Policy Brief: The H-1B Visa Program Harms American Workers and Should Be Repealed
By Ken Cuccinelli
In the midst of the Biden-caused maelstrom regarding border security and numerous other immigration issues, the H-1B visa program quietly continues to serve as a tool for corporate America and big businesses not only to make use of cheap foreign labor at the expense of hard-working Americans, but also to perpetrate fraud and engage in corrupt business activities that elevate profit and power above all other considerations.
Corporate America and elites in Washington continue to prioritize their desire for cheap foreign labor over the employment of U.S. workers. There is no well-financed lobby in Washington for border security or displaced workers. As a result, federal immigration policy continues to prioritize the interests of non-citizens and big businesses over those of the citizens from whom the government derives its legitimacy within various visa programs.
These programs are numerous and include the H-2A temporary agriculture worker program, the H-1A nursing visa program, and the more well-known H-1B so-called “specialty occupation” work visa program that has become a favorite of the Chamber of Commerce and Silicon Valley. Decades after it was sculpted into a program to serve the needs of burgeoning tech and consumer-oriented industries, the H-1B program remains rife with fraud and abuse. In light of these realities, policymakers should consider that whatever benefits the program promised at its inception may well have run their course.
It is time to end the H-1B visa in its entirety.
Background: What is the H-1B Visa Program?
The H-1B visa program traces its origins to the H-1 program created in the Immigration and Nationality Act of 1952, which established a specialized visa for immigrants who possess “distinguished merit and ability” and who come to the United States to temporarily provide services of an “exceptional nature.” Importantly, the legislation specified that those eligible for the H-1 visa must also have no intention of abandoning their existing residency and citizenship status with their home country. The ostensible purpose of the H-1 program was to facilitate the orderly and legal process by which select, skilled non-citizens could travel to the United States for work on a temporary basis. Over time, the purpose of the program transformed.
In 1990, the H-1 program was bifurcated into two separate visas: the H-1A and H-1B programs. The H-1A program was specifically designated for nurses, while the new H-1B program was given a broader “specialty occupation” designation. Congress enacted a hard cap of 65,000 annual H-1B visas and attempted to enact oversight mechanisms to clamp down on fraudulent use of the program. Specifically, Congress enacted statutory changes requiring employers to pay “prevailing wages” for H-1B recipients and to fill out labor condition applications verifying that such wages were being paid.
The bifurcation of the H-1 program and the broadening of its scope proved an integral tool for Silicon Valley tech startups in the early 1990s to hire variably-skilled foreign workers at a lower overall cost than hiring American labor, and it did not take long for loopholes to be exploited. By 1993, public reporting revealed that the fast-developing computer industry had taken advantage of the 1990 H-1B changes to accelerate their growth at the expense of American workers.
During the Clinton administration, concerns over H-1B abuses did little to deter lawmakers from expanding the program. Following the passage of the offensively-named American Competitiveness and Workforce Improvement Act of 1998, the annual cap on the H-1B program increased from 65,000 to 115,000 for both FY1999 and FY2000–nearly doubling in size. A policy bone was thrown to reformers with the inclusion of a $500 “retraining fee” that employers were required to pay for each H-1B application. That fee then went to a program intended to train American workers to eventually do the job that the H-1B recipient performed.
The fee was doubled less than two years later to $1,000 per application under the American Competitiveness in the 21st Century Act. Considered one of President Clinton’s signature bills, the legislation ignored concerns over fraud and displacement of American workers and nearly doubled the annual cap once again to 195,000 H-1B visas for FY2001, FY2002, and FY2003. Incredibly, the law also exempted nonprofit organizations from the annual cap. Nonprofits currently account for over 10 percent of the private sector workforce according to the latest data compiled by the National Center for Charitable Statistics.
During the Bush administration, the expansion of the H-1B program continued apace. Free trade agreements with Chile and Singapore resulted in the creation of the H-1B1 visa. This carve-out applied solely to Chile and Singapore and included annual caps of 6,000 visa allocations separate from the annual H-1B visa lotteries.
