A vital lesson from recent history
Let’s start with a recent example of the US manufacturing industry. Post World War-II, the US economy exploded with growing demand for American goods across the world to support the rebuilding and reconstruction. This resulted in more and more Americans joining the middle class. The mantra prevalent at that time was to promote “maximum employment, production and purchasing power”. Contrastingly today, the American economy is in a debt worth trillions of dollars. One of the reasons for it is that the US manufacturing industry heavily outsourced its manufacturing activities to plants in China to take advantage of cheap labor available there. Today, increasingly Americans import American brands but manufactured in China.
Loss of factories not only resulted in a direct loss of jobs, loss in direct taxes (personal, property and corporate) to the US government and shutting down of ancillary services like shipping, transportation, construction, etc but also tilted the American balance of trade towards import and thus a federal deficit. The examples are all around us; IBM laptop is now Lenovo; GM and Chevrolet have filed for bankruptcy; Toyota, Nissan and Honda weathered the storm and will eventually come out stronger.
There are two points to be noted from the example above.
• First and foremost, capitalist companies must evolve and save costs to remain profitable lest they will go bankrupt.
• Two, companies must retain their factories or development centers, etc in the United States to help the American Government and the society in general.
Thus the bottom line is that while outsourcing cannot be completely avoided, it can and must be controlled via proactive and smart immigration policies.
The scenario today
Today, the American Industry is more complicated than in the past. Today there are layers of teams involved in management, human resources, quality assurance, etc, which goes into working of an organization. In fact some quality maturity models like SEI-CMM Level 5 mandate companies to maintain a buffer workforce in most of these departments to weather out the periodic business cycles without stoppages.
Apart from cost cutting, one of the main reasons why American companies are outsourcing complete departments today is the lack of ready availability of skilled labor within United States.
The H1B visa program
For this very reason, the H-1B visa program was created by the US Government under the Immigration & Nationality Act, section 101(a)(15)(H) to address the shortage of locally available skilled workforce by temporarily hiring foreign skilled workers n specialty occupations.
Some key facts about the H1B program:
1. The duration of stay is three years, extensible to six.
2. The total number of H-1B visas per year is subject to a congressionally mandated visa cap. The number of visas that can be granted is currently capped to 65,000 per year.
But the H1B program is taking jobs from US workers
This is a false perception.
Let’s take a look at the bureaucratic processes that a US employer must undergo to seek an H1B for a foreign employee:
1. The application process requires an employer to file a labor condition application (LCA) with the Department of Labor attesting to several items. The employer must then file the certified LCA with a Form I-129 petition, requesting for H-1B classification. Based on the USCIS petition approval, the alien may apply for the H-1B visa. The visa process takes between 3 to 6 months and a U.S. company cannot allow a foreign worker to work unless his or her H-1B visa is granted.
2. Since the H1B visa quota gets filled within days of the application start date, companies that want to hire foreign skilled workers need to make a decision at least 6 months prior to April 1. Hence, 6 months prior to April 1, a company needs to make a decision on the number of foreign nationals it needs for an entire year. Considering the vibrant nature of the US economy, this is highly unreasonable to expect. Even if companies are inclined to wait for 6 months to hire a foreign national, the visa application may never be granted due to the restrictive visa cap.
3. Apart from being time consuming, the H-1B process is also expensive. If one takes into account the recruitment and training fee (generally $1500), the anti-fraud fee ($500), the filing fee ($190), the “premium processing” fee that is often necessary ($1000) and the legal fees and costs, U.S. employers typically spend between $5000 and $6000 just to try to secure an initial H-1B approval. This is on top of the recruitment, compliance and other administrative costs.
Clearly, companies need to spend much more to hire a foreign national via the H1B process than a local national. And no capitalist company would spend extra, if there were no need. There is a need for more skilled labor than what the American population can offer to sustain and increase corporate profitability.
Bottom line: The jobs taken by foreign nationals via the H1B are the jobs that could not be already fulfilled locally.
No! The companies are hiring foreign nationals because they are cheap labor.
This is another myth.
