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Does the United States Need Foreign Workers?

High U.S. unemployment rates—and employer abuses—are fueling debate about foreign workers.

June Cover​Parthavi Pathak found a lot to like in Nashua, N.H., a former mill town 60 miles from Boston and close enough to the Atlantic coast and the White Mountains to make day-tripping easy.

"The town is very quiet, and life is so simple here," says Pathak, who came to the United States from India in 2003 to study engineering. Two years later, a master’s degree in hand, she landed a job with KBACE Technologies Inc. Like her Indian-born husband, who also works at KBACE, Pathak was hired through the H-1B visa program. It allows employers to recruit architects, engineers, computer programmers and other skilled foreign professionals when qualified U.S. workers can’t be found.

It wasn’t long before KBACE managers, delighted with the couple’s work, agreed to sponsor them for green cards providing permanent resident status.

On Massachusetts’ Cape Cod peninsula, a half-day drive east of Nashua, innkeeper Gregory Stone awaits the arrival of a vastly different crew––mostly middle-aged Jamaican women who will clean dishes, rooms and laundry at his seaside resort throughout the summer. At season’s end, they will return to Jamaica or relocate to another seasonal business—probably in Florida or California––until their temporary work visas expire. Most have been returning to Stone’s Lighthouse Inn for years, often inviting friends and relatives to work with them.

Stone, and scores of business owners on the Cape, began recruiting foreign workers in the 1990s, after most local wage earners were driven off the peninsula by soaring housing prices. While students had once been reliable fill-ins, they now turn up their noses at housekeeping, opting for more glamorous or resume-enhancing jobs that sometimes pay less. The H-2B visa program, he says, remains his lifeline.

The ability of U.S. employers to attract the world’s best and brightest, not to mention the proverbial huddled masses, has long been a point of national pride. But there is no consensus on how, or if, immigrants fit into the U.S. workforce. For years, national debate centered on undocumented workers and their role in stimulating the economy or depressing wages. Now, with slow economic growth and high unemployment, the same questions are asked about legal foreign workers, particularly the 181,000 or so who gain entry each year on H-1B and H-2B visas.

Foreign-hiring programs generally stem from the premise that Americans aren’t skilled enough or won’t do certain jobs. The claims evoke skepticism from many academics and labor rights advocates. But even when confronted with bureaucratic hurdles, U.S. employers at both ends of the skills spectrum say they have no choice.

Top H-1B Occupations 

"It’s a matter of getting the right person at the right time with the right set of skills," says Brian Testa, vice president at KBACE. About one-tenth of its 450 employees hold H-1B visas or received intracompany transfers from operations in India. The Nashua-based Oracle consultancy has to tap worldwide talent to stay competitive, he argues.

And Stone needs workers willing to get their hands dirty. "People from this country don’t want the label that they work in housekeeping," he says. "We advertise for American workers. The problem is, we don’t get any applicants."

Inside the ‘Cap Gap’

The H-1B employment visa brings in upwards of 115,000 skilled foreign workers annually, including some 30,000 researchers and academics not subject to the annual H-1B visa cap set by Congress. Of those 115,000, 85,000 are distributed to employers through a lottery held by U.S. Citizenship and Immigration Services (USCIS), an arm of the U.S. Department of Homeland Security (DHS), each April. Until this year, demand far outpaced supply, and convincing Congress to raise the cap has been a legislative priority for many, particularly high-tech employers.

Here’s a little-known fact: No one knows exactly how many H-1B visa holders are working at any one time. B. Lindsay Lowell, director of policy studies for the Institute for the Study of International Migration at Georgetown University, offers an estimate of 500,000. But it’s a moving target: A three-year initial visa can be renewed for another three years, and if a worker is on track for a green card, H-1B status can be renewed annually.

Many employers say the H-1B visa program provides the only practical avenue for finding high-tech workers with cutting-edge skills. Immigrants represent 24 percent of U.S. workers with bachelor’s degrees in science and engineering and 47 percent of those with doctorates, according to a 2008 working paper by William R. Kerr of Harvard Business School and William F. Lincoln of the University of Michigan, who analyzed 2000 census data to determine immigrants’ impact. From 1995 to 2006, 67 percent of the growth in the U.S. science and engineering workforce stemmed from immigrants, they conclude.

A growing body of research suggests that foreign students’ razor-sharp focus on science and engineering benefits the U.S. economy. Among U.S. tech and engineering companies launched from 1995 to 2005, more than 25 percent had at least one foreign-born founder, according to Duke University professor Vivek Wadhwa. In 2005 alone, these immigrant-founded companies produced $52 billion in sales and employed nearly half a million workers.

Wadhwa says tech-savvy immigrants are driving U.S. innovation. In 2006, more than 24 percent of international patent applications filed from the United States named foreigners as inventors or co-inventors.

