Engineering a win-win for U.S. businesses and the American middle class.

[Cross-posted at The Political Junkies for Progressive Democracy.]

A recent article in Financial Times reports:

US employers have breached the annual visa cap for hiring highly skilled workers from other countries after only five days, the shortest application season since 2008 and a sign that the economic recovery is strengthening.

It comes as the Senate prepares to discuss a comprehensive immigration reform bill, perhaps as soon as next week, and will increase pressure on lawmakers to think creatively to meet businesses’ demands for more visas…

Under current law, the government can issue only 85,000 H-1B visas each year – 65,000 to highly skilled private sector workers such as engineers and computer programmers, and 20,000 to those with advanced graduate degrees in science, technology, engineering and mathematics [“STEM”] fields from US universities.

But demand is always much greater, leading to calls to raise the caps.

The H-1B visa phenomenon provides a curious counterpoint to the oft-stated conventional wisdom that American middle class jobs are irretrievably moving overseas solely because foreign labor is so much cheaper.  In certain sectors this is undeniably true, particularly for industries that rely on low-skilled workers for high-volume manufacturing jobs, for reasons that include thousands of employees willing to live on-site in company dormitories and work 12 hour shifts six days a week for the low, low price of $17 a day.  (You know:  the grand vision conservatives have for the American workforce.)  But the strange thing is that middle class jobs in the tech sector are a casualty of cheaper foreign labor here.

It doesn’t have to be this way.

Critics of the H-1B visa program say corporations only want to import foreign labor in order to pay them less and provide fewer benefits than they would Americans, and this is true in some cases.  But American businesses also have a fair point:  the U.S. is failing to produce enough citizens with science, technology, engineering and mathematics (“STEM”) backgrounds to meet their immediate needs.  Virtually no one disputes that.  The question is why?  There is no shortage of STEM schools here, which is what accounts for those 20,000 additional visas awarded yearly to foreign nationals with advanced degrees from U.S. universities.

Part of the answer is that the H-1B visa program has been expertly exploited by outsourcing companies, particularly from India.  These companies garner a wildly disproportionate share of H-1B visas, and then lease these workers to U.S. companies.  It is no small problem.  For example, Facebook can attract and afford the best tech talent in the world, yet it received only 307 H-1B workers.  ExxonMobil:  only 58.  In fact, the vast majority of companies participating in the H-1B visa program obtain only one or two.  But outsourcing companies like Cognizant and Tata obtain thousands.

Consider, too, that American companies must dedicate significant resources to find and recruit every qualified job applicant with the skill set they seek, and then file a visa application on their behalf — often paying thousands in legal fees per applicant — all without any guarantee that the applicant will actually receive a visa.  Eliminating all of the overhead and uncertainty makes outsourcing companies particularly attractive as a way to meet the need for skilled labor.  But profitability for the outsourcing company is driven by the sheer volume of workers it provides, and the portion it can extract for itself from the amount of pay that would otherwise go directly to workers.  As outsourcing companies compete against each other for U.S. clients on the basis of price, salaries that American companies pay for skilled tech labor are kept down.

Outsourcing companies are not just exploiting loopholes in the H-1B program either, they’re exploiting their workers.  Some are paid in rupees deposited directly into Indian banks: they survive on a stipend paid with a debit card and live with six or eight coworkers in a two-bedroom apartment.  Perversely, the outsourcing business model worsens the very problem the H-1B program was meant to address:  the dearth of skilled American workers, who understandably view downward pressure on wages and tech workers being treated like disposable commodities by American companies as disincentives to pursue tech careers.

With so many companies seeking a share of those 65,000 visas and hitting the cap in less than five days, many open positions simply remain unfilled.  It’s no wonder companies are lobbying to get the cap on the number of H1-B visas raised or eliminated entirely:  they argue that the market and not the government should determine how many visas are issued.  While that strikes me as a truly terrible idea, they have a genuine need that remains unaddressed.  Letting positions that would increase productive capacity remain unfilled handicaps American businesses in a global market that is already aggressively addressing this problem.  China and its neighbors have rapidly expanded their science and engineering capabilities by investing in engineering education and research:  since 2000, the number of doctoral degrees in engineering awarded in China has more than doubled and now far exceeds the number awarded in the U.S.

None of this bodes particularly well for U.S. prominence in a high-tech future.

But this is not an argument for expanding the H-1B visa program, because the very program itself is a boon to foreign competitors.  H-1B visas are good for three years, and only renewable for another three years for a maximum of six.  At this point the worker returns home or goes elsewhere in the global job market, with a top-notch skill set and 3-6 years of recent industry experience.  The program results in more than a loss of good-paying tech careers for American citizens.  It is also helping to build the workforce of the future.  Elsewhere.

If the U.S. committed today to providing education grants in science, technology, engineering and math, in a few years it would be churning out qualified graduates of its own, with no student debt, ready to work.  (Of course those other nations are not burdened with a deficit-obsessed, austerity-crazed political and media class infatuated with the zombie mantra of “small government” like the U.S. is, at the expense of its own work force and its domestic economy.  But that’s another column.)  Where would these newly minted American graduates work?  Well, Microsoft alone has been trying to fill 44,852 jobs in the U.S., with an average salary higher than $90k.  That is not exactly minimum wage.  These are some of the positions Microsoft is looking to fill:  Software Development Engineers, Senior Software Development Engineers, Premier Field Engineers, Support Engineers, Computer Software Engineers (Applications), Computer Software Engineers (Systems), Computer Hardware Engineers, Lead Software Development Engineers, Senior Support Escalation Engineers, Senior Support Engineers, Lead Software Development Engineers.  Does anyone believe a U.S. citizen with an engineering degree and no student debt would not want those jobs?

Please.

The benefit to U.S. corporations and the economy is so obvious it’s hardly worth stating:  a domestic workforce with the skills and knowledge to drive technological innovation and growth, which China and India will have in abundance.  If we were serious about it we could probably wind down the H-1B visa program entirely by 2020.  But we are not serious about it.  If we were, we would close the H-1B outsourcing loophole and invest in science and engineering education for our citizens like our global competitors do.

Instead, we have a bipartisan consensus among the Senate and President Obama now pushing to lift the H-1B visa cap, as high as 300,000.

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