Durbin and Sessions agree H-1B guestworker program must be fixed to protect migrant and American tech workers

Senator Jeff Sessions (R-Ala.), a Tea Party favorite, and Senator Dick Durbin (D-Ill.), a progressive stalwart, rarely agree on immigration policy. But last week, they did. What’s the issue they agree on? The need to reform two temporary work visas, the H-1B and L-1, because corporations use them to keep wages low and indenture foreign guestworkers—and replace U.S. workers in the technology sector with those lower-paid indentured foreign workers. This isn’t the first time this kind of bipartisan agreement has happened though: last year, 10 senators from across the political spectrum, from Bernie Sanders to James Inhofe, signed on to a letter to the Departments of Justice, Homeland Security, and Labor, asking them to investigate abuses of the H-1B program.

Sessions, who chairs the Senate Subcommittee on Immigration and the National Interest, held a hearing on February 25 to highlight H-1B abuses, especially the scandal surrounding the Walt Disney Company. Disney received much attention last year after the New York Times reported on its practice of laying off American workers and forcing them to train their own replacements on H-1B visas. The hearing was a substantive discussion about what’s wrong with the H-1B program and how to fix it. (The L-1 visa, which is also abused by the same companies and for the same occupations as the H-1B, but has fewer rules and virtually no enforcement, did not get nearly as much attention.) For anyone interested in U.S. immigration policy relating to skilled workers, the hearing is well worth watching in its entirety, but a few moments are worth highlighting.

Sessions and Durbin agreed that the system is being abused, and used primarily in ways that were not originally intended. Namely, most H-1B visas are not used to fill labor shortages or to bring in the best and brightest workers from abroad, or to put them on a path to lawful permanent residence. Instead, they are mainly used by temporary employment agencies that have an offshore outsourcing business model. This means that the H-1B workers who come to work in the United States are rented out to third-party companies, learn their job, and then transfer as much of the work as they can to the foreign offices of their staffing company. These outsourcing companies get about half of the 85,000 H-1B visas that are allotted each year to for-profit firms, and data show they apply for permanent residence for only a minuscule share of their workers. That means their H-1B workers aren’t on a path to permanently benefit U.S. labor market, but instead are being used as temporary, cheap labor and constantly rotated back to their home countries.

The hearing’s first witness was Leo Perrero, a former information technology engineer for Disney. Despite high praise from colleagues and stellar performance reviews from his supervisors, Mr. Perrero was laid off by Disney—but not before being told he would have to train the person who would replace him to do the same job. His replacement, he discovered, was an H-1B guestworker who would shadow him for a few months until he learned the job. This practice is euphemistically called Knowledge Transfer, or KT. The extent to which KT has been scientifically managed is mind boggling. Elsewhere, Perrero has described how the foreign worker videotaped him, recorded every computer keystroke, all in a very systematic way to take over the job in three months. Perrero also learned that if he refused to train his H-1B replacement, he would not be given a severance package. Perrero’s emotional testimony put a much-needed human face on something that has been going on for years and years while Congress refuses to lift a finger to stop it.

Why does this happen? Because H-1B law allows guestworkers to be paid much less than the U.S. workers they replace. As Professor Ron Hira testified and has reported in the past, at Southern California Edison, the major power producer in the Los Angeles area, H-1B workers earned approximately $40,000 to $50,000 less than the U.S. workers they replaced—a 40-50 percent wage savings. This means huge profits for the companies that replace their workforce with H-1B guestworkers, and from that perspective, any company that can do it would be crazy not to—because it would breach their fiduciary duty to their shareholders—since it’s completely legal according to the Labor Department and the Department of Justice.

How is this allowed to continue to happen? Because, as Professor Hal Salzman’s testimony notes, there is quite a “chasm between evidence and policy” when it comes to tech industry claims about labor shortages in science, technology, engineering, and math (STEM) fields. Over the past twenty years H-1Bs have mostly been used to fill jobs in these STEM fields, and labor shortages are usually the reason corporate lobbyists give Congress to justify their desire to increase the annual number of H-1B visas and to keep any sensible rules (like a prohibition on replacing U.S. workers) from being enacted. Salzman presents convincing evidence that shortage claims are bogus, including the facts that U.S. “colleges and universities graduate twice the number of STEM graduates as find a job each year; that is, only about half of our STEM graduates enter the STEM workforce” and, “of the entire workforce, only about a third of those with STEM degrees are employed in STEM jobs.” But most importantly:

With two decades of large flows of guestworkers, average wage levels in IT have barely budged from where they were in the late 1990s. And, as noted above, starting salaries for computer science graduates have remained stagnant… All rigorous studies that examine the effect of H-1B workers on IT wages find that, as currently structured, the guestworker programs depress wages.

