The State Department just created about 4,000 jobs in Alaska

For years, seafood processing companies in Alaska have been hiring foreign student guest workers on J-1 visas through the Summer Work Travel program (SWT). Despite the astronomical youth unemployment rate—averaging 15.3 percent last year for 16-24 year olds in Alaska, and 17.3 percent nationally—about 4,000 SWT workers were employed by these companies last year. Thanks to new regulations issued by the State Department in May, however, there’s good reason to believe that many of those jobs will go to young unemployed Alaskans and Americans in the lower 48 states next year. In other words, the State Department may have just created 4,000 jobs for them.

SWT is the largest category within the State Department’s Exchange Visitor Program (EVP), which was created to facilitate educational and cultural exchanges between Americans and people from around the world. The SWT, one of 16 different EVP categories, allows college students from abroad to experience American culture by working full time in the United States for four months. To give you an idea about the size of the SWT program, there were 109,000 SWT students working in the United States last year out of the total 324,000 exchange visitors with J-1 visas.

The SWT program has been quite popular among employers across the country (the program peaked at over 150,000 workers in 2008), and it’s easy to understand why. Employers use the SWT program because it’s an easier, cheaper alternative to recruiting and hiring U.S. workers. Because of this, a few months ago I argued at length in support of the State Department’s then-rumored move to ban fish processing jobs from the SWT program. I noted (among other things) that there are plenty of unemployed young workers available in Alaska and the lower 48 states—and that fish processors should improve and increase their recruitment efforts to find them before filling those jobs with temporary foreign workers who are in the country on an exchange program.

A recent report in the Anchorage Press  indicates that seafood companies will do fine employing Americans instead of SWT workers.

In the spring, Alaskan seafood employers were howling that they desperately needed SWT workers to fill labor shortages because Americans aren’t willing to take seafood processing jobs in Alaska (admittedly, not easy work). Seafood industry representatives claimed that despite the slow economy, it was difficult to find workers in Alaska or from the lower 48 states because seafood processing is “grueling,” low-paying and in isolated locations. Alaska Sen. Mark Begich (D) argued nearly identical talking points to the State Department and the Office of Management and Budget on their behalf, and then the entire Alaskan congressional delegation urged a delay on any rules banning seafood companies from using the SWT program. The State Department, however, did the right thing and issued new regulations prohibiting seafood processing jobs in the Summer Work Travel program. The rules banning seafood processing were issued in May of this year, but only enter into force in November, giving seafood companies over a year to plan for their workforce needs next summer. (Read EPI’s detailed comments on the new regulations.)

The Anchorage Press  story examined how the Alaskan seafood industry would cope with losing more than 4,000 SWT workers next year after the State Department’s ban takes effect. Although most of the employers declined to comment for the story, here’s what one major employer in Anchorage had to say about how they would deal with this looming workforce issue:

“We have no plan to pursue any foreign labor going forward,” said chief business development officer Robin Richardson. Instead, she said, the company is automating some of its plant operations and hiring more Alaskans.

Richardson said Copper River Seafood has relied on J-1 workers in the past and through the current season. She said the workers tend to be “intelligent” and “reliable.” But, she said, even before the State Department announced the new restrictions on J-1 visas in May 2012, Copper River Seafoods was setting up a new workforce development program and looking to expand local hire. (sic.)

“We did a major recruitment here in Alaska, as well as up (and) down the West Coast this spring,” Robinson said.

So, to be clear, Copper River Seafoods is admitting that they expect to find enough available U.S. workers to fill all of their positions by hiring more locals and recruiting on the West Coast. This shouldn’t surprise anyone, considering the double-digit unemployment rates in Alaska and across the country. There are plenty of young workers who would jump at the chance to earn a few thousand dollars and get some valuable work experience over the course of a summer.

If U.S. workers are indeed available, as Copper River Seafoods claims, then why have they and other seafood companies in Alaska been using a cultural exchange program to staff their workforce? Because employers save big on their wage bill, since they’re not required to pay Social Security, Medicare, and unemployment taxes for SWT workers, and can pay them the minimum wage, rather than the average local wage. Employers using the SWT program also don’t have to recruit workers in the United States. Instead, they can have State Department-sanctioned labor recruiters, known as “sponsors,” do the work for them at no cost

The SWT program is also cheaper than using the other—more appropriate—guest worker programs designed not for the purpose of cultural exchange, but to help employers fill labor shortages when unemployed U.S. workers are unavailable. The Anchorage Press  touches on this:

Another option is to hire foreign workers through the H2-A and H2-B visa work programs, which are regular work visas for employment in the United States. But that method is much more expensive in comparison to the J-1 visas, which are designed to facilitate cultural exchange and be easily accessible to students.

The H-2A visa authorizes agricultural workers to enter the country to do farm work. State’s new rules now prohibit SWT students from working as farmworkers, thus, from now on the comparison to H-2A will be moot. But the H-2B program is indeed “much more expensive” than the SWT program because it requires that employers attest that they’ve recruited local workers, that they pay those workers the prevailing wage, and often, that the employer hire and pay an attorney and labor recruitment agency. Moreover, H-2B employers are not excused from paying FICA and other payroll taxes. Unfortunately the H-2B program is so riddled with loopholes that it still allows employers to exploit and underpay workers, but nevertheless it offers a vastly higher level of protection for the wages and working conditions of U.S. and foreign workers than the SWT program provides. Although the State Department has recently taken some important steps to reform and improve the SWT program by excluding certain industries and occupations that may hire SWT workers, the SWT program still lacks these basic protections.

For the employers who continue to use the SWT program (for example, the hospitality industry), the incentives to hire SWT workers instead of unemployed American workers or H-2B workers remain unchanged. The Anchorage Press article is a reminder that the program remains a large, under-regulated guest worker program that displaces U.S. workers—and is not a true cultural exchange program—but it also provides evidence that the problem can be fixed.

If other Alaskan fish processing companies follow the example of Copper River Seafoods next summer and begin recruiting and hiring unemployed Alaskans and Americans (and don’t switch over to the H-2B program), then the State Department will deserve a lot of credit for creating 4,000 jobs for Americans in Alaska, just by banning seafood processing from the SWT program. But if State were to reduce the size of the Summer Work Travel program even further—or suspend it until youth employment is no longer in crisis—it could create up to 105,000 more jobs for young people. Although the State Department’s mission to facilitate cultural exchanges is a noble one which I support, suspending the SWT program would not undermine that mission, because 215,000 foreign nationals will continue to participate in the other 15 cultural exchange categories offered by the J-1 visa Exchange Visitor Program.