DHS Unabashedly Biased in Its New OPT Proposal

The Optional Practical Training (OPT) provision for foreign students in the U.S. is now back in the news.  Under OPT, a foreign student can work in the U.S. for a certain time after graduation. As you may recall, earlier this year a court struck down the federal government’s 2008 expansion of the duration of OPT from 12 to 29 months for STEM students, on the grounds that that decision had not been properly put up for public comment as a proposal. The judge set a deadline for a resubmission of the 2008 proposal for public response. The government had been planning to make a new OPT rule anyway, which would extend OPT duration even further, to 36 months, so they have rushed putting out the new proposal for comment, to comply with the judge’s deadline. The new proposal is now up for comment.

Critics of the proposal have already begun to speak, such as David North of CIS. North, a former U.S. Labor Department official, notes that OPT amounts to the government offering a $10,000 incentive to employers for hiring a foreign student instead of a U.S. citizen or permanent resident. This bonus takes the form of the foreign students being exempt from payroll tax (due to their student status, which they technically still have under OPT in spite of having graduated). I would add that if OPT’s duration were to be extended to three full years, as DHS wants, the employer bonanza gets multiplied by 3, so it becomes $30,000 or more. Why hire Americans, eh?

Since this tax exemption from payroll tax was pointed out in the lawsuit against DHS, and has been one of the major points raised by critics, DHS was well aware of it. Yet they are refusing to address it or even acknowledge it. Hard to understaand such blatant pro-employer bias from an administration headed by a former community organizer.

The DHS people do throw in one bone for Americans, in banning employers from replacing U.S. workers by OPTs.  However, as I have stressed often in this blog, the bigger problem with OPTs and foreign workers in general is that employers hire foreign workers instead of Americans, rather than using foreign workers to replace Americans. As I have harped on in this blog, this is yet another example of the downsides to overemphasizing the Disney/SCE cases (where U.S. workers were replaced by foreign ones), as many critics of H-1B are doing.

The DHS then shows further severe bias in its proposal by citing only pro-foreign-worker research (and distorting neutral research; see below), notably that of my UCD colleague Giovanni Peri, an Obama Administration favorite source. Nothing at all from the other side, including my own research showing that the overall quality of the foreign students is low. Since my work was published for EPI, a Democratic Party-oriented think tank, founded in part by Clinton Sec. of Labor Robert Reich, it is further clear that DHS has not looked at this issue with any impartiality whatsoever.

Indeed, DHS grossly misinterprets the work of Prof. Jennifer Hunt of Rutgers. She found in essence that (a) immigrant STEM workers file more patents than native English mjaors and (b) the patenting rate of immigrant STEM workers is less than, or at most equal to, that of native STEM workers. (See my EPI paper for details.) DHS seized upon finding (a), without explaining it for what it is, and  of course, it has no relevance to the issue at hand.

In contrast to DHS’ recent statements, in which they openly admitted that they intend OPT as an end-run around the H-1B cap, they now describe OPT in warm and fuzzy terms of “mentoring” (putting the T back into OPT). That raises several questions:

  • If the U.S. indeed “needs” the foreign students (DHS’s phrasing on this point verges on desperation) to remedy a STEM labor shortage, why do these students need training? The DHS/industry narrative is that the U.S. lacks sufficient workers with STEM training, while the foreign workers are supposedly already trained.
  • And, if workers with such training are indeed needed, why won’t these special mentoring programs be open to Americans? Why just offer them to foreign students?
  • Since DHS admitted that its motivation in OPT is to circumvent the H-1B cap, does that mean that if the cap were high enough to accommodate everyone, these same foreign students wouldn’t need training after all?

Very poor proposal, even by DHS standards. Hopefully the judge in the case will see through it.

