Rethinking Immigration: Stop with the Protectionism
For a supposedly-sleepy dog day of summer, last Thursday produced a disturbing clash of views on employment-based immigration in the two Washingtons -- DC and WA.
Seattle, about as far from the Beltway as one can go in the lower 48, hosted the Northwest Summit of ImmigrationWorks -- a coalition of large and small businesses bent on reforming the immigration laws in ways that will enable the economy to grow. At the same time, the Senate reconvened from its recess for about a half hour to pass H.R. 6080, a $600 million border enforcement law whose protectionist elements triggered an immediate complaint from the Government of India to the U.S. Trade Representative.
The Northwest Summit offered speaker after speaker from far-flung industries describing a set of immigration rules and restrictions that prevents the economy from growing. Throughout the day, farmers, seafood harvesters, restaurant owners, executives in the service industries, and entrepreneurs in technology companies decried a broken system that demonizes law abiding businesses for the failings of federal officials. Even more compelling were the corridor conversations where individual business owners -- grizzled veterans of their industries -- spoke privately of the fear of criminal prosecution and loss of livelihood despite scrupulous efforts to obey the immigration laws and the daunting challenge of running legitimate businesses plagued by domestic labor shortages.
A continent's width away, Senator Charles Schumer, lead Democrat on immigration policy, defended the financing mechanism for the border bill -- the doubling of H-1B and L-1 visa filing fees -- as a poetically just surcharge on companies whose very "business model" contravenes Congressional intent and "[is] ruining the reputation of the H-1B program." He blamed these firms (which he had earlier called "chop shops" but corrected himself and then termed them "body shops" that engage in "labor arbitrage") for a host of ills:
According to the Economic Policy Institute, [misuse of H-1B visas by these companies is] lowering the wages of American tech workers already in the marketplace [and] . . . discouraging many of our smartest students from entering the technology industry in the first place [because they balk at paying tuition for advanced degrees] when the market is being flooded with foreign temporary workers willing to do tech-work for far less pay. . . .
Congress does not want the H-1B program to be a vehicle for creating multinational temp agencies where workers do not know what projects they will be working on or what cities they will be working in when they enter the country. The fee is solely based on the business model of the company, not the location of the company.
If you're using the H-1B to innovate new products and technologies, that's a good thing regardless of whether the company was originally founded in India, Ireland or Indiana. But If you're using the H-1B visa to run a glorified international temp agency for tech workers in contravention of the spirit of this program, I and my colleagues believe you should have to pay a higher fee to ensure that American workers are not losing their jobs because of the unintended uses of the visa program, and this belief is consistent whether the company that uses these practices is founded in Bangalore, Beijing or Boston. . . .
[Based on press reports, the] leaders of this business model are agreeing that our bill will make it more expensive to bring in foreign tech workers to compete with American tech workers for jobs here in America. That means these companies are going to have to start to hire U.S. tech workers again. . . . This bill [thus] has the . . . advantage of creating more high paying American jobs.
Sen. Schumer's rationale for sticking foreign companies who sponsor H-1B and L-1 workers in volume with the cost of protecting the U.S. border is flawed on several counts:
The Senator cites no evidence that American students are refraining from the study of STEM (science, technology, engineering and math) subjects because of a flood of lowly paid tech workers. As the White House attests, good STEM teachers make for dedicated STEM students. Rather, a report prepared by Public Agenda for The National Center for Public Policy and Higher Education confirms that, as a general matter, "many Americans are becoming more skeptical about whether colleges and universities are doing all that they can to control costs and keep tuition affordable." Thus, the skyrocketing of tuition costs, not a deluge of poorly compensated foreign workers, is the primary reason that some students refrain from pursuing higher education.
The meme that the H-1B visa program allows access to underpaid foreign workers ignores the law's requirements. As the American Immigration Lawyers Association made clear in challenging the findings of an Economic Policy Institute report (a study prepared in partnership with the AFL-CIO, and the same report cited by Sen. Schumer):
The H-1B program carefully protects wages by requiring that companies pay the higher of the wage paid by their competitors for comparable positions or the wage the company itself pays to other comparable workers. These protections are enforced by the Department of Labor and non-compliance already includes heavy penalties, including complete bars from petitioning for any foreign worker. Furthermore, H-1B employers are required to pay a $500 fraud prevention and detection fee for the initial H-1B petition which funds the government's ability to investigate potential fraud in the H-1B program, not to mention the fee of up to $1500 filed with each petition to help train U.S. workers. If employers are deliberately violating the program requirements, the DOL can and should levy penalties. But the characterization of these programs as a means of obtaining cheap, indentured labor is false and irresponsible.
Temporary staffing agencies are not the same as global sourcing companies that provide IT and business-process solutions and other innovative services. Temp agencies, whether domestic or foreign, supply temporary workers to fill short-term needs, sometimes at lower costs. Global sourcing enterprises use a legitimate business model that significantly benefits governments, businesses, citizens and customers by offering better quality, 24/7 service across time zones, and speedier start-up and delivery, while allowing customers to focus on core competencies. Global service providers are not "glorified international temp agenc[ies]." They are no less vital to American businesses than are the hundreds of private contractors who serve the federal government, including the Departments of Justice and Homeland Security. Regrettably, the border-law's definition of businesses that must pay the ramped-up H-1B and L-1 filing fees is not carefully tailored to reach only temp agencies engaged in body-shop activities. It unjustly imposes a protectionist tax on legitimate multinationals in the global sourcing industry.
The fees generated by the new border law won't "ensure that American workers are not losing their jobs because of unintended uses of the visa program." None of the money raised will be provided to the two government units with primary authority to investigate and enforce H-1B and L-1 visa requirements -- the Department of Labor (Wage & Hour Division) and the Fraud Detection and National Security division of U.S. Citizenship and Immigration Services. Rather, as the last sentence of the border bill provides, "all amounts collected pursuant to the fee increases authorized . . . [must] be deposited in the General Fund of the Treasury."
The border law is not a carefully crafted statute intended to