Employers must pay H-1B professionals the higher of 100 percent of the prevailing wage set by the Department of Labor or of what they pay other similarly situated workers. Foreign workers must receive the same benefits and working conditions as U.S. workers.
In addition to wage requirements, it is expensive just to hire an H-1B worker. U.S. employers typically spend between $5000 and $6000 just to secure an initial H-1B approval; and that is on top of the recruitment, compliance and other administrative costs.
According to the March 2008 National Foundation for American Policy (NFAP) report, “the argument that companies only hire skilled foreign nationals because they will “work cheaper” is based largely on the questionable assumption that people not born in the United States have no value in the marketplace unless they work for less than Americans. If this proposition is true, when businesses hit hard times they should hire more H-1Bs to save money. However, NFAP analysis shows that overall, H-1B filings at U.S. technologies declined when companies hit hard times, thus undermining the perennial assertion that H-1Bs are hired as “cheap labor.” Further, based on a regression model that controls for both general market conditions and firm size, the NFAP found that requests for H-1B certifications by U.S. technology companies are associated with an increase in total employment by more than five times the size of the H-1B requests. The data showed that for every H-1B position requested, U.S. technology companies in the S&P 500 increased their employment numbers by 5 workers. For technology firms with fewer than 5,000 employees, each H-1B position requested in labor condition applications was associated with an increase of employment of 7.5 workers. This is particularly remarkable since the actual number of individuals hired on H-1B visas is likely to be much lower than the total number of applications”. This greatly undermines the notion that the H1B visa program is detrimental to the US economy and its workers.
But what is being done to ensure Americans can take up those jobs?
The U.S. Department of Labor, and the Employment and Training Administration (ETA) use a portion of the money from H-1B applications on training to improve the skill of U.S. workers. The National Science Foundation (NSF) receives 22 percent of the funds to distribute as scholarship grants to post-secondary schools that distribute the funds as scholarships for low-income students in computer science, engineering, and mathematics degree programs.
So does the government spend on them too?
No!
Unlike countries like Canada, where the government invests into each incoming foreign immigrant for basic services like healthcare, etc., the United States government does not invest any amount into incoming immigrants.
The immigrants must pay for every service themselves. Every new foreign immigrant invests money into the American society by setting up his household. This includes buying cars, setting up a house, buying household goods, buying services like electricity, telecommunications services, medical insurance, etc.
All of these activities result in increased consumer spending, which in turn generates employment, sales and revenue.
After foreign students come here and pay the full ride for their educations, many decide to stay in the United States. They provide this country with a steady source of highly trained scholars and workers in fields that demand skilled workers. These are productive, wealth- and job-creating students for whom the American taxpayer paid not a single cent for elementary, high-school and, in most cases, college education.
And are they taxed?
Foreign skilled workers are taxed as any other US citizen is. Foreign skilled workers pay millions of dollars in taxes to federal, state and local coffers. In addition, foreign skilled workers also pay Social Security tax and Medicare/Medicaid tax.
Like US citizens, they are eligible to receive Social Security benefits even if they leave the United States, provided they have paid Social Security benefits for at least 10 years. But the duration of stay on H1B visa is three years, extensible to six; and hence many H1B visa-holders cannot take advantage of these services they have already paid for!
Thus, in fact, most of these foreign nationals are in fact bearing the cost of social security and Medicare of the common American citizens.
Conclusion
It is evident that the H-1B visa program was created to benefit the United States and to ensure the country remains in the forefront of technological breakthroughs.
From time immemorial, the great super-powers of their time have attracted scholars, artists, painters, architects, mathematicians from all around world. And this has been the true source of the sustainability of their power. This was true for ancient Babylonians to Baghdad to Taxila and Nalanda. Today, the United States of America is the global powerhouse and just like Baghdad, Babylon and Nalanda of the ancient times, today United States attracts scholars, artists, painters, architects, mathematicians from all around world.
Unless U.S. laws continue to encourage the best and the brightest not only to study in the United States, but also to stay and contribute, the best and most driven people will go elsewhere in the welcoming arms of other developing nations.
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