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34 thoughts on “DHS Unabashedly Biased in Its New OPT Proposal

  1. I was waiting to see your thoughts on this. Although I am not clear on a few things.

    1. I read the document. It is long and difficult for me to assess where to send my comment. Can you help out by telling us what is the most effective and easy way to comment on this for the record?
    2. Is there a lawsuit still pending against this? If so, what is your opinion on the status or chances of it having any effect on this not becoming the law of the land?
    3. I read on the Hill the other day that EAD that was overpromised due to our country quotas of only 7% per country per year will be the Administration’s next target to get rid of to import even more STEM workers. Any thoughts on this?

    This is really sad as the financial news headlines are all about tech companies laying off techies all over the map from dinosaurs such as Microsoft and IBM to startups.

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    • I think some of the immigration reform organizations will be posting instructions.

      Yes, there is still a lawsuit pending. See the links in my posting.

      The EAD thing is complex. I’ll write about that separately.

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    • > 1. I read the document. It is long and difficult for me to assess where to send my comment. Can you help out by telling us what is the most effective and easy way to comment on this for the record?

      I found that you can post comments at the following URL:

      http://www.regulations.gov/#!submitComment;D=ICEB-2015-0002-0011

      As you can see at http://immigrationgirl.com/quick-overview-what-is-included-in-the-new-opt-stem-extension-proposal/ , some immigration lawyers have already passed that URL on to their readers. If you go to http://www.regulations.gov/#!documentDetail;D=ICEB-2015-0002-0011 , you’ll see that there are already 1,144 comments received. I went through about the first 30 and they all seem to be from current or hopeful foreign OPT students in support of the bill.

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    • You can send/post your comments here – http://www.regulations.gov/#!documentDetail;D=ICEB-2015-0002-0011

      As for your #3 above, the administration *cannot* do anything to remove the country caps. All the administration is proposing to do is to give mobility to those stuck in the greencard queues via rulemaking.
      This *will not* by any means make the immigrants get their greencards any faster than it does today. All the proposed rule does is to take away the incentive from the employers to keep an employee for decades without a promotion or even a pay hike. Recent article on thehill (http://thehill.com/blogs/congress-blog/the-administration/257041-obamas-latest-plan-to-rewrite-immigration-law) which you seem to be referring to makes the issue convoluted so much that the readers think that –

      1) Either administration is giving away greencards faster
      2) Or that illegals get greencards along with the legal folks stuck in the queue

      I am talking about this article –

      I cannot understand the motive behind these articles other than to undermine the american worker rights and to continue the layoffs in favor of these static/low waged non-americans.

      Here’s what would happen if that rule is not passed – We continue to get more and more folks (either via the recent OPT ruling or by H-1 or different means) stuffed into the greencard queue and more and more appealing for the employers to have those employees stuck in the same position/pay for decades.

      Can we all get the congress to act? Certainly… The odds ..? I leave it at that.. Until that happens, we would have lost more jobs than what we have imagined.

      And yes, it’s decades (plural) wait vs what everyone else would like to quote – an ‘average’ wait of 8-12 years.

      Giving equal rights to legal immigrants (wage fixes/immigrant owning the greencard process/job mobility) will go a long way in plugging these holes. Seriously. Take out the incentive for the employers to retain folks who have ‘fewer rights’ and results will improve to a large extent.Entitlement mindset as some would say – But it’s far from it.

      Or, stop the immigration altogether !

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      • I’ve addressed this general issue before. Reducing the wait in the green card queue would make those workers free agents earlier, this not exploitable. HOWEVER, they would still be preferred by employers over most Americans, simply due to the age factor (younger workers are cheaper). What has happened with many bills in Congress in the last few years is that they pretend to solve the foreign worker problem by providing fast-track green cards, and that does NOT solve the problem. The trouble with a bad solution is that it actually makes things worse, in this case by being coupled with an INCREASE in the H-1B cap.

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        • For the age factor to be addressed, brakes need to put on the OPTs/students NOT on those that are already on LPR process. By holding LPR folks indentured, the problem only worsens.

