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April 2009, Volume 16, Number 2

Labor: Recession, H-1B

The US unemployment rate climbed to 8.5 percent in March 2009, as job losses in the recession that began in December 2007 topped five million. The US economy lost three million jobs in 2008, and two million in the first three months of 2009.

Employment of 135 million at the end of 2008 included 113 million private-sector jobs. There were 6.8 million construction jobs at the end of 2008, 13 million manufacturing jobs; 8.1 million financial services jobs; and 13.5 million jobs in leisure and hospitality. Between December 2007 and December 2008, employment fell by 700,000 in construction; 800,000 in manufacturing; 200,000 in financial services; and 200,000 in leisure and hospitality.

Outplacement firm Challenger, Gray & Christmas reported 260,000 terminations by financial firms in 2008, up from 153,000 in 2007 and 50,000 a year in 2005 and 2006.

Foreign-born workers are concentrated in sectors that are losing jobs, including manufacturing and construction. Unauthorized workers are generally not eligible for unemployment insurance and other benefits, but generally are willing to move their location to get a job. Many analysts expect jobless migrants to remain in the US, since conditions in their countries of origin are often worse.

Some 16 million workers are employed in health care, a sector believed to be recession-proof; the number of jobs increased by 500,000 in 2008 and early 2009 as the US economy lost over five million jobs. However, a combination of reduced investment income, fewer elective procedures and reduced government reimbursements slowed job growth in health services to less than 50,000 in the first quarter of 2009.

More men than women are losing jobs; women are poised to be over half of those employed in the US in 2009. A DOL-sponsored study of wage disparities found that men earned an average of 22 percent more than women in 2007; the gap had been 38 percent in 1970. Analysts try to explain the pay gap between men and women with factors that may influence wages, such as education, experience, number of children and breaks in work. Such factors typically reduce the 22 percent "raw-wage gap" between men and women to five to seven percent.

Almost 17 percent of Americans 65 and older were in the labor force in 2008, up from 12 percent in 1998. The unemployment rate of older workers is lower than the US rate, but jobless older workers have longer spells of unemployment, reflecting the reluctance of some employers to hire them.

Across the US, 20 percent of 45 million home mortgages examined were underwater at the end of 2008, meaning that mortgage holders owed more than their houses were worth. The $14 trillion US economy may shrink by $1 trillion during 2008-09, so that even if economic growth resumes at a 2.5 percent a year pace, expanding by $350 billion a year, it may take three years to restore the lost output. Manufacturing was running at 68 percent of capacity in spring 2009, the lowest level since 1948, when recordkeeping began.

H-1B. On April 1, 2009, USCIS made H-1B visas available for FY10. There were far fewer employer requests than the 163,000 received in five days in April 2008 for FY09 visas. Some 65,000 H-1B visas, plus 20,000 for foreigners who have earned Masters and Doctorates from US universities, are available each year to profit-making employers. There is no cap on the number of H-1B visas available to nonprofit universities and research labs.

USCIS reported 32,500 requests for the 65,000 general H-1B visas in the first five days of April 2009, and almost 20,000 requests for the 20,000 for advanced degrees.

USCIS in March 2009 reported that the top recipient of H-1B visas in FY08 was Infosys Technologies, which had 4,560 H-1B petitions approved. Like Infosys, six of the top 10 users of the H-1B program were outsourcing firms that bring foreign workers into the US, usually from India, and move them from firm to firm. The largest US-based user of H-1B visas in FY08 was Microsoft, which received 1,035. The list of leading H-1B employers in FY08 was similar to that in FY07 and earlier years.

One of these outsourcers, New Jersey-based Cognizant Technology Solutions, agreed to pay $150,000 in back wages to 67 H-1B visa holders after DOL found that it had underpaid them.

Many US employers complain of too few US applicants for science & engineering jobs. US universities confer 235,000 BS degrees a year in engineering and natural sciences, but only a third of these graduates study or work in Science and Engineering fields. Half of the 36,000 graduates a year with MS and PhD degrees in S&E enter S&E occupations.

Firms such as Microsoft assert that as global firms they must hire from the global labor force. Microsoft estimates that a only quarter of the "competitive" candidates for its jobs are in the US to justify its request for easy access to foreign workers. However, the Taulbee Survey in March 2009 reported that the number of new undergraduate majors in computer science increased 10 percent in 2007-08, and that almost 1,900 students earned PhDs in computer science.

US employers with 26 or more employees must pay a training fee of $1,500 for each H-1B application (universities and nonprofit research institutes are exempt from the training fee), plus a $500 anti-fraud fee and a $320 filing fee. Many employers use attorneys to apply for H-1B visas, and they typically charge $1,500 to $3,000 per H-1B application.

