Economy / Immigration / Labor Force

Trump’s H-1B Policies Are Neither Buying American Nor Hiring American

Three months after his inauguration, President Donald Trump signed an executive order enacting a trademark promise of his campaign: “Buy American, Hire American.” Among other things, the order directed his administration to review the current immigration system and determine policies for the United States to promote higher wages and employment for American workers.

One the first programs to go under the microscope was the H-1B visa program for temporary high-skill workers. Trump issued threats to crack down on companies abusing the H-1B program by passing over equally capable American workers. He introduced rules making it more difficult for firms to sponsor H-1Bs. Consequently, H-1B visa applications have fallen for the second year in a row.

Trump and other opponents lament that H-1B visas overwhelmingly go to workers from a handful of countries—China and India in recent years have accounted for 80% of newly issued visas—and go mainly to firms in the tech industry. Silicon Valley in particular is heavily reliant on foreign-born skilled workers. Some critics go so far as to claim tech firms are going out of their way to hire H-1B workers instead of qualified American applicants, depressing wages in the process by bringing overqualified immigrants into entry-level positions.

But Trump’s attempts to limit the program are misguided, and they will likely have the opposite of their intended effects. A 2017 NBER study found that reducing the number of H-1B visas has little effect on native employment. What visas are left become more even concentrated within the tech industry, and among a handful of employers. In 2004, when the H-1B cap was reduced from 195,000 to 65,000 workers, the concentration of visas sponsored by the largest firms doubled. Tech giants like IBM, Microsoft, Google, Amazon, and Apple sponsor thousands of H-1B workers each year, and in recent years, even as the overall cap has remained fixed, each of these firms—as well as major start-ups Tesla and Uber—have continued to increase their use of the H-1B. American small businesses that lack the networks, experience, and financial resources to target talented H-1B workers compared to larger, more established companies feel the brunt of these artificial restrictions.

In the meantime, Indian tech firms are reducing their dependence on the program by outsourcing their work back to Asia, where the skilled labor already exists—and is growing—with lower wages to boot. In fact, for years, fearing immigration reform, Indian firms have also been exploring ways to reorient their business model toward nearshore hubs like Mexico and Latin America from where they can deliver services in the United States. While major Indian firms have also responded to the more stringent H-1B environment by hiring locally and increasing investment on local training, increased “localization” does not change the fact that there is a shortage of talent in the United States, and many desirable job candidates overseas. After all, more than half of graduate students in many STEM disciplines are international students. (Many international students acquire H-1B visas after their F-1 student visas expire, but many more have no choice but to pack their bags and take their skills back home.) Rather than paying thousands of dollars in filing and attorney fees to bring skilled workers to the United States, tech firms are redirecting their investments abroad. Although the United States remains the global hub for tech innovation, an increasing amount of the actual work that goes into these businesses is being sourced internationally.

Reducing the number of H-1Bs available has another detrimental effect: attracting fewer top-talent workers. The same study cited above found that when the visa cap was lowered, firms responded by hiring fewer high-wage workers. Because of the uncertainty of the H-1B visa lottery—for the past six years in a row, the cap has been met within 5 days and a lottery has been instituted to select the winners—firms forego the risk of unsuccessfully sponsoring high-skill employees and instead focus on core, mid-talent workers.

The effect of these policies is neither Buying American nor Hiring American. And it is not making the United States more competitive.

Thus, the very criticisms that Trump and other opponents of the H-1B program cite are also the very problems Trump’s restrictions are exacerbating. It is true that the H-1B program has its flaws, but the solution is an overhaul of the entire immigration system—necessary, but, if recent Congressional action is any guide, unlikely. The added scrutiny toward H-1B petitions should be done in conjunction with expanding and amending the program, not eliminating it.

The temporary H-1B program, despite its name, is not actually always temporary. It is one of the few non-immigrant visa categories that allows holders to pursue “dual intent,” whereby foreigners can lawfully remain and work in the United States but with immigration intent. When it comes to employment-based green cards, a statutory per-country limit means that no more than 7% of visas can be issued to individuals from any single country. At the high end, the backlog for high-skill Indian workers due to this constraint can be as long as 151 years, according to a Cato analysis. The Trump administration’s introduction of additional hurdles for green card applicants has made the process even less streamlined.

Given this statistic, it is no wonder that high-skill Asian workers opt for the H-1B and other non-immigrant visas with dual intent to get their foot in the door, and U.S. companies will hire skilled workers through any means possible in order to keep competitive in the global economy. The L-1 visa for intercompany transfers, another temporary dual intent visa, is another category heavily-used by tech firms.

Trump and other critics are right that the H-1B program overwhelmingly grants visas to Asian workers in the tech industry, but the technology sector is at the forefront of American innovation and these immigrants possess much-needed skills that drive this growth. Current administration policies and proposals have made H-1Bs more difficult to acquire, but the result has been to increase their concentration in tech at the expense of other industries, reduce the number of top-talent workers, and disproportionately hurt smaller start-up businesses in need of skilled employees.

Fixing the program means tackling the litany of problems in the current immigration system that trickle down into the H-1B, such as the per-country limits, and it means issuing more high-skill visas, not fewer.