January 19, 2016

All’s Fair in Love and War...and in Competing for H1-B Work Visas?

The federal government issues a number of different types of visas that allow people from other countries to enter the U.S.  One type of visa, the H1-B visa, allows companies to bring in foreign workers temporarily to fill jobs that require special skills.

About four years ago, we speculated that mayors and governors might start chasing after immigrants, who may come to the U.S. on an H1-B visa, instead of businesses (i.e., smokestack chasing, a popular metaphor used to describe the competition between the states for businesses and jobs).  Summarizing Brookings Institute research on the people who establish “high-impact businesses” (i.e., those that help other companies boost productivity and give consumers more choices), we mentioned that these businesses often included at least one immigrant, a finding that lead the institute to recommend policies to help clear the green card backlog.

Well, there’s a new twist to the “chase immigrants instead of smokestacks” story. The twist arises from the fact that the law limits the total number of H1-B visas the federal government may approve each year to 85,000.

The New York Times reports on an unintended consequence of this limit: about 20 companies, including 13 global outsourcing firms are gaming the system, taking about 40% of the visas. The application period starts April 1 and the federal government accepts them on a first come, first served basis. The law allows only one application per worker, but there’s no limit on the number of applications a company can submit. Tata Consultancy Services, also known as TCS, for example, submitted applications for 14,000 visas in 2015 and won approval for 5,600.

Okay, why is this a problem? According to the Times, the firms that soak up most of the visas use them to “bring their employees, mostly from India, for large contracts to take over work at American businesses. And, as the share of H1-B visas obtained by outsourcing firms has grown, more Americans say they are being put out of work, or seeing their jobs moved oversees.”

Another unintended effect is that some companies denied H1-Bs have looked overseas to hire the talent they need. One employer cited in the article, Mark Merkelbach, needed engineers and landscapers who could speak Mandarin to work on water projects in China. When he could not find people with the technical and language skills, he applied for H1-B visas. After his applications were denied, he hired people who resided in Taiwan. 

In general, the HB-1 visa program continues to attract much debate, with many arguing about its value and impact on the U.S. economy.