Should the US expand the H-1B visa program?

But the program is contentious.

The number of new H-1B visas is limited by Congress to 85,000 a year. American technology companies—major users of the program—say they never are allotted enough visas to meet their needs, putting the U.S. at a disadvantage amid the global competition for talent.

Meanwhile, some economists and employee groups say the visas are abused, used as a way to replace U.S. workers with lower-paid foreigners in a form of job outsourcing.

To discuss the issue, we gathered three experts: David Bier, associate director of immigration studies at the Cato Institute; Theresa Cardinal Brown, managing director of immigration and cross-border policy at the Bipartisan Policy Center; and Ron Hira, associate professor of political science at Howard University and a research associate at the Economic Policy Institute.

Below is an edited version of the discussion, which was held online.

Big picture

WSJ:What are the main reasons the U.S. should—or shouldn’t—expand the H-1B program?

MR. BIER: We should expand H-1B visas, because the workers make America a more prosperous place. Goods and services would become more expensive without them. Companies would relocate more operations to other countries. Yet the H-1B cap is keeping over a million computer jobs open right now.

DR. HIRA: The program should not be expanded, because it is deeply flawed. It cheats H-1B guest workers out of wages and places them in an indentured status, and undercuts American workers’ wages and job opportunities. The top H-1B employers are top offshore technology-outsourcing companies that exploit the program. In dozens of cases that have been reported, American workers were replaced by H-1B workers, with the American workers being forced to train their H-1B replacements as a condition of collecting their severance package and unemployment insurance.

MS. BROWN: The existing program doesn’t really work. It is increasingly not realistic that anyone who gets an H-1B visa could become a green-card holder, which provides permanent residency. That traps them in a decadeslong wait to get permanent status after working for years on an H-1B visa, requiring them to put off promotions and transfers that could advance their career until the process is complete.

Main problems

WSJ: How would you address what you see as the biggest flaws in the H-1B program?

MR. BIER: Setting aside that the H-1B visa does not guarantee permanent residency, the biggest problem is the cap, because it limits the number of foreign workers who can contribute to the economy. For federal fiscal year 2023 so far, applicants had just a 26% chance of winning the H-1B lottery, with over 483,000 unselected registrations, pushing skilled employment to other countries.

MS. BROWN: I think our entire employment-based immigration system—temporary and permanent—needs a big rethink. The system has not changed since 1990, and its inflexibility is one reason that those who are intent on exploiting it can; others are trying to uncomfortably fit the existing system to their needs; and no one can say it’s serving any national interest. U.S. workers, foreign workers, employers and the country as a whole are suffering. Continuing to tweak the existing category is just going to perpetuate these problems. And I’m saying that as someone who lobbied in the early 2000s to double the program!

DR. HIRA: I agree with Theresa that all of these programs are interconnected as a system, and we should take a systemwide review of what we want to get out of the high-skilled immigration system. I disagree about who it is helping and harming. The winners of the current system are employers, and the losers are workers. It is rigged to be a transfer of wealth from workers to employers.

MS. BROWN: To David’s point about increasing visas—I agree, the current numbers are woefully out of step with any reasonable assessment of what might be useful, but to raise the H-1B cap without looking down the line to the much more limited pool of green cards is asking folks to continue to line up in a never-ending queue. It’s already costing us. Many skilled workers are looking for other countries to settle in rather than the U.S.

DR. HIRA: The program has three major flaws: 1) It does not require employers to demonstrate a shortage of U.S. workers before hiring an H-1B; 2) Wages for H-1B workers are set far too low; and 3) Its compliance system is designed to fail to keep any employer accountable. Guest-worker programs are supposed to fill domestic labor shortages. The H-1B program does not fill shortages.

MR. BIER: The H-1B workers are absolutely filling market needs. And building more bureaucracy to enforce discrimination against talented people who were born elsewhere is the exact opposite of what we should be doing. We should be protecting their rights, in part because that’s the moral principle underlying the American constitution, but also because it’s the best way to assure that their talents go to the highest productivity use.

MS. BROWN: I would argue, again, that we need to rethink the idea that “temporarily filling" skilled labor positions to address “shortages" is the right mission statement for skilled, employment-based immigration. Most other developed countries recognize that adding skilled foreign workers to their workforce on a permanent basis is a net gain for them, and generally make it much easier for them to stay on an ongoing basis.

DR. HIRA: If we want immigrants we should give them immigrant status, not guest-worker status. If people are worried about bureaucracy and regulations, then offer permanent residence. Guest-worker programs, whether they are skilled like H-1B, or lesser-skilled like H-2A, are all vulnerable to exploitation and require a new, separate set of employment regulations.

MS. BROWN: I think we should start thinking of probationary or introductory visas. A shorter-term visa that is to test both whether the foreign worker can integrate into the U.S. labor force and whether they want to stay permanently.

Foreign talent

WSJ: Let’s bring the discussion back to the current state of H-1Bs. Do U.S. companies compete better with overseas rivals because of the talent they can attract here using the visas?

DR. HIRA: The top H-1B employers are multinational corporations. Many are headquartered in India. Competitiveness is a slippery term. A firm can become more competitive by out-innovating or out-managing a rival. A firm can also out-compete by lowering its labor costs. The story of the H-1B over the past 20 years is how firms have become more competitive by exploiting the H-1B program to lower labor costs.