          If H-1s get same rights as citizens, employers will tend to make liberal use of their ‘hire-fire’ policy. The age factor would get addressed to some extent, in my opinion. Today, the low wage makes an employer think twice before removing an ‘under performing’, young aged lad.

          And so the solution cannot be a status quo or anything that seems to address the mess to some extent.

          Here the options as I see it:

          0) DO NOT increase any H-1 caps, better market assessment for any visa type (student and work) and one of the following:

          1a) Stop new immigration altogether and just let jobs get moved overseas.(No younger folks, no pay issues, nothing) – American jobs are lost regardless of what the overseas worker’s age is. Especially true in IT/STEM fields.

          1b) Stop new immigration altogether and deport all current workers that are on LPR queue and in temporary visas (L-1/H-1 etc)

          2) Put country caps on all entry types possible – L-1/H-1/F-1/J-1/what-not and leave the LPR process as-is.

          3) Take out country caps in LPR as first step. (not adding any new LPR visas to current quotas).

          4) Status quo. Statistically looking at last few years for nationalities for H-1 applicants, we all know how a lack of ‘fast-track’ green-card process (or a fair-to-all-nationalities greencard process) will help employers in retaining these indentured workers.

          5) Diversity/Family based immigration – Are they really needed to the numbers of today? How much are they burdening the economy (elsewhere we are focusing just on employer paying FICA taxes etc). Family based folks, by law, need not earn anything (they get a free greencard) . Where as elderly citizens are still having to (or look for) work to make a living in this country (as is evident from couple of commenters on this blog)

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          • As the old saying goes, “It all depends on whose ox is being gored.” You are already in the LPR queue, so you think the queue is the pressing problem. Current foreign students would disagree with you, saying that the short duration of OPT and the H-1B cap are the problems. Those who’ve been waiting for years to bring a family member to the U.S. would say that that is the worst problem. And Americans whose wages and job opportunities are adversely impacted by immigration would say THAT is the problem.

            “Without more H-1Bs, we’ll have to send the jobs overseas” is the tech industry’s favorite argument. But overseas labor is much cheaper, so why aren’t they sending everything overseas already? The answer is that they can’t do it most cases; they need the face-to-face contact.

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          • >>>> But overseas labor is much cheaper, so why aren’t they sending everything overseas already? The answer is that they can’t do it most cases

            It *is* happening – As I comment elsewhere on this blog, new jobs *are* getting created there. As the baby boomers gen is winding up, companies are moving those jobs overseas. this is one example of how they are getting moved overseas..

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          • Did you see my word “everything”? Of course SOME work is being offshored, as we all know.

            The “winding up” of the baby boomers, as you put it, is irrelevant. Why wait for them to leave, and for that matter, why hire new Americans, or even new H-1Bs now? Why not just send everything offshore now? Offshore labor is cheaper, even relative to H-1Bs. So why not move everything offshore right now? The answer, as I said, is that this can be done only for the simplest tasks. The firms would love to offshore the whole thing if they could, but they can’t.

            And if you’ve been following my writings at all, you know that the employers don’t want to hire the baby boomers anyway. They hire H-1Bs instead.

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          • Agreed. Didnt mean to say complete offshoring is happening at the flip of a switch. It’s a slow process. And yes, not everything can go overseas, regardless.I see that happening over couple of decades. Everything didn’t move out to china in Mfg. Mfg still has some presence in US. I see a similar trend for H-1/IT/Pharma work. And it has started with this ‘peripheral’ work already going overseas. I am waiting eagerly to see how TPP will play out in the next decade.

            In my mind the following factors still hinder big chunk of work going overseas from ‘high skilled’ standpoint are:

            1) IP/Patent Laws: Due to the poor (or lack of) IP laws in other countries, especially India. When IP laws are strengthened out there, there will be a large outflux of work. Pharma/IT/BioTech – You name it.. All are eager to push work (aka “real” R&D) Industry is still a bit hesitant to send work overseas due to the lack of strong IP/patent laws.

