Reforming the H-1B Visa Program

By ·February 17, 2017
Rutgers University

The Issue:

Proposals to change the H-1B visa program, which allows companies to hire specialized foreign workers in the U.S. on a temporary basis, have been debated by lawmakers from both sides of the aisle for years. The visas are most heavily used by foreign companies providing temporary computer services, especially Indian companies such as Tata, Wipro and Infosys, but also by high-tech companies such as Amazon, Microsoft and Google. Critics contend that the program does not attract the "best and brightest" foreign workers, that it pays lower wages, and that it is used to facilitate the offshoring of services (by allowing non-U.S. workers to be trained at the offshoring company, and to be based at the offshoring company as a liaison with the company providing the services). While the Trump Administration has not made any official announcements regarding the H-1B visas, its emphasis on reforming the U.S. immigration system might give new steam to H-1B reforms. Four bills that address H-1B visas have been introduced in the House and Senate since January.
Critics contend that the program does not attract the "best and brightest" foreign workers, that it pays lower wages, and that it is used to facilitate offshoring of services.

The Facts:

  • The H-1B visa program allows companies to employ in the U.S. temporary workers who have a bachelor’s degree or equivalent, if they work in a “specialty occupation” requiring “theoretical or practical application of a body of highly specialized knowledge” --or are fashion models. Currently, 65,000 such visas are available each year without further restriction, and these are allocated by lottery if the cap is reached. Another 20,000 visas may be awarded to workers with a master’s or doctoral degree from a U.S. university, and an unlimited additional number may be awarded to non-profit organizations including universities. In fiscal year 2014, 124,326 petitions of new H-1B employment were approved, and 191,619 petitions for continuing employment (renewals) were approved. The majority, 65 percent, were issued for work in computer-related occupations.
  • The H-1B visa is not intended for the “best and brightest” workers: that is the purpose of the O-1 temporary visa. The 1990 Immigration Act split the precursor to the H-1B visa, the H-1, into visas for workers of exceptional ability or achievement (O-1) and visas for specialty occupation workers and fashion models (H-1B). The number of O-1 visas is uncapped, but applications are burdensome (for both applicants and adjudicators) and adjudicators have considerable latitude for discretion. 11,406 workers received new O-1 visas in FY 2015.
  • Rather than constituting an abuse, the use of the H-1B for offshoring is something the United States has committed to under the General Agreement on Trade in Services (GATS) of 1995. In this World Trade Organization (WTO) agreement aimed at facilitating trade in services, the United States committed to making 65,000 H-1B visas available for temporary foreign workers providing services. The United States also committed to allowing companies to transfer certain employees from abroad to the U.S. The WTO notes: “The supply of many services is possible only through the simultaneous physical presence of both producer and consumer. There are thus many instances in which, in order to be commercially meaningful, trade commitments must extend to cross-border movements of the consumer, the establishment of a commercial presence within a market, or the temporary movement of the service provider himself.” Because of these commitments, changes to the H-1B visa program can lead to international challenges. The World Trade Organization is currently adjudicating a complaint by India that U.S. H-1B practices such as fee increases violate the GATS.
  • The system of H-1B prevailing wages provides an incentive for employers to hire inexperienced, and therefore less skilled, workers. H-1B workers must be paid the maximum of the "prevailing wage" and the wage paid by the employer to workers with similar skills and qualifications. The program's "prevailing wage" varies by education (bachelor’s degree versus master’s degree) and years of experience, increasing sharply at low experience levels to reach a maximum at five years of experience. In contrast, average actual salaries rise gradually with experience over about fifteen years. The difference in how actual and "prevailing" wages progress over time makes it more likely that companies will hire H-1B workers that have lower levels of experience.

What this Means:

It would be legally difficult to reorient the H-1B program away from the provision of computer services and towards attracting the best and brightest immigrants, and may not be desirable. Concerns about insufficient immigrant workers considered among the “best and brightest” would be best addressed by an expansion of the O-1A visa. The language of the legislation is very general, and changes could be made through the rule-making process to expand the number of visas awarded. Substantive changes to the H-1B visa program could constitute violations of U.S. obligations under the General Agreement on Trade in Services (GATS). Changes aimed at reducing the number of H-1B visas awarded to computer and information technology service companies, including the prioritization of applications for workers with the highest salaries or education, would likely trigger a complaint against the U.S. at the World Trade Organization (WTO). A successful complaint would permit retaliation against the United States in the form of tariffs. However, one way to raise the skills of workers for whom H-1B petitions are filed would be to restructure the prevailing wage schedule. The rule-making process should be used to base the prevailing wage schedule on data relating salaries and experience, which is not currently the case.


Immigration / Trade-in Services
Written by The EconoFact Network. To contact with any questions or comments, please email [email protected].
More from Econofact