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July 2011, Volume 18, Number 3

Labor, Immigrants, H-1B

The US economy added 54,000 jobs in May 2011, down from 244,000 jobs added in April 2011; the unemployment rate rose to 9.1 percent from nine percent. Among the almost 14 million unemployed, six million were unemployed 27 weeks or more.

The 2008-09 recession officially ended in June 2009, but there has been little net job growth because the private-sector jobs added since then have been offset by the jobs eliminated by federal, state and local governments, including 2010 census-related jobs.

Some employers are investing in labor-saving capital rather than hiring workers in the recovery. Minnesota-based Vista Technologies, which makes plastic products, spent three times more on equipment than additional labor in 2010 and said: "Everything should be as automated as it can be. We just can't afford to compete with countries like China on labor costs, especially when workers are getting even more expensive."

High unemployment is likely to persist during the recovery if manufacturers invest in equipment rather than hire workers. During the first half of the 20th century, there was mass migration from farms to factories, as the share of the US labor force employed in agriculture fell from 41 percent in 1900 to 15 percent in 1950. Today, less than two percent of workers are employed in agriculture. Services, which already employ over 85 percent of workers, are likely to expand as a share of employment as manufacturing employment shrinks.

The US labor market has significant "churn," reflecting hiring and separations due to layoffs and quits. During a typical year, there are about 50 million new hires, so that, that during a month in which employment increases by 200,000, five million workers may have been hired and 4.8 million separated from jobs.

The US has a declining labor force participation rate (LFPR)? only 64 percent of US residents 16 and older were employed or looking for work in spring 2011, down from 67 percent between 1997 and 2000. Since each one percent of the labor force is about 1.5 million workers, if the LFPR were the same today as in the late 1990s, there would be 4.5 million more US workers.

High unemployment is depleting UI benefit funds (over half the states were borrowing money from the federal government to pay UI benefits in spring 2011), which are replenished primarily by taxes on employers. Some states, including Michigan, reduced regular state UI benefits from 26 to 20 weeks. When unemployment is high, the federal government covers the cost of UI benefits after state benefits expire. During the 2008-09 recession, the federal government covered the cost of UI benefits for workers who were jobless from week 26 to week 99.

BLS reported that the average hourly earnings of private-sector workers were $19.50 in the first quarter of 2011, plus $7.60 for benefits, making total compensation $27.10 an hour and benefits 29 percent of total compensation. The most costly benefit was health care, at $2.10 an hour, followed by paid leave, $1.90, and retirement benefits, $1 an hour. Legally required benefits such as Social Security and Medicare cost $2.30 an hour.

Persisting unemployment has rekindled debates about poverty lines and living wages. The poverty line in 2010 was $10,830 for one person and $22,050 for a family of four. At the federal minimum wage of $7.25 an hour, a full-time worker would earn $14,500 a year, and a family with 1.5 earners would earn $21,750. Families with low earnings are eligible for means-tested benefits that include, for example, Food Stamps and health insurance for children.

Free-trade agreements with Colombia, Panama and South Korea were held up in spring 2011 by disagreements over Trade Adjustment Assistance, the extra UI benefits, tax credits for health insurance, and training for US workers who lose their jobs because of increased trade. TAA was expanded in 2009 during the recession from manufacturing to service, farm, and other workers displaced by freer trade with countries that do not have FTAs with the US; 280,000 workers received $1.3 billion in TAA benefits in FY10. Recession-related benefits expired in February 2011, and President Obama refused to send the pending FTAs to Congress until the expanded TAA benefits were restored.

Immigrants. The US labor force in 2010 included 130.2 million US-born workers and 24.4 million foreign-born workers, that is, foreign-born workers were 15.8 percent of the 154.6 million strong US labor force. About 45 percent of the foreign-born workers in the US labor force were naturalized US citizens, and half of all foreign-born workers were Hispanic.

About 27 percent of foreign-born workers had not completed high school, compared to five percent of US-born workers. The median weekly earnings of foreign-born workers were $600 in 2010, while US-born workers had median weekly earnings of $770. BLS first reported foreign-born workers in 1996, when there were 14.4 million, making them 10.8 percent of the US labor force.

The 23 million Hispanics employed or looking for work in 2010 were 15 percent of US workers. Their unemployment rate in 2010, 12.5 percent, was between that of whites, 8.7 percent, and Blacks, 16 percent.