Immigration advocates say such findings underscore the need for legislative changes that would make it easier for skilled immigrants to enter the United States, get jobs and start businesses. Absent meaningful immigration reform, they warn, workers will return to their home countries and U.S. employers will be forced to tap their talents through outsourcing.

Immigration critics insist that the outsourcing threat is overstated. They point to the four- to six-year backlog of petitions for permanent residency as proof that immigrants still want to come to the U.S. Thus, the argument goes, foreign workers would accept lower pay to put themselves in good stead with U.S. employers who might sponsor them for green cards.

Those challenging the need for foreign workers say that even when foreigners are offered the same pay as U.S. counterparts, their presence increases competition for U.S. jobs, driving down wages.

Such sentiment came through boldly in a House resolution Rep. Eddie Bernice Johnson, D-Texas, introduced in February to celebrate Black History Month. She applauds the achievements of black employees in computer science while observing: "The offshoring of jobs and the H-1B visa program—which allows non-U.S. citizens in high-skill professions to live in the U.S. as temporary workers––are contributing to salary stagnation in domestic technology jobs."

Top 10 Companies Using H-1Bs 

Ron Hira, an assistant professor of public policy at New York’s Rochester Institute of Technology, has become the academic voice for those challenging expansion of immigration quotas. After analyzing foreign-labor condition applications filed by employers with the U.S. Department of Labor (DOL), he concluded that a large portion of the specialty workers hired under H-1B visas aren’t special at all. In 2008, the DOL certified more than 5,000 applications for H-1B positions paying less than $15 an hour. In 2005—the most recent year for which H-1B statistics are available—the median yearly wage for new H-1B recipients working in computer science, including many with master’s degrees and years of experience, was $50,000. "That’s comparable to the $51,000 median salary paid to entry-level U.S. workers with only a bachelor’s degree," Hira says.

Many immigration critics question the validity, or relevance, of foreign-worker certification, as the DOL certifies virtually all H-1B petitions. In fact, when applications are given closer scrutiny, many don’t pass muster. A 2008 internal report by USCIS, posted online by Sen. Charles Grassley, R-Iowa, found evidence of forged documents, fake degrees and other improprieties in one out of every five petitions. Some employers didn’t pay prevailing wages and benched employees when there wasn’t work, the report stated. In one instance, the H-1B position described by the employer was "business development analyst." It turned out that the visa holder would be doing laundry and maintaining washing machines.

Recent H-1B-related scandals underscore the program’s vulnerability to abuse. In May 2008, iGate Mastech, a Pittsburgh computer consultancy, agreed to pay $45,000 in civil penalties to settle U.S. Department of Justice (DOJ) allegations that the company violated anti-discrimination laws by favoring H-1B visa holders above U.S. citizens and other legal U.S. workers. Earlier this year, federal officials indicted 11 individuals in six states who allegedly recruited H-1B workers but didn’t have jobs for them. Some of these workers were placed with employers who hadn’t been certified, "displacing qualified American workers and violating prevailing wage laws," according to a USCIS statement.

Reports––real or imagined––that employers routinely prefer foreign hires to U.S. workers could cause the gap between foreign and U.S. workers’ skills to widen, some say. Lawrence Feidelman, an adjunct computer science professor at Florida Atlantic University in Boca Raton, sees the number of U.S. students in his computer science classes decreasing while the number of foreign students increases. He attributes the trend to U.S. students’ fear that when it comes to getting jobs, the deck is stacked against them.

Who Gets a Green Card? 

Displacement Theory

As the economy deteriorates, charges that foreign workers are displacing U.S. workers are increasing. Many lawmakers were infuriated by reports that banks receiving bailout funds had sought foreign workers for high-paying jobs stateside, even as they were laying off U.S. citizens. Some foreign workers were hired for senior human resource positions. In response, Congress enacted stricter limits on aid going to businesses that employ H-1B workers.

"The very least we can do is to make sure that banks receiving a taxpayer bailout are not allowed to import cheaper labor from overseas while they are throwing American workers out," says Sen. Bernie Sanders, I-Vt., who sponsored the restrictions with Grassley.

The fact that many of the companies most reliant on H-1Bs are India-based outsourcers doesn’t win points with lawmakers or the public. During the past three years, Indian-owned companies collectively accounted for some 12 percent of all new H-1B hires, according to the DHS. While most employers petition for only a handful of new H-1Bs each year, several large Indian-owned companies, including Infosys Technologies Ltd. and Wipro Ltd., hire thousands for their U.S. workforces. Microsoft—the only U.S. employer coming close—sought 1,037 new H-1Bs last year.

Sen. Richard Durbin, D-Ill., usually chooses his words carefully when criticizing Indian-held companies. But he held no punches in 2007, saying that the "primary mission" of Indian outsourcing companies "is to gain the expertise necessary to take on critical tasks performed by companies in the United States and perform them in India at a fraction of the cost." A bill he and Grassley introduced in April would give government officials greater authority to investigate employers suspected of abusing H-1B rules and prevent companies from using H-1B visa holders to displace U.S. workers. It would prohibit U.S. employers from recruiting only foreign workers for certain jobs. Until enforcement of H-1B rules is improved, the lawmakers say they will oppose raising the H-1B cap.