            2) Industry/Academia collaboration – Unlike US, the collaboration model still does not exist over there. And it’s changing slowly but surely.

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          • I am fairly sure that offshoring “hit a wall” at least five years ago. Like the old ship phrase, “All ashore who’s going ashore!”, but in reverse. It’s not the slow, inexorable process you imagine.

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  2. We need to demand that EMPLOYERS be required to pay FICA taxes on ALL employees no matter whether the employees visa status entitles them to SS credits and coverage. This one requirement negates the benefit to employers for hiring OPT and CPT students yet does not entitle these temporary workers any benefits in the SS system.

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      • Now our US citizen and current green card holders graduating are at a great disadvantage from the savings for hiring OPT and CPT students that they cannot get started. This is true for even graduates with majors not covered by the STEM extension. How many unemployed or underemployed liberal arts majors, MBAs and attorneys are there floating around who might be employable without the extra expenses required of employers.

        The ability of an employer to bench an OPT without pay make this person even more attractive than an H-1B that must be paid at all times.

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  3. Plus, one of the stronger reasons to favor H-1B in the first place is because we need more, younger workers to contribute to social security (payroll tax). Remove that and hey.

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    • Increasing the number of quarters required to qualify for SS benefits would be a good start on preventing the guest workers from working for a relatively short period and claiming retirement or disability benefits. Because of the way benefits are calculated, a worker with few years of credited work – and a lower average covered wage – benefits from the skew in the benefits. Some who come as H-1B workers and even naturalize have no intention of living their life out in the US. One of the most offensive, to me anyway, discussions is how to qualify for SS disability so as to return to their home country and collect.

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    • @JRStern,

      The main reason to favor H-1B or L-1 is to get employees with fewer rights. This trumps over everything else. When you can get an indentured employee stuck with you for decades at the same position/same pay, why would anyone favor the local workforce.

      Take *that* incentive out and most of this can be fixed.

      Speaking of SS taxes, the H-1s cannot claim any of the benefits since majority of them are ‘churned’ every 6 years. SS benefits requires atleast 40 quarters to be able to claim the benefits, if I am not mistaken.

      So most of these just pay and leave the country and majority of them do not even realize that. How much does a SS tax of Level I H-1B employee gives our economy is a completely different issue.

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  4. This bonus takes the form of the foreign students being exempt from payroll tax (due to their student status, which they technically still have under OPT in spite of having graduated).

    When was this provision introduced? I was on OPT in 2008-09 and my employer paid all payroll taxes, Social Security and Medicare included. And since when has student status exempted one from paying tax? I paid taxes and filed returns every year as a foreign student. Only in my first 5 years, I filed a 1040 NR; in the remaining 2 years filed a 1040.

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      • Perhaps I’m being dense, but I don’t understand that at all. Any taxes an employer withholds from his employee is tax that’s been paid to the government, right? These numbers are reported on a W-2 form. so unless you are alleging massive fraud, I’m not sure what you are talking about.

        Or are you talking about some some other type of tax?

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          • I just checked my W2s (all 3 of them, since I only worked for 2 years and a bit before I moved to India). All of them report non-zero values for Social Security Tax withheld (box 4) and Medicare tax withheld (box 6). I was on OPT for most of my first year, until October, when I transitioned to H1 status; I’m not sure if that had any effect on taxes, but the numbers indicate that the entire year’s income was taxed.

            I have no problem posting a picture of my W2 without the private information (my info and the company’s info) or with that info redacted, i.e., boxes 1-20, but would that prove anything? A W2 does not differentiate taxpayers on the basis of their citizenship or visa status. If you’d like to see it anyway, please let me know how to upload a file, as I can’t find an option on this page.

