President Trump is expected to issue an executive order this week aimed at fixing a number of skilled guest worker programs that have spun out of control and are now widely used to import cheap labor.
This is long overdue; both the Obama administration and previous Congresses, under Democratic and Republican control, chose to take no action despite dozens of egregious cases made public in which companies used cheaper workers with H-1B & L-1 visas to replace Americans already doing those jobs. The indignation expressed by some policy makers about the abuse rings hollow as Americans continue to train their foreign replacements. American workers are right to conclude they have not only been forgotten, but also betrayed, by their government.
The likely changes should be of no surprise to those who followed Donald Trump’s utterances on the campaign trail. He has called for ensuring American workers have priority in filling these jobs, and that the programs no longer be used for cheap labor. Contrary to widespread misconceptions by the press and policy makers (including former President Obama and former Vice President Joe Biden), companies currently don’t have to show they can’t find an American to do the job before hiring a guest worker, and guestworkers can legally be paid less than an American.
Take the largest guest worker program, the H-1B. According to the Labor Department, it is supposed to “help employers who cannot otherwise obtain needed business skills and abilities from the U.S. workforce.” While that may be a policy aspiration, massive loopholes enable any company to legally use the program to import cheaper workers to substitute for U.S. workers. It and smaller, lesser-known visa programs, such as the L-1 for multinational transfers, J-1 for summer work travel for foreign students who work in jobs at U.S. resorts, B-1 for business visitors, and OPT for international students completing U.S. degrees, have reduced job opportunities, depressed wages and cut off some of the best career pathways for Americans to the middle class.
The majority of H-1B visas go to fill IT-related jobs. But contrary to popular belief, most of these visa holders generally don’t do cutting-edge software engineering. Instead, most do back-office programming for banks and insurance companies. These are good-paying jobs that provide a solid middle-class standard of living, paying on average $90,180, and there is no shortage of Americans to fill these jobs.
Indeed, many Americans were doing these jobs — at places like Walt Disney Co., Fossil Group, Southern California Edison, Toys “R” Us, New York Life, Northeast Utilities, Emblem Health, Abbott Labs, University of California and PG&E — before they were ordered to train their guest worker replacements.
In 2014, the 10 biggest users of the H-1B program were in the IT outsourcing business. The U.S. government granted them 25,227 worker visas, each good for six years, nearly 30% of the program’s 85,000 annual quota. And 2014 wasn’t an unusual year. Over 10 years from 2005 to 2014 those firms brought in 170,535 new H-1B guestworkers. Virtually all of these jobs can, and should, be done by Americans or lawful permanent residents.
Why do IT outsourcing firms dominate the H-1B program? The answer is simple. It is extraordinarily profitable to replace, or substitute American workers with H-1B guestworkers. And it’s extraordinarily easy to do so.
Here’s how. Under the H-1B visa program, wage floors are set using three variables: occupation, location and skill level. This is intended to ensure H-1B workers are paid a market wage. But because wage floors are set so low, it doesn’t. Employers routinely select the lowest skill levels and hire at the lowest possible “prevailing wage” levels, knowing that the government will never verify whether these are appropriate. In the fiscal year that ended Sept. 30, 2015, 41% of the H-1B visas granted were at the lowest category — jobs that the Labor Department says should be for “beginning-level employees who have only a basic understanding of the occupation. These employees perform routine tasks that require limited, if any, exercise of judgment. … Statements that the job offer is for a research fellow, a worker in training, or an internship are indicators that a Level I wage should be considered.”
The wages paid to H-1B visa holders for those jobs are at the 17th percentile of the wage distribution, which according to my analysis provides roughly a 40% discount to the average wage paid to Americans.
The second-lowest wage level is roughly 20% below the average wage for Americans in those occupations, according to my analysis. Nearly 40% of approved H-1B applications were at that level. In sum, 80% of approved H-1B applications were for wages substantially lower than the average wage Americans earn in those jobs.
Counting the number of jobs that will be saved by fixing the guest worker visa programs and estimating the impact on pay is difficult. But at a minimum, tens of thousands of jobs will be saved and created, and hundreds of thousands of workers will have their job security and standard of living improved. And it won’t just help American workers. Foreign guestworkers’ wages and working conditions will be improved and better protected.
Nor will companies respond by moving those jobs wholesale to India or other low-cost countries where pay is lower. Because of the nature of the tasks, these positions are geographically sticky and not easily shipped offshore.
But if you’re one of those U.S. workers who is hoping for major change, it will take some time. The executive order should direct the Department of Homeland Security, the Labor Department and the Justice Department to better enforce existing regulations, rescind bad regulations, and write new ones to ensure that U.S. workers are not harmed by these programs. How and how quickly they follow through remains to be seen. One question they could consider is whether to replace the current lottery system with one that grants visas to only the highest-paid jobs in the application pool. Some critical changes, such as raising the wage floors, likely needs congressional approval.
Trump’s campaign proposals to repair the H-1B, L-1, B-1, J-1, and OPT guest worker programs were sensible, straightforward and mainstream. They are in sync with bipartisan proposals made in Congress. These principles have had wide support across the political spectrum from liberal to conservative senators, from Richard Durbin (D-Ill.), Sherrod Brown (D-Ohio), and Bernie Sanders (I-Vt.) to Charles Grassley (R-Iowa), Ted Cruz (R-Texas), and Jeff Sessions (R-Ala.).
Voters in both parties have expressed concerns about the declining fortunes of the middle class. Here’s an opportunity for progressives and conservatives alike to show voters that the government still works for them.