Worried About Foreign H-1B Hirers? Award More Visas!

The H-1B visa, a temporary visa to hire high-skilled foreign workers for jobs in the United States for which American workers are not available, is intended to be awarded on a first-come, first-serve basis. Starting tomorrow, April 1, applications for this visa will be accepted and considered for fiscal year 2017. However, April 1 isn’t so much as a start date, but a starting gun for the furious race by U.S. employers to secure skilled labor. If this year is anything like the last few (and all indications suggest it will), between April 1 and April 6 over 230,000 applications will be filed for 85,000 visas, prompting U.S. Citizen and Immigration Services (USCIS) to use a lottery system to award visas. This process, which was designed to award visas over the course of the year, will receive three times as many applications as it has visas available—all in under a week.

Many of these applications will be filed by information technology (IT) management firms based outside the United States. In the H-1B lottery, a handful of firms based in India, such as Infosys, Tata, Wipro, and HCL (dubbed “outsourcing firms” by critics), apply for and receive large quantities of H-1B visas. Last year these four alone represented 22 percent of total applications. Firms then subcontract H-1B visa workers to U.S. companies who need skilled IT or engineering professionals.

IT management firms specialize in navigating the restrictive, complicated, and costly lottery system set up by the Department of Labor and USCIS. Fixing this broken system would reduce the need for U.S. employers to go through intermediaries to acquire labor. Want to decrease the number of H-1B applications from foreign IT management firms? The answer is not to eliminate the H-1B program or enact unnecessarily strict regulations on applicants, but to raise the cap and make it easier for American companies to access skilled labor.

These firms occupy a niche in the market that U.S. immigration policy has unintentionally created through restrictive caps on H-1B visas. Offshoring firms do not make a living by underpaying their workers, helping U.S. companies replace Americans, or by shuffling under-skilled workers into domestic jobs as The New York Times has implied. Indeed, average wages paid by the four companies listed above was 42 percent higher than the U.S. median household income. Instead, they specialize in connecting U.S. companies desperate for STEM-skilled employees with valuable, scarce H-1B visa workers. The shortage of STEM workers constrains growth by American companies, as illustrated by the over 500,000 STEM job openings in the United States today. An influx of STEM workers will allow American companies to grow. Furthermore, H-1B guest workers have been shown repeatedly to have a large positive impact on the domestic economy and raise wages and employment opportunities for domestic workers (both in the industries they work in and in the communities they move into). H-1B workers and other immigrants also contribute heavily to American innovation at the highest levels.

The H-1B selection process is marked by broad demand for limited resources. Scarcity in the H-1B lottery system means two things: First, companies need to become experts in navigating the H-1B application process and invest considerable resources into coordinating efforts to hit the visa deadline on the nose. Identifying need, paying fees, recruiting potential foreign workers, and submitting applications before window expires, frequently within a week, is difficult.

Second, the lottery system makes applying for H-1B visas a very risky venture. If a company wants 10 workers, they had best apply for 25 to 30 visas, as applicants for FY 2016 had just a 36 percent chance of getting approved.* Uncertainty and risk are big factors for companies looking to hire someone with an H-1B visa and substantially add to the cost of applying for H-1Bs. What if they apply for 25 visas and get only 5 visas? The company is left with an insufficient labor force. What if they get 15 visas? Suddenly they must pay for workers they don’t need or deserve. What if they get the right number of visas, but fewer engineers and more IT workers than they’d desired? They don’t have the right mix of personnel to get the job done.

Just think of the costs implied for a medium-sized engineering company in the United States that can’t find a U.S. STEM worker. First, they must interview job applicants in India, where there are many highly skilled workers. However, because of the lottery system, they must find three candidates for every job they want to fill, for a job that can’t legally start for six months, and for which both parties know the worker has only a 36 percent chance of winning a visa for. It’s far from ideal.

So what do U.S. companies do? They subcontract the whole process out to large IT management firms from India. These firms provide a valuable service: taking the risk and complications out of procuring H-1B visas. Applying in bulk allows offshoring firms to reduce the risk of winning too many or too few visas or having uneven skill sets. They also can much more efficiently recruit workers (especially workers from India) and even frequently submit multiple applications for the same foreign workers with different companies to maximize the chances of getting visas approved.

Offshoring firms in 2016 were awarded 16,500 visas or almost 20 percent of total H-1Bs. Visa holders were then allocated efficiently to U.S. employers.

Our system needs to ensure that more U.S. firms can get an H-1B visa for a needed employee. But we are in a prison of our own making—constrained by the artificial and costly 85,000 visa cap of H-1B visas, which has turned the H-1B application process into a cut-throat competitive market characterized by high risks and low rewards.

Raising the cap would eliminate the market conditions that make firms like Tata and Infosys so necessary. Yes, foreign firms will still be used to identify talented foreign candidates for H-1B visas. However, if there are suddenly enough visas to meet demand, the lottery system will disappear and U.S. employers must no longer rely on these companies to file applications in order to manage risk. With a doubling or tripling of the H-1B cap, a move that has broad support from both sides of the aisle, the number of visas filed by these IT management firms is likely to decrease.

We should pursue the necessary reforms to the H-1B program to ensure that H-1B workers complement rather than substitute for American labor. Such responsible reforms can help keep a few well-publicized cases of misuse from lending notoriety to the whole program.

U.S. companies should not have to engage in an all-out race every April to secure the talent they need. Instead, reforms to the H-1B program should focus on raising the 85,000 visa cap on the H-1B program and letting more highly skilled workers into the country.

 

*Average chance, given 2016 visas available and the number of applicants. Probability is higher for graduates from U.S. advanced degree programs or residents of Chile or Singapore.