Salzman also pointed to the latest, most damning study on H-1B—where the researchers had access to the wage records of the firms that hired H-1B workers—which found that “H-1Bs substantially crowd out employment of other workers…has an insignificant effect on patenting…[and] H-1Bs lead to lower average employee wages while raising firm profits.”

In summary, there is scant evidence of STEM labor shortages, and it’s likely that guestworker programs depress wages in IT, but, the H-1B does result in higher corporate profits. Salzman concluded his testimony with a conjecture about why the H-1B law has managed to remain so destructive for so long: “The tech industry continues to spend nearly $15 million a month in Washington. Perhaps this is the level of lobbying necessary to keep driving the wedge separating policy from evidence.”

The subcommittee’s ranking Democrat, Senator Chuck Schumer, made a brief appearance and an opening statement that contained some obvious inaccuracies, including his claim that that the comprehensive immigration bill he co-authored in 2013 would have prevented Leo Perrero from losing his job. That bill (known as S. 744, which I wrote a guide on), did not include a prohibition on displacing or replacing U.S. workers with H-1B workers. To the contrary, the bill would have vastly increased the number of H-1B workers while failing to make crucial reforms, such as those in recent legislation authored by Senators Durbin and Grassley.

Schumer invited two witnesses to testify who were very much in favor of the H-1B program as presently structured and who pushed back against worker-friendly reforms. Mark O’Neill, the chief technology officer for the online retailer Jack Threads, argued against forbidding companies to displace or replace U.S. workers:

The only thing that concerns me when we talk about the proving that we’re not displacing an American worker, is just the ability to do that. In principle that sounds wonderful, but the concern is that in practice the existing visa regime can already be a challenge for us to operate.

It would not, in fact, be much of a challenge to implement anti-replacement and displacement prohibitions. A simple rule banning replacement would consist of legislative language prohibiting replacing an incumbent worker with a guestworker—either directly or indirectly with the use of a subcontractor or outsourcing firm—who will perform the same or similar job duties. When it comes to firms that would avoid hiring qualified, willing, and available U.S. workers in the first place, to prevent this the government should require a month-long recruitment period, at the start of which an employer seeking an H-1B would send a job posting with a description of duties and an offer to pay the local average wage to a central database maintained by the Labor Department. The employer would then leave the posting up for 30 days, and be required to hire any equally or better qualified U.S. worker who applied during that window. If none applied who met the qualifications, then the employer could hire an H-1B worker. That’s a cheap and easy rule to operate.

Senator Schumer’s other witness was Chad Sparber, a professor at Colgate who was commissioned by the Partnership for a New American Economy (co-chaired by Disney CEO Bob Iger) to write a pro-H-1B paper. Sparber sympathized with foreign students and graduates who are stressed about getting a job in the United States and an H-1B visa, and Durbin pointed out that he is in favor of offering a pathway to lawful permanent residence and citizenship to STEM graduates of U.S. universities who have a job offer. But, Durbin concluded, “I understand what you’re saying, but we are also trying to make sure that we take care of American graduates and American workers first. I think that’s our obligation.”

Sparber thought that the benefits H-1Bs bring to the economy trump the concerns of U.S. students and workers:

I understand your position, but I think I want to go back to the data suggesting that despite the abuses, the program is successful in generating American jobs, American employment, American wages and American productivity.

Sen. Durbin passionately disagreed:

My job I think is to encourage a growing economy in this country, but to do it in a fair way. Taking Mr. Pererro’s job away, so a foreign worker can come in at lower wages for a three-year period of time, I don’t believe is consistent with fair economic growth. We oughtta have a conscience in this country too, about the kind of economy we want to generate. We don’t want to drive it to the bottom, with low wages and foreign workers who are here on a temporary basis. When we need them and they help to grow our economy, I’m for it. But not at the cost of American workers’ jobs, and not when we see half of these visas going to two Indian companies. There is something wrong with this picture.

I’m not sure I’ve heard a better summation of the main problem with American skilled guestworker programs as currently constructed. Bravo, Senator Durbin. Thank you for standing up for an immigration system that is fair to both migrant and American workers—and that adds value to the economy by bringing in talented individuals to fill labor shortages while being paid a fair wage—rather than one that functions to increase profits for corporations at the expense of decent-paying American jobs.

Postscript: During the hearing, one of the witnesses, John Miano, mentioned that Abbott Labs was in the process of doing a Disney-like H-1B replacement of 180 of its American IT workers. The India-based offshore outsourcing firm Wipro, one of the top ten H-1B employers, won the contract. The employees being replaced work in Sen. Durbin’s home state of Illinois; he’s written a letter to Abbot’s CEO asking for an explanation.