In 2004, Congress passed visa reform legislation that increased the retraining fee for larger businesses from $1,000 to $1,500. Businesses with 25 or fewer employers had their retraining fees set at $750 per application. Additionally, a $500 “anti-fraud” fee was added for each H-1B application. While the annual cap was lowered back down to 65,000, another separate carve-out was created for non-citizens with advanced degrees. Furthermore, the legislation effectively expanded H-1B visa usage by fully excluding government entities from the H-1B annual cap.
A minor “reform measure” was implemented following the 2008 financial crisis as part of the American Recovery and Reinvestment Act of 2009–better known as the “shovel-ready” $700 billion stimulus package. That bill required employers who had received TARP funds to attest that H-1B visa workers would not displace American workers. It also prohibited employers from laying off American workers performing the same jobs as H-1B applicants for at least three months after H-1B applications had been filed. This “reform,” however, is now an effective license to displace domestic workers, as will be seen.
It was not until the Trump administration that serious efforts began to curb the abuses in the H-1B program. A March 31, 2017 agency memorandum issued by the United States Citizenship and Immigration Services (USCIS) stated that computer programming no longer automatically constituted a “specialty occupation” for purposes of H-1B visas. This preceded the issuance of Executive Order 13788 on April 18, 2017, which instructed federal agencies to enact policies that would maximize the usage of domestic goods, products, and services and enforced strict compliance with statutory measures designed to protect American workers. In FY 2021, the last fiscal year of the Trump administration, the number of H-1B petitions filed declined by 6.8 percent and the number of approvals dropped by 4.6 percent.
The H-1B Program’s History of Corruption and Exploitation
There is no shortage of examples of U.S. companies exploiting foreign labor and discriminating against American workers through the H-1B program. Following the 1990 statutory changes to the H-1 program, it didn’t take long for major U.S. companies to take advantage.
In 1993, Microsoft turned down nearly 50 experienced American applicants to hire a young Malaysian national with less than two years of experience to help customers troubleshoot Windows. Hewlett-Packard was found to have employed dozens of Chinese, Russian, and Indian programmers through the H-1B program at a “fraction of the cost” of an average American worker. These practices eventually attracted scrutiny even from the mainstream press, generating reports by both the New York Times and 60 Minutes outlining tech company abuse of the H-1B program to acquire cheap foreign labor to maximize profits and cut business expenses.
Unfortunately, such scrutiny did little to curb abuses of the program in subsequent decades. In 2015, Disney laid off nearly 250 American workers and replaced them with H-1B visa holders. Insult was added to injury when a number of the laid-off workers were required to train their cheaper, foreign replacements. A handful of the workers sued Disney, but ultimately lost their lawsuit two years later as Disney’s abuse was ruled legal under the statutory guidelines of the H-1B program. In 2018, the Department of Labor (DOL) found that Cloudwick Technologies in California exploited a dozen foreign workers, paying them nearly $200,000 below the required “prevailing wage” provisions. Cloudwick had promised some of its Indian workers $8,300 per month, but paid them only $800 per month.
Last year, a report by the Economic Policy Institute revealed that HCL, one of India’s largest outsourcing firms and the eighth-largest H-1B employer, exploited its own H-1B employees out of nearly $95 million. HCL has received more than 30,000 H-1B visas since 2009, facilitating the displacement of thousands of American workers to benefit large companies inside the United States. Among HCL’s many beneficiaries are Google, Boeing, and Merck.
The H-1B visa program is also tied to the recent Theranos scandal. Founded by disgraced former CEO Elizabeth Holmes, Theranos falsely claimed to have developed unique biomedical innovations regarding rapid blood-testing technology. The scam successfully hoodwinked investors out of hundreds of millions of dollars. Holmes, recently found guilty of defrauding investors and awaiting prison sentencing, employed dozens of Indians through the H-1B visa program during the apex of her company’s astounding con.
As John Carreyrou of the Wall Street Journal described in his book, Bad Blood: Secrets and Lies of a Silicon Valley Startup, Holmes relied almost exclusively on frightened foreign laborers with H-1B visas to perpetuate her grift in the final years of the company. This was in large part due to the fact that most of the American workers had either been fired or quit as they realized the extent of Holmes’ scam. The serf-like foreign workers, however, relied on employment at Theranos to remain in the United States, providing Holmes with the compliant–and cheap–workforce she needed to continue operations.