H-1B. The House Immigration Subcommittee held a hearing on the H-1B program on March 31, 2011 that suggested an emerging consensus on modifying the program. It would couple increased enforcement of H-1B program regulations with easier access to immigrant visas for foreign students who earn STEM degrees at US universities.

Witnesses highlighted different issues. Ron Hira testified that four of the biggest users of H-1B visas between 2007 and 2009 were Indian outsourcing companies: Infosys, Wipro, Mahindra Satyam and Tata. Bruce Morrison urged Congress to enact legislation that would allow foreign graduates of US universities with science and engineering degrees to have automatic or easy access to immigrant visas. He said: "There are no problems for which green cards are not a better solution than temporary visas." Immigration lawyer Bo Cooper stressed the cost to employers of obtaining H-1B visas, $2,320 in government fees for a first H-1B visa and $1,820 for renewal, plus legal fees. Cooper said: "Without a robust, fully functioning H-1B program [the US will lose its ability to] out-innovate the rest of the world, to keep jobs here, and to grow new jobs."

An ex-project manager of Infosys, Jack Palmer, charged in a February 2011 suit that Infosys was using B-1 business visitor visas rather than H-1B visas to bring Indian IT workers into the US. Palmer said that Infosys managers in Bangalore in March 2010 discussed ways to get around H-1B visa caps "to fulfill the high demand for its customers at lower cost," and Palmer later complained when he said that Indians in the US on B-1 visas worked alongside Indians with H-1B visas. Infosys has 15,500 US employees, including 10,100 with H-1B visas.

There are 65,000 H-1B visas a year available, plus 20,000 for foreign graduates of US universities with advanced degrees, plus an unlimited number for nonprofits and universities. There are an unlimited number of B-1 business-visitor visas available at a cost of $140 each. Foreigners in the US with business visitor visas remain employees of foreign firms; they are not considered US workers.

DOL's Office of Inspector General in June 2011 emphasized that DOL must approve employer attestations seeking approval to hire H-1B foreigners unless they are "incomplete or obviously inaccurate." The OIG said that DOL must be given authority to verify the accuracy of information provided by employers, since the H-1B program is vulnerable to "fraud and abuse, particularly by employers and attorneys."

Maryland's Prince George's County Public Schools in April 2011 was ordered to pay $4.2 million to 1,044 foreign teachers hired through the H-1B visa program to reimburse them for fees that the school employer rather than the teachers should have paid; DOL also levied a $1.7 million fine. The Prince George's schools hired mostly Filipinos, and says it will appeal the decision and the fine.

Representative Zoe Lofgren (D-CA), introduced the Immigration Driving Entrepreneurship in America Act (IDEA) in June 2011 to expand the number of immigration visas for foreign students earning advanced degrees in Science, Technology, Engineering and Mathematics (STEM) from US research universities who receive US job offers related to STEM that pay at least the prevailing wage. Lofgren said: "It makes no sense for us to educate the world's brightest students and then ship them back to their home countries to compete against us."

Under HR 2161, the current four-level prevailing wage system would be replaced by a new three-level prevailing wage system, which would eliminate the current lowest wage. If employers requested more H-1B visas than were available, those offering the highest wages would get preference for visas. Employers who are deemed "established US recruiters" of foreign workers could use a streamlined certification process if they had at least 80 percent US workers on their payrolls.

IDEA would also make two-year probationary immigration visas available to foreigners who obtain at least $500,000 in US venture capital and create at least three full-time US jobs, raise an additional $1 million, or generate at least $1 million in revenue. Foreigners could also use their own capital to create at least 10 full-time jobs. Unauthorized foreigners in the US would be eligible for IDEA-immigrant visas. Finally, IDEA would change the employment-based immigration system, which currently provides 140,000 immigrant visas a year to workers sponsored by US employers plus their families. Typically, only 65,000 visas are given to workers; the other 75,000 go to their families. IDEA would make all 140,000 available to workers and would eliminate per-country ceilings.

Other Programs. The US has a dozen programs that admit foreigners to work temporarily in the US, with visas ranging from F-1 for foreign students who can work part time while they study to TN for professionals from Canada and Mexico, who can work indefinitely in the US.

The New York Times on May 17, 2011 reported on the P1-B program, which admits foreign entertainers in groups recognized internationally as outstanding. Some of the foreign music and other groups have contracts with Columbia Artists Management that put them on grueling schedules while touring the US, sometimes traveling long distances before playing.

Catherine Rampell, "Companies Spend on Equipment, Not Workers," New York Times, June 10, 2011.