, which allows them to work in the US where one’s abilities and skills are given due respect and compensation, which is why they have been offered a job. They believe that it is their exceptional credentials and brilliance that got them the job, urging other people to grab the golden opportunity and “succeed” like themselves.

    Grads from many areas dream of this: mainly CS, engineering, finance, economics, statistics, medicine, nursing, pharmacy… etc. the list goes on. I genuinely thought the US was in dire need of international talents, but this blog has just given me a whole new perspective. Very interesting. If you don’t mind me asking, then what happens to most of the H1b workers after they get PR? It seems to me that except for the few who are truly talented, they are going to suffer from this H1b situation eventually?

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      • I’m working with two people from india now.
        One around 40 and one around my age of 57.
        Both are either unemployed or seeking minimum wage jobs just so that they can provide for their families.

        Both worked like I did in software

        All 3 of us are desperately seeking work that will allow us to provide a roof over our head and provide for our families.

        I guess the best way to look at it is when you have a country with 140 million jobs and then you bring in 40 million temporary workers on temporary visas and move them to the head of the line, up to 40 million americans and even temporary workers on temporary non immigrant visas are going to be displaced.

        Somehow we need to find a way to create more jobs in every country rather than pursuing this game of musical countries that displaces PEOPLE everywhere it is played.

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  9. There’s a short article at Computerworld now on this.

    http://www.computerworld.com/article/2971523/it-outsourcing/working-stem-students-may-be-forced-to-leave-us-next-year-says-court.html

    ‘One GOP aide for a Senate Judiciary Committee office, who wasn’t authorized to speak and could only comment anonymously, said in response to the court ruling: “The Administration’s abuse of the OPT program is extraordinary. American workers are paying the price daily.”‘

    Only true if ‘The Administration’ is generic, referring to both parties, who have always strongly supported hiring foreign techs, they are well paid by business for doing so.

    Still our best chance is if people try to make foreign techs an election issue. This is the time when politicians pretend to care about American jobs, and Romney was hurt by his past connections with China outsourcing, though Obama strongly favors outsourcing / insourcing. A lot depends on the media, who protect the corporate viewpoint. It would be highly embarrassing for Obama or Hillary to be asked about the firings at Disney & SCE, but no asks even Obama’s press secretary [for example: ‘Should they all send their resume to Obama, like that guy 4 years ago who’s never been mentioned since?’]. But they don’t ask; it might harm the reporter’s career I think.

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    • I really don’t think the media is generally biased on this issue. But they are woefully ignorant, in large part because of the industry’s extremely deft PR campaign.

      I have suggested to activist organizations that they meet with newspaper editorial boards, just like the industry PR people do. But to my knowledge, none of them has ever heeded my advice.

      I do suspect that the H-1B issue has been declared off limits by the candidates in debates. But if Clinton is asked, she’ll have a ready answer, along the lines of clamping down on the Infosyses but also stating how the Intels need H-1Bs.

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  10. Well, first of all, it is WRONG to say “OPT would run up to six years!!” During the OPT, one would have to apply for a H1B VISA, which after paying for the fees and the lawyer and filing your case is just hit or miss!! (it’s now lottery-based because of the limited spots allotted each year). Second, if you are an OPT worker present in the U.S. for five or more years, you PAY MEDICARE AND SOCIAL SECURITY TAXES like others!! Third, there are no studies showing OPT workers are younger than American workers yet the relationship between AGE and the PREVAILING WAGE is also unknown.

    Last, and just as a reminder, OPT workers PAY TAXES (feds/state income taxes) like other American workers!

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    • Actually, even DHS has said that the purpose of extending OPT is as a workaround to the shortage of H-1B visas. In other words, the person uses OPT as a way to get the right to work, instead of using H-1B to do so.
      You don’t need studies to know whether it’s raining; just look out the window. OPT workers are STUDENTS, and most students are YOUNG. End of story.

      It’s my understanding that you are wrong concerning Social Security tax, but to me it’s a minor issue anyway.

      And did you ever stop to think that the Americans who are displaced by OPTs, H-1Bs and so on are paying NO income tax if they can’t find a job?

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