What's the real reason tech companies want to hire foreign workers?

Top talent might not be the whole answer
Posted at 11:25 AM, Feb 16, 2017

Tech companies complain a recently circulated draft of a presidential executive order to cut back high-skilled foreign worker visas would restrict their access to the world’s best and brightest and blunt their competitive edge.

Not everybody buys that argument. Some experts say the executive order would restrict the companies’ access to cheap labor.

Tech companies love the H-1B visa, which allows companies in any industry to apply for guest-worker visas for foreign workers with advanced degrees. Each year 85,000 of those visas are allotted through a spring lottery. Of that, 20,000 are specifically given to applicants who received a U.S. master’ degree or higher.

The top three sponsors of the visas in 2015 were Deloitte consulting, Cognizant Technology solutions and Tata consultancy services, but well-known tech companies such as Facebook and Google also employ foreign workers under the program.

Tech companies argue there’s a shortage of high-skilled workers in the U.S. because not enough students are graduating with science, technology, engineering or math (STEM) degrees. Others point out that the number of visas handed out under the program, which was introduced in the 1990s, actually should be increased not decreased. They say more visas are needed to meet the growing labor needs of tech businesses. In 2015, the U.S. tech industry added 200,000 jobs and now employs more than 6.7 million people. The fear of a visa upheaval has many tech companies worried.

If an executive order limited available high-skilled foreign labor, “It would cause us to think about hiring more folks to work outside the U.S.,” said Barney Silver, BitTitan’s vice president of finance. “And I don’t think that’s a win for the U.S.”

The president and CEO of the Silicon Valley Leadership Group, Carl Guardino, put his reaction to the draft in a historical context, saying, “America’s economy, including its innovation economy, has been built on the courage and creativity of immigrants, including refugees. In fact, 40 percent of America’s Fortune 500 companies were founded by an immigrant or the child of an immigrant. Fifty-three percent of our engineers, the lifeblood of Silicon Valley, weren’t blessed to be born in the United States.”

Donald Trump has said he’s opposed to most visa programs, but has specifically targeted the H-1B program. In a statement released in March, he said “the H-1B program is neither high-skilled nor immigration: these are temporary foreign workers, imported from abroad, for the explicit purpose of substituting for American workers at lower pay.”

“There’s a lot of myth about it, there’s a lot of misconception,” said Hal Salzman, an expert on technology education at Rutgers University who studies labor markets. “I mean it’s the height of hypocrisy… they’re laying off workers and yet claiming they can’t find people.”

Salzman has worked on various studies about the availability of high-skilled workers in the domestic pool — which includes U.S.-born citizens, green-card holders and immigrants. His work was quoted by President Donald Trump on the then-candidate’s website when he was running for office.

Salzman said there’s no proof that there’s shortage of high-skilled workers in the U.S. He points to reports of technology companies laying off thousands of workers as proof that the problem isn’t that there is no available native U.S. labor. One high-profile example he cites involved Disney in 2015. The New York Times reported the company laid off 250 employees and most of their jobs were transferred to workers on the H-1B program. Many of the fired workers were required to train their replacements as part of their severance package.

A similar thing happened at California Edison, where 300 American workers were laid off and replaced by high-skilled foreign workers.

Salzman also scoffs at claims H-1B workers are the best and the brightest and says studies show that only one third of H-1B workers hired by tech companies have STEM degrees.

According to the most recent Department of Labor data from 2015, the top three H-1B occupations are computer systems analysts, software developers and computer programmers.

Salzman argues that while many of the hires are programmers, the jobs they fill are largely in IT roles. “It’s help desk. It’s systems admin. It’s maintain your laptops and database management. These are not the Google jobs. These are not the Microsoft jobs. That’s the bulk of the demand and most of the demand is what’s called IT services,” he said.

He adds that in reality there’s a labor boom in the U.S. in the high-skilled arena, so much so that Ph.D. science students are having trouble finding work — not the other way around. According to a 2016 study by the National Science Foundation, doctoral students in science and engineering fields who reported definite work commitments or a postdoc position dropped to the lowest in 15 years.

So why do tech companies go through such lengths to apply for visas and hope for foreign labor to fill jobs if they could find workers right here in the U.S.?

Testifying in March 2016 on the impact of high-skilled immigration on U.S. workers, Ron Hira, a research associate at the Economic Policy Institute, a nonprofit, nonpartisan think tank, told a U.S. Senate subcommittee that H-1B labor was much cheaper than American labor. Referring to a study conducted by EPI, Hira said the wages of H-1B workers were at least $40,000 lower per worker — about a 40 to 50 percent discount.

The current labor laws state that companies can pay H-1B workers based on four skill levels all with different salary ranges. According to the United States Department of Labor website, hiring foreign workers cannot adversely affect the wages and working conditions of U.S. workers comparably employed, and to try to control this “the department’s regulations require that the wages offered to a foreign worker must be the prevailing wage rate for the occupational classification in the area of employment.”

However, according to Hira, companies routinely define a H-1B employee’s role as the lowest skill level because it corresponds with the lowest payment and it’s an easy work around for tech companies.

“About 40 percent of all H-1B applications are at Level 1 now, and another 40 percent or at Level 2,” he told IEEE Spectrum.

There are a number of bills in Congress meant to address some of these issues.

There’s a bipartisan bill in the Senate from Chuck Grassley, R-Iowa, and Dick Durbin, D-Ill., that hopes to redefine the H1-B salary floor by requiring companies to compare the market salary and median pay for the available job and pay the higher of the two.

In the House, there are two bills. One is by Rep. Zoe Lofgren, D- Calif., which would award visas to companies who offer the highest salaries. Secondly, there’s a bill that was introduced by Darrell Issa, R-Calif, which has the goal of making it more complicated for companies to hire H-1B workers.

One of the threads in many of the bills is to generate more demand for U.S. applicants to fill open tech positions while making it harder for tech companies to hire foreign workers for less pay.

“If you have a shortage, raise salaries, students respond,” said Saltzman, pointing to the previous shortage in petroleum engineers in the Dakotas as an example. “The peculiar thing about this is that the only industry crying shortage out of all of this is the tech industry.”