            (Let me clarify that I was just trying to get the facts about visa status and taxes straight. I wasn’t making any political point or passing comment on the opinions expressed in this blog post.)

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          • @Someone: Maybe I’m missing something, but where on Form W-2 does it state *employer* contributions to FICA? I’ve only ever seen *employee* contributions.

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  5. I just posted the following comment at http://www.regulations.gov/#!submitComment;D=ICEB-2015-0002-0011 . You can likewise view comments at http://www.regulations.gov/#!docketBrowser;rpp=25;po=0;D=ICEB-2015-0002 . As can be seen, there are a number of mass mailings and the site attempts to avoid posting the duplicates. Anyhow, following is my comment:

    There are serious problems with some of the sources on which you base your proposals. For example, footnote (24) refers to “Foreign STEM Workers and Native Wages and Employment in U.S. Cities” by Giovanni Peri, Kevin Shih, Chad Sparber. An updated version of this paper was released on July 1st and an analysis of it at http://econdataus.com/jole_pss.htm shows some serious problems.

    In addition, a search of the comments for the number 2.62 or 262 show at least six references to another flawed study that is often quoted by proponents of OPT expansion. One of them is labeled “Mass Mail Campaign 22” and contains the following statement:

    “A 2012 report co-sponsored by the U.S. Chamber of Commerce found that every foreign-born student who graduates with an advanced degree from a U.S. university and stays to work in a STEM field creates on average 2.62 jobs for U.S. workers, often because they help lead in innovation, research and development.”

    Googling this sentence shows that it’s source appears to be a sample letter posted by an immigration lawyer at http://immigrationgirl.com/f-1-students-tell-dhs-to-fix-the-2008-opt-stem-extension-rule-sample-email-here/ . Interestingly, it appears that this sentence was taken verbatim from a 2013 article at http://www.metrocorpcounsel.com/articles/26825/raising-cap-need-increased-numbers-h-1b-visas-skilled-workers . In any case, an analysis at http://econdataus.com/amerjobs.htm shows that the 2.62 number is deeply flawed. It is the result of a study of the years 2000-2007. If you use the exact same formulas but move the time span forward two years, to 2002 to 2009, the association becomes a LOSS of 1.21 jobs. This strongly suggests that the positive association is caused by the inclusion of the tech crash and the steep job losses of both foreign and native workers in 2000 and 2001. You see, a strong job LOSS in both groups is mathematically identical to a strong job GAIN of both groups, at least as far as the linear regression that determines the job change is concerned. If the study’s interest is the effect of an increase in foreign STEM workers, 2002 to 2009 is a much more appropriate period and this period is associated with a job LOSS.

    All of this shows that you need to check that studies that you or your readers reference have been replicated and validated. The fact that an economist has put their name on it is meaningless unless the study has been reviewed and validated, preferably by researchers on all sides of the issue. In my view, the most credible evidence suggests that current policies lower wages and job opportunities for native workers. For this reason, I am very much against the STEM OPT extension.

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    • I’m pretty sure that 2.62 sentence is a lot older than 2012.

      But I don’t care what years they studied, it completely reverses cause and effect, that is it claims the H-1B employment is a cause of general hiring when by common sense one would expect it to be an effect. In lieu of much stronger evidence (stronger than zero!) about the direction of causality, the claim is absurd in any year.

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      • It just seems older the 2012 because H-1B proponents parrot it so much! You can see from http://econdataus.com/claim262.htm that it comes from a December 2011 working paper that, to my knowledge, has never been reviewed or replicated (except by me). I can see why the number is so popular since it implies a free lunch. If every such worker creates 2.62 jobs, then everyone wins! Happy, happy, joy, joy! Of course, that makes no mention of whether those jobs are other good technical jobs or jobs for janitors and food servers. And, as you say, any correlation between hiring of foreign and native workers likely has much more to do with the economy than one of those two groups. That’s especially the case during a sharp decline in hiring such as during the 2001 tech crash.

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