Facebook recently settled separate lawsuits from the Department of Justice (DOJ) and the Department of Labor (DOL) in the fall of 2021 over charges that the company discriminated against American workers in favor of hiring cheaper, foreign employees. This resulted in fines of $14.2 million in what the federal government deemed the “largest fine and monetary reward” recovered in the “35-year history of the INA’s anti-discrimination provision.” For perspective, the fine amounted to roughly .02 percent of Facebook’s total revenue, which at the time stood at $86 billion. For major companies like Facebook, the allure of the H-1B program’s inherently corrupt design is far more appealing than whatever minimal deterrence federal officials can impose through fines that are only collected after a long, drawn out process.
Harming American Workers and Exploiting Foreign Workers
The design of the program contains no shortage of loopholes for exploitation. Among them is the glance-and-rubberstamp loophole whereby the Department of Labor is only allowed to review H-1B applications for completeness and “obvious inaccuracies.” This “glance and rubberstamp” loophole allows employers to claim payment is the “prevailing wage” regardless of whether it actually satisfies that requirement because the Department of Labor can only inspect for obvious inaccuracies on the form. This means that abuses are only likely to come to light through whistleblowers who risk their own careers and possible deportation if they are H-1B recipients.
Furthermore, the Department of Labor is prohibited by statute under 8 U.S.C. Section 1182 from reviewing prevailing wage claims after they have been approved. This loophole bookends the perverse incentive structure of the program, tilting it fully toward exploitative behavior on the part of major companies. Even the claimed reforms in the 2009 stimulus bill backfired in their ostensible purpose to protect American workers. Though language prohibiting Americans from being displaced within 90 days of the filing of an H-1B visa application remains embedded in federal statute, this essentially serves as a de facto green light for companies to displace American workers once the 90-day filing period has lapsed.
These design flaws are intrinsic to the entire purpose of the H-1B program as actually employed by corporate America. Companies turn to the program to perpetuate:
In 2021, more than 30,000 U.S. employers made use of the H-1B visa program. However, data compiled by the Economic Policy Institute shows that the program is astonishingly top-heavy, with the top 30 H-1B employers utilizing over 37,000 H-1B visas. This accounts for some 44 percent of all H-1B visas available in 2021. Even more alarming is the fact that half of the top 30 H-1B employers are outsourcing firms that explicitly exist to resell cheaper labor to other American companies. Put another way, over half of the top 30 H-1B employers are companies such as Tata Consultancy Services, Cognizant, and Infosys that exist for the explicit purpose of replacing American workers with cheaper, foreign-born workers.
According to data compiled in 2020, some 60 percent of H-1B workers were paid at the two lowest prevailing wage levels for these top H-1B employers, meaning that three out of five foreign visa workers were being paid wages far below the local median wage for similar occupations. Amazon and Microsoft are particularly egregious in their practices, with over 75 percent of their H-1B workers in 2019 paid at the two lowest prevailing wage rates.
There is substantial data to suggest that the H-1B visa program continues to be one of the most abusive programs condoned by the federal government. The design and implementation of this program necessitate inflicting real harm on middle-class and middle-class-aspiring Americans, their families, and their communities, as well as many of the foreign recipients of the visa.
The H-1B Visa Program Should Be Repealed
At an absolute minimum, policymakers should raise the statutory cost of each H-1B visa application to $100,000. This would serve as a deterrent for many companies seeking to continue their exploitation of cheap foreign labor at the expense of American workers. If the cost is not worth the benefit, employers will abandon their harmful practices. Similarly, another bare minimum reform consideration is eliminating the H-1B visa lottery process and instituting an auction-style process whereby only the 65,000 highest wage offerings – relative to the prevailing wage scale1Because any given wage amount, e.g., $100,000, might be at the 50th percentile of the prevailing wage scale in a big city, but at the 75th percentile in middle America, the auction would be judged against the percentile ranking of the proposed wage in the location where the foreign worker was proposed to reside and work. – are given visas annually. This would both maximize the value of the program and serve as a deterrent to abuse. Moreover, in the absence of moving to an auction-style allocation of visas, Congress should repeal the glance-and-rubberstamp loophole. The Department of Labor must have the power to analyze whether H-1B employers are paying the actual prevailing wage so that enforcement actions actually have teeth.