Fears of abuse have stimulated more careful review of employer applications. DOL, which usually approves applications filed by employers on-line in seconds, has begun to individually scrutinize some employer applications. USCIS has stepped up its investigation of suspect firms filing petitions for H-1B workers.

An Indian engineer living in Canada because his wife could not get a US work visa was profiled in the New York Times on April 12, 2009. Employed by Google, he traveled to California twice a month (about 10 percent of Google's 20,000 US workers have temporary work visas). The story asserted that half of the engineers in Silicon Valley were born abroad, and that half of the start-ups between 1995 and 2005 were founded by foreign-born US residents.

The point of the story was that the US is losing global competitiveness because of restrictive immigration rules. In this case, the Google engineer's wife could accompany him to the US, but would have to find a US employer to obtain a separate H-1B visa for her if she was to work.

Google receives a yearly total of over a million applications from US residents and foreigners. Critics of the H-1B program assert that most are not considered seriously by Google. Instead, Google looks around the world for the precise "skill set" desired for a particular job and, when they believe they have found it, expect the US government to quickly approve immigrant status for foreign candidates. Google says that it spends $20 million a year helping its employees to navigate the US immigration system.

In a forum associated with the article http://roomfordebate.blogs.nytimes.com/2009/04/08/do-we-need-foreign-technology-workers/?pagemode=print), Vivek Wadhwa asserted that there were 500,000 foreign engineers and other professionals in "immigration limbo" in the US, confined to the US employer who is sponsoring them while waiting for immigrant visas (green cards). This wait, according to Wadhwa's surveys, encouraged many Chinese and Indian IT workers to return to their countries of origin, where some are likely to make globally important contributions.

Norm Matloff cited data showing that H-1B workers are lawfully paid less than comparable US-born workers. Employers prefer young and freshly trained workers to experienced workers, in part because new graduates are cheaper and more likely to work long hours for the employer on whom they are dependent for continued residence in the US.

Ron Hira emphasized that the rules governing the H-1B programÑ developed in the late 1980s when the theory was that the US had sufficient workers, but insufficient time to train them to fill fast-growing IT jobs Ñ are very employer friendly. Employers simply assert that their job requires a college degree and pays the prevailing wage, and are approved via the internet to hire foreigners with college degrees. There is significant fraud.

Mark Heesen argued that being an immigrant signifies a willingness to take risk, and that US policies that do not allow all foreign graduates of US universities to stay in the US and work are short-sighted.

John Miano noted that the major question in the debate is the definition of "highly skilled." There are no limits or waits for visas for the most distinguished foreigners seeking immigrant visas; waits lengthen as skill levels fall http://travel.state.gov/visa/frvi/bulletin/bulletin_1360.html). Miano emphasized that most H-1Bs who are hired are classified by their employers as being entry-level.

TechAmerica's Cyberstates report estimated that US high-tech employment increased from 5.8 million in 2007 to 5.9 million in 2008; average annual earnings were $83,300, compared to $44,400 for all private sector workers. California had 940,000 high-tech jobs in 2008, about 16 percent, followed by Texas with 475,000 and New York with 305,000. TechAmerica, which lobbies on behalf of 1,500 companies to raise the number of H-1B visas, estimated that high-tech employment peaked at 6.6 million in 2000, and fell to 5.5 million between 2001 and 2004.

Politics. Candidates McCain and Obama supported proposals to increase the number of H-1B visas available to foreigners with at least BA degrees arriving to fill US jobs that require such degrees. However, McCain supported what employers call a "clean" increase in the 65,000 visas-a-year program, while Obama endorsed "a stopgap increase in the number of H-1B visas" until a sufficient number of US BA-degree holders are available to fill jobs. Obama said: "we have a skills shortage, not a worker shortage. There are plenty of Americans who could be filling tech jobs given the proper training." (www.techcrunch.com/2007/11/26/qa-with-senator-barack-obama-on-key-technology-issues/)

President Obama emphasized training American workers to fill jobs for which employers seek foreign workers, while Secretary of Labor Hilda Solis argued that employers should have to try to recruit US workers before hiring foreign workers; she promised a review of how employer requests for H-1B workers are handled. The current attestation process in the H-1B program does not give US workers priority over H-1B workers, allowing some employers to lawfully replace US workers with H-1B visa holders.

The H-1B and L-1 Visa Fraud and Abuse Prevention Act of 2007, co-sponsored by Senators Richard Durbin (D-IL) and Charles Grassley (R-IA) would make two major changes to the H-1B program. First, all employers would have to attempt to recruit US workers for at least 30 days before being permitted to hire H-1B workers. Second, employers would have to assert that they are not displacing a similar US worker 90 days before or after hiring the H-1B worker.