MR. BIER: If H-1B visas were all about low wages, we’d expect to find nearly all H-1Bs being paid the exact mandatory minimum wage required. Labor Department data show the opposite. We’d expect that H-1Bs would be less well paid than similarly skilled U.S. workers at similar ages. A study by Kent State University assistant professor Omid Bagheri shows the opposite. We’d expect that when U.S. companies are looking to cut labor costs, such as during the economic downturn, demand for H-1Bs as replacement for expensive U.S. workers should spike. We saw the opposite. So there’s absolutely nothing to this theory.

MS. BROWN: The ability to outsource those back-office functions has made those companies more profitable and competitive against their rivals. There’s no blocking this off from the rest of the economy. IT outsourcing was itself a business innovation that enabled other companies to grow.

DR. HIRA: This is the same argument used to justify the deindustrialization of the Midwest. Most of the firms that are hiring the offshore outsourcing firms are already profitable. The logic of chasing “competitiveness" by undercutting the U.S. labor force has no end point. We can all make employers more competitive by agreeing to a 30% pay cut. Any takers?

MR. BIER: A number of companies would not exist at all in the U.S. without the H-1B visa. H-1Bs or former H-1Bs fill critical positions in a host of technology companies and are the major source of medical and scientific researchers at pharmaceutical and scientific research organizations.

Status of workers

WSJ: Let’s discuss the foreign workers who come to the U.S. via these visas. Some say the program exploits them. Do you agree?

DR. HIRA: Guest workers are always put in a vulnerable position and can be easily exploited. The Department of Labor has done a terrible job at protecting H-1B and other guest workers. Daniel Costa and I wrote a recent paper about one of the top H-1B employers, an offshore outsourcing firm, that was cheating its H-1B workers out of $90 million in wages.

MS. BROWN: They are certainly at a disadvantage in the system. We have a system that requires that they be sponsored by a U.S. employer. They, for the most part, can’t self-petition, unlike in, say, Canada. Our system has some advantages over the self-petition system. It requires that immigrants have a landing spot and a job that they have upon arrival. It minimizes the circumstances of underemployment you see in Canada, for example, with their point system. However, it does mean that the visa is in the hands of the employer. That is a disadvantage to the workers, and they have to rely on that until they get their green card.

MR. BIER: Exploitation is hyperbolic. H-1Bs cannot live and work wherever they please, which is unfair to them and economically damaging to the U.S. because it limits their productive potential. But exploitation implies that the arrangement only benefits one side. Yet H-1Bs voluntarily agree to work on terms that are mutually beneficial to their employers and to them. H-1Bs dramatically increase their wages by moving here. While their options are more limited once here, they can still change jobs, and nearly a third of all petitions to continue H-1B employment come from workers leaving one job for another. H-1Bs exercise market power, which is one reason why their wages usually exceed the H-1B mandatory minimum wage.

WSJ: Could concerns about H-1Bs be eased if third-party consulting or outsourcing companies were restricted from being a conduit for them?

MS. BROWN: The government deciding that consulting businesses are evil and shouldn’t be allowed to sponsor foreign workers? I’m not sure that’s the best answer. Where there has been purposeful exploitation or underpayment, that’s a different story, but millions of Americans work in consulting firms to other entities that have “outsourced" some of their work. Even the Indian-headquartered companies employ thousands of U.S. workers here, in addition to any foreign workers they hire.

DR. HIRA: It is necessary but not sufficient. The Department of Labor has an easy and straightforward way to close the outsourcing loophole: When an outsourcing firm files an H-1B application with DOL it already lists the secondary entity (its customer company) where the H-1B worker will be placed. Simply have that customer file an H-1B application for that worker attesting that it is not adversely affecting its U.S. workers by hiring the H-1B worker through the outsourcing firm. That’s exactly the policy the DOL proposed but has not implemented.

MR. BIER: Stopping any company employing foreign workers from being able to provide services to another company would be both discriminatory and economically absurd. One benefit of the H-1B visa is that it allows these companies to do their work inside the U.S. It’s impractical for every company to employ all the IT support that they need, and the transition away from in-house IT was inevitable as IT needs at every company greatly expanded. The transition would have happened with or without the H-1B visa.

Final assessment

WSJ: Overall, is the H-1B program good, bad or neutral for the U.S. economy?

DR. HIRA: It does more harm than good. The shame of it is that it could be reformed to do a lot more good than harm. The Biden administration has the power and legal authority to reform it. Raise the H-1B minimum wages, close the outsourcing loophole, enforce the rules, audit major users of the H-1B program to ensure compliance, join in whistleblower lawsuits.

MR. BIER: The H-1B visa benefits the U.S. economy in numerous ways, creating innovation and new products that benefit U.S. consumers, reducing costs and inflation, and expanding the tax base. The H-1B visa is also the only way for most skilled workers to obtain permanent residence in the United States. As a result of these pathways, foreign workers have risen to become CEOs of dozens of major companies, including Microsoft and Google. Skilled immigrants (mostly starting their careers on H-1B visas) have also gone on to found more than half of the $1 billion startups in the U.S., creating thousands of jobs for U.S. workers.

MS. BROWN: I think it’s better than nothing but a far cry from what would really help the U.S. economy.