Fixing H-1Bs

I materially agree with Daniel Costa’s op-ed at MSNBC in reaction to President Trump’s announced $100K fee and other measures to reform H-1Bs. Here’s the meat of the op-ed:

First, U.S. employers are not required to advertise jobs to U.S. workers and recruit them before hiring H-1B workers. Employers claim there are labor shortages of skilled workers — often despite evidence to the contrary — but are ultimately not required to test the labor market to see if this is true. Instead, they can completely bypass the U.S. workforce.

Second, the rules for H-1B visas require that those workers be paid a fair wage according to U.S. standards. However, in practice, the rules allow the majority of H-1B workers to be vastly underpaid, earning less than the true market wage for their occupation and location.

Third, the way visas are allocated is problematic: As Bloomberg reported last year, staffing companies that pay the lowest wages allowed by law easily exploit the random lottery system that allocates H-1B visas and eat up a large chunk of the 85,000 visas that are subject to the annual cap. (Another 56,000 visas were issued last year to firms that are not subject to the cap.)

Fourth, lack of federal enforcement has allowed companies to underpay H-1B workers by tens of millions of dollars. While some H-1B workers do possess rare skills that benefit the U.S. economy, most who are admitted are classified as filling entry-level jobs that do not require advanced skills. Because of visa rules, H-1B workers are placed in working arrangements akin to indentured servitude. H-1B rules ultimately subsidize the outsourcing and offshoring of U.S. jobs and even incentivize firms to directly replace their U.S. workers with H-1B workers, who can be legally underpaid compared with the market rate for local workers. Just this week, two prominent senators — Republican Chuck Grassley of Iowa and Democrat Dick Durbin of Illinois — penned a letter calling out the biggest tech employers for laying off thousands of U.S. workers while simultaneously hiring thousands of H-1B workers.

The emphasis is mine. He continues:

There are several clear and simple steps that the Trump administration can take to fix H-1B, if this White House is serious about improving the program and protecting workers. None of these steps involve announcing a large fee that creates chaos and uncertainty: The fee is already in effect, for instance, even though there isn’t even a process or a form yet allowing employers to pay it.

The good news is that the administration is implementing or considering two regulations that could go a long way in curbing employer abuses of the visa. One is mentioned at the end of Trump’s proclamation, which directs the Department of Labor to craft a regulation to raise wage rates for H-1B workers. If a rule is ultimately proposed and the final version requires that H-1B workers be paid at least the local median wage for their specific occupation, it would go a long way to fixing the program.

No reform of the program will succeed without enforcement and companies employing H-1B visa cannot be trusted to follow the rules on their own. My modest proposal for remedying the present debacle would be to a) pay substantial bounties to individuals who reveal H-1B workers who weren’t hired, paid, etc. in conformity with the rules; b) don’t require intent to be proven to find a company in violation; c) increase the penalty for employers violating the rules. I suggest that any employer who skirts the rules should be barred from hiring H-1B workers for five years.

None of that will be enough, either. We really need to start monitoring the use of offshored workers. We have no real notion of the scope of the problem.