The Executive Branch can help mitigate the ongoing harm caused by the program by prosecuting H-1B visa fraud under the False Claims Act and requiring secondary employers of H-1B workers to file labor condition applications. This will significantly undercut outsourcing firms whose sole purpose is to incentivize American companies to fire American workers. Alternatively, outsourcing may just be banned, i.e., the applying company must be the sole corporate beneficiary of each H-1B worker.
Such reforms, however, are ultimately stopgap measures. The H-1B program is an intrinsically harmful and corrupt program and is not worth salvaging. Instead of trying to reform or retool the H-1B visa program, lawmakers should take a simpler approach: repeal and elimination of the statutory authorization for the program altogether. Congress and bureaucrats in the executive branch simply have no way of knowing what the annual cap should be set at in a given year. The annual exercise of raising or lowering the visa cap presumes the H-1B visa lottery’s continued merits. Such merits are illusory. The benefits of repealing the H-1B visa program, by contrast, are manifold.
Repeal of the H-1B visa program would end the most brazen practice of government-sanctioned worker exploitation. The frequent abuse of foreign labor to avoid employing Americans cannot be denied, even by proponents of the H-1B program. A repeal of this program would not only bring that practice to a halt, but also close a major statutory loophole facilitating fraud and remove a program that has allowed businesses to engage in corrupt practices with minimal punitive consequences.
Second, a repeal of the H-1B program would restore a healthier employer-employee relationship in companies that currently make use of such visas. This is necessary not only to improve internal trust among employees, but also to build trust among citizens who utilize the services and products of such companies. Data collected by Gallup in July 2021 shows that Americans overwhelmingly distrust big businesses compared to small businesses and other institutions. According to the 2021 Gallup survey, 70 percent of Americans have a “great deal or quite a lot” of trust in small businesses, compared to just 18 percent who trust big business.
The elimination of the H-1B visa program would also stand to improve our national security posture. Continued efforts by communist China and other adversarial nations to engage in espionage through the exploitation of visa programs pose a very real threat. There have been many cases in which spies or assets for such adversarial nations have utilized temporary visas to gain access to American businesses and technology. In the current climate, it is vital that we shut down such valves for the protection of both U.S. workers. Any measure that can be taken to widen the technology gap between the United States and China–or at least hinder China’s abilities to steal our technology–is one worth taking.
Furthermore, the program has a major net negative on meaningful labor force participation because it incentivizes companies to look beyond the domestic workforce for cheaper sources of labor. The labor force participation rate has plummeted in the past decade and currently sits at 62.3 percent, denoting the lowest percentage of working Americans since October 1977. Eliminating the H-1B visa program will usher in a renewed focus on building up the American workforce and forcing companies to look to their own communities to fill their business needs.
Importantly, eliminating the H-1B program will provide the policy foundation to restore a domestic workforce capable of meeting the civic needs and societal challenges in the 21st Century. Specifically, companies will have to look to American high-school students or college graduates to fill their workforce. This will incentivize American corporations and big businesses to invest in the development of young American workers and retain their already existing domestic workers.
The purpose of work is to provide the opportunity for self-support and the resulting human dignity that comes from being the independent source of one’s own material well-being, and that of one’s family. This is the cornerstone of each individual’s own “American Dream.” These notions have been lost in recent decades as policymakers, corporate lobbyists for K Street, and tech magnates in Silicon Valley have focused instead on maximizing profits for global shareholders at any cost.
Bolstering the domestic workforce will not only benefit workers themselves, but will also begin the long process of restoring the hollowed-out communities across the nation in which they reside. The repeal of this program would go a long way toward reminding Americans that their government is supposed to serve them, not the financial interests of well-connected big businesses or the employment opportunities of non-citizens.
The H-1B visa program is designed to displace American workers and facilitate the exploitation of cheap foreign labor. Big companies and their lobbyists in Washington have long sold the program as a necessity in order to maintain labor supply and a “modern” workforce. Decades after its implementation, Americans largely see through this charade. The H-1B program’s long and well-known history of fraud and exploitation means that it is past time for lawmakers to fully reassess the merits of maintaining such a divisive and harmful policy. The societal, economic, and domestic workforce benefits of repeal far outweigh the merits of continuing to exploit cheap foreign labor. It is time for lawmakers to put American workers, families, and communities first.
Congress should eliminate the H-1B program.
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