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October 2011, Volume 18, Number 4

Labor, H-1B, J-1

The US unemployment rate averaged 9.1 percent in summer 2011, when there were about 14 million unemployed workers, including 6.2 million who were jobless six months or more. The average duration of unemployment was almost 20 weeks, and six million jobless workers were unemployed 27 weeks or more.

Some employer recruitment ads "strongly prefer" currently employed workers, prompting some states to enact legislation prohibiting employers from discriminating against the unemployed. President Obama backed a bill pending in Congress that would bar employers from discriminating against jobless applicants.

Georgia Works, a program that allows employers to use unemployed workers as unpaid interns for up to 24 hours a week while they continue to receive unemployment insurance benefits, may be expanded nationally to spur hiring. After eight weeks, the employer can hire the worker. Since 2003, about 18 percent of those who completed eight-week internships with Georgia employers were hired; the hiring rate dropped to 10 percent since the 2008-09 recession. President Obama supports expanding the so-called Bridge to Work program to other states, even though many unions criticize it as a free-labor program.

The US labor force rose by 10 million between 2001 and 2011, a period that saw the number of private-sector jobs fall by two million. The percentage of Americans 16 and older who are employed fell from 65 percent in 2000 to 58 percent in 2011. Production and profits are up, but employers are reluctant to hire more workers, opting instead to obtain additional labor in ways that include the use of temporary or contract workers who do not become regular employees.

There were 25 million US residents without high-school diplomas in June 2011. Only 10 million or 40 percent were employed, and 1.6 million were unemployed, meaning that most were not in the labor force. The number of NEETS, 15- to 24-year-olds who are not employed or enrolled in education or training, rose to almost 17 million in 2010, meaning that over 12 percent of all persons in the 15-25 age group were not in the labor force or in school.

The 2008-09 recession widened wealth gaps between whites, whose median wealth was $113,000 in 2009, compared to Blacks (median $5,700) and Hispanics ($6,300). Almost half of the wealth of whites, and an even larger share of the wealth of Blacks and Hispanics, was home equity.

Between 1990 and 2008, the US added over 27 million jobs, including 98 percent in the non-tradable sector, such as government and health care. Jobs in the tradable sector are often high wage, as for example when US-based employees design airplanes or electronics that are produced abroad. A $500 Apple iPad includes about $290 of components and assembly overseas, yielding $210 per device to cover US design, marketing and profits. Fast-growing economies such as China are moving up the value chain, doing more of the higher-wage work that has been done in the US, including development and design.

The Bureau of Labor Statistics reported in October 2011 that fewer than one in five Silicon Valley high-tech firms launched at the height of the dot-com bubble in 2000 remained in business in 2009; most of the start-ups that failed went under within two years. The 20 percent survival rate is typical for US high-tech companies started in the past two decades.

H-1B. The H-1B program admits 65,000 foreigners a year with college degrees coming to fill US jobs that normally require a college degree; another 20,000 H-1B visas a year are available to employers seeking foreigners with advanced degrees from US universities. US employers request permission to hire H-1B foreigners by attesting that they are paying them prevailing wages. Thus most are not required to try to recruit US workers, and most can lawfully lay off US workers and replace them with H-1B visa holders.

This easy-entry system means that all H-1B visas are usually requested soon after they become available, normally April 1 for the federal fiscal year beginning October 1. The 2008-09 recession reduced employer requests for H-1B visas, but the recovery of 2010-11 prompted new efforts to persuade Congress to "raise the cap." As of August 26, 2011, employers requested 29,000 of the 65,000 regular H-1B visas available for FY12 and 16,000 of the 20,000 advanced degree visas.

The Senate Immigration Subcommittee held a hearing on July 26, 2011 that featured testimony from business leaders urging more H-1B visas. Microsoft, arguing that "jobs move in search of the right people" instead of people moving to jobs, testified that it had 4,500 job openings for which it cannot find US workers and cannot obtain H-1B visas for foreigners, encouraging it to move the vacant jobs overseas.

Cornell University President David Skorton testified that there are "not enough qualified or interested US students in STEM fields," science, technology, engineering and math, and urged more immigrant visas for foreigners who earn STEM degrees from US universities. New York City Mayor Michael Bloomberg said: "There is no such thing as too many engineers, scientists, or technological innovators," and we should "give them green cards when they finish their degrees."

Critics of the H-1B program testified that US employers are seeking foreigners with H-1B visas because they are younger and can be paid lower wages. H-1B visa holders are also tied for up to six years to the US employer who brought them into the US. During this six-year period, many H-1B visa holders hope to be sponsored by their employers for immigrant visas, rewarding them as "loyal workers."

The House Judiciary Committee's Subcommittee on Immigration Policy and Enforcement held a hearing October 5, 2011 that featured testimony asserting that about 40 percent of advanced degrees in STEM fields granted by US universities go to foreign students. Texas Instruments testified that its goal is to "hire the best engineers and innovators from US universities and to retain them," which it finds hard to do because of sometimes lengthy waits for immigrant visas for the foreigners it sponsors.

There appeared to be agreement that per country limits (no country can receive more than seven percent of quota-limited immigrant visas in a year) should not apply to STEM graduates. However, not all witnesses agreed that the US needs more foreign STEM workers. Some argued that long-term US competitiveness would be enhanced by inducing more Americans to earn advanced degrees in STEM fields.

J-1. The J-1 exchange visitor visa program, sometimes called the trainee or intern program, is administered by the US Department of State. Trainees have graduated from a foreign educational institution, while interns are still studying.

Foreign trainees and interns obtain "practical training" not available in their home countries in the US for up to 12 months related to their field of study. Some 51 designated sponsoring organizations arrange for entry and internships, and 132,000 J-1 visas were issued in 2010; two-thirds of the J-1 visitors were brought to the US by 14 entities.

In August 2011, over 400 J-1 foreign-student visa holders employed in a Hershey-owned warehouse in Palmyra, Pennsylvania protested low wages and large deductions from their pay. Ohio-based logistics firm Excel operated the warehouse for Hershey, and used SHS Staffing Services to find workers. SHS used the Council for Educational Travel USA (CETUSA) to recruit foreign students willing to pay $3,000 to $6,000 to come to the US.

The J-1 student workers at the Hershey warehouse were paid the promised $8 an hour, but had $395 a month deducted from their wages to cover the cost of apartments they shared with three other J-1 visa holders. The protests were motivated in part by these deductions for rent that were higher than neighbors paid for similar apartments.

Education. For-profit colleges enroll about 10 percent of US undergraduates, but their students made up 150,000, or almost half of the 320,000 students who had taken out federal loans and did not make their required first loan repayments in FY09. Default rates are likely to rise over time.

For-profit institutions depend on federal student aid for over 80 percent of their revenues. Colleges with excessive default rates, defined as over 40 percent in the latest year or over 25 percent for three consecutive years, can lose their eligibility for federal student aid programs.

A national chain of charter schools that developed the Knowledge Is Power Program to raise student achievement found five keys: a "no excuses" culture, longer school days and years, more rigorous and selective hiring of principals and teachers, frequent quizzes whose results determine what needs to be retaught, and extensive tutoring.

Julia Preston, "Foreign Students in Work Visa Program Stage Walkout at Plant," New York Times, August 18, 2011.