Grassley in February 2009 sent a letter to Microsoft, asking how many of the 5,000 employees being laid off were US workers and how many H-1B workers it was retaining. Senator Bernard Sanders (I-VT), who said that US banks have laid off 100,000 workers in six months in late 2008-early 2009, believes the "H-1B program is a sweetheart deal for employers, in many instances, to be able to gain cheap labor from abroad."

The Washington Post profiled several foreign graduates of US universities who reported that US employers were rescinding job offers that would have enabled them to obtain H-1B visas.

Representative Jeff Flake (R-AZ) introduced HR 1791, the Stopping Trained in America Ph.D.s from Leaving the Economy Act of 2009, to exempt foreigners who earn PhDs in science, technology, engineering, or mathematics (STEM) fields of study from the cap on H-1B visas that applies to profit-seeking US employers. The same bill did not move out of the Judiciary Committee in the last Congress.

Background. The H-1B program allows US employers to hire foreigners via an easy attestation process. The jobs H-1B workers fill must "require theoretical and practical application of highly specialized knowledge to perform fully."

When the H-1B program was being developed for inclusion in the Immigration Act of 1990, the consensus was that the US had enough workers, but not enough to fill jobs in fast-growing occupations that required several years of training, such as in science and engineering. For this reason, employers were allowed to simply assert or attest that they wanted to hire foreign "specialty workers" and were paying at least the prevailing wage to the foreigner. The US Department of Labor was obliged to approve the employer's application, and was not allowed to investigate whether employers were abiding by their promises unless complaints were received. To protect US workers, the number of H-1B visas was capped at 65,000 a year.

There were fewer than 65,000 requests for H-1B workers until FY98, when the US unemployment rate was 4.5 percent, employment was growing by two million a year, and there was talk of a "new economy" no longer subject to economic cycles. The high-tech industry persuaded Congress to approve the American Competitiveness and Workforce Improvement Act of 1998, which raised the ceiling on H-1B visas to 115,000 in FY99 and FY00 and to 107,500 in FY01. An employer-paid training fee of $500 was imposed on each H-1B application or renewal to train US workers to fill jobs for which employers were requesting H-1B workers.

The 1998 Act placed new restrictions on H-1B-dependent employers, generally those with at least 15 percent H-1B visa holders among their US employees. Such employers were required to attest that they had not laid off a similar US worker 90 days before the request for an H-1B foreigner, and would not lay off a similar US worker 90 days after the H-1B worker was employed. H-1B-dependent employers were also required to make "good faith" efforts to recruit US workers before applying for H-1B workers.

In 2000, with employer requests again exceeding the H-1B cap, the American Competitiveness in the 21st Century Act raised the annual ceiling to 195,000 for three years. This limit was never reached, in part because H-1B visas issued to US universities and nonprofit research institutions were exempt from the cap and because the IT bubble burst in 2001. The employer-paid training fee was raised to $1,000 per H-1B application or renewal.

The ceiling on H-1B visas reverted to 65,000 a year in 2002, but another 20,000 H-1B visas were made available to employers seeking foreigners with MS or PhD degrees from US universities. This means that US employers can now hire 85,000 new H-1B visa holders a year, plus an unlimited number for universities and non-profit research institutes. Employers are requesting more than twice the 85,000 H-1B visas available under the ceiling each year; there were 163,000 requests for the 85,000 visas available for FY09. DHS selects winning applications for H-1B visas by lottery, a procedure that is widely considered not optimal.

Disagreement between supporters and opponents of the H-1B program has blocked efforts to raise the cap. Most employers want a "clean" increase in the cap, which means raising the number of H-1B visas available to 200,000 a year or more without adding protections for US workers, and allowing the cap to rise if employers request all the visas available, the so-called market adjustment mechanism. Critics want more protections for US workers, such as requiring all employers, rather than just H-1B-dependent employers, to try to recruit US workers before hiring H-1B visa holders and attest that they did not lay off US workers to open jobs for H-1B visa holders.

In April 2008, DHS extended the period of Optional Practical Training (OPT) from 12 to 29 months for foreign graduates of US universities. This allows US employers to hire foreign graduates of US universities and employ them in OPT status while waiting for H-1B visas. US employers hiring OPT-foreign students must enroll in E-Verify.

Matt Richtel, "Tech Recruiting Clashes With Immigration Rules," New York Times, April 12, 2009. Emily Wax, "U.S. Visa Limits Hit Indian Workers," Washington Post, April 6, 2009.