Measures strengthening protection for U.S. workers, especially during layoffs, could put some employers in a bind. "There is a rationale that [U.S.] companies should prefer their own workers over foreign workers," says attorney Marilyn Fish of Bryan Cave in Atlanta. But employers are prohibited from discriminating against workers on the basis of national origin, and employers that show bias could be vulnerable to charges of illegal discrimination, she warns. Thus, employers that respond to political pressure by singling out H-1B workers for layoffs are at risk of discrimination charges.

Laid-off H-1B workers are permitted to find work with other H-1B-certified employers but must comply with strict immigration rules governing their status while unemployed.

Low-Skill Dilemma

White-collar workers now have center stage in the immigration visa debate. But as a growing number of U.S. workers file for unemployment, the H1-B’s poorer cousin, the H-2B, is getting scrutinized, too. Some employers are giving their reliance on foreign workers a closer look.

Come winter, Danette Logan, HR director for Colorado’s Aspen Skiing Co., anticipates needing only a fraction of the 300 or so H-2B workers she previously hired as ski instructors, ticket takers, slope groomers and hospitality workers. There will be fewer skiers during the recession, and unemployed U.S. workers might be desperate enough to take temporary jobs on the slopes. "We’ll assess the unemployment rates in other states and maybe throw the net wider," she says. "You look at where your labor pool is and your ability to attract."

That’s an approach economist Andrew Sum, director of the Center for Labor Market Studies at Northeastern University in Boston, has been urging H-2B employers to take for years, particularly on Cape Cod.

"Anyone who says that young people are not available to do the work is seriously lying," he says. "Americans do that kind of work every day." He dismisses the argument that U.S. workers turn up their noses at scut work.

"It’s well and good to say there are Americans looking for jobs, but there are practical problems," counters Greg Siskind, author of The Employer’s Immigration Compliance Desk Reference (Society for Human Resource Management, 2009). "If you’re laid off from a plant, looking for [part-time or seasonal] work isn’t going to solve your financial problems."

Karen Oertel, whose family has run an oyster-processing operation in Kent Narrows, Md., since the 1940s, bristles at the notion that today’s rising unemployment rate will solve her decades-old shortage.

"It’s wonderful that we are educating our kids," she says. "But with that, we have lost our traditional workforce."

Earnings Gap 

Like more than half of Maryland’s shellfish processors, she turns to the H-2B program, typically bringing in 20 workers from Mexico to shuck oysters from October to February. It’s dirty, smelly work that she hasn’t been able to find U.S. workers willing to take on. "I’ve tried everything," she says, including "going to job fairs up and down the state [and] busing in workers from Baltimore."

She pays by the pound, and a typical worker earns about $12 hourly––well above the minimum wage. Paying more would price her out of the market, she says.

Like white-collar counterparts, Oertel is joining other seasonal business owners to convince Congress to raise the H-2B cap, currently set at 66,000. Although Oertel was approved for the workers she needed this year, crab pickers on the whole were not so lucky. Only four of 25 Maryland crab-picking houses received allotments of H-2B visas, and, as a result, many could be forced to shut down, owners claim. That, in turn, could put hundreds of U.S. workers out of jobs, says University of Maryland resource economist Douglas Lipton. While limiting his research to the seafood industry, he estimates that every H-2B visa job lost leads to a loss of 2.54 domestic jobs.

At press time, Sen. Barbara Mikulski, D-Md., was seeking to exempt returning H-2B workers from the cap on behalf of her state’s seafood industry. Other lawmakers hesitate to raise the cap, as the program displays many of the same abuses as the H-1B program. In April, for instance, a Texas jury convicted twin brothers of arranging phony H-2B visas for 87 individuals from India. The scheme generated an estimated $1.8 million for the conspirators, according to a Justice Department statement.

Plus, legal rights advocates say H-2B workers are vulnerable to abuse, as anyone who complains about substandard wages, conditions or other workplace problems may be fired and forced to leave the country.

Think Twice, Hire Once

At least in the short term, employers reliant on foreign workers will almost certainly face increased public scrutiny. Employee morale—and companies’ standings with customers and other constituents—could easily be at stake. Thus, such employers must defend their positions.

Yet the posture they choose need not be binding: This spring, Reston, Va.-based Sallie Mae, the nation’s largest student loan provider, announced a plan to bring 2,000 jobs to the United States within 18 months as it shifts call center and other operations from India, the Philippines and Mexico. "The current economic environment has caused our communities to struggle with job losses," said Chief Executive Albert L. Lord. "They need jobs."

The day the company announced the move, shares rose 4.4 percent.

The author is senior writer for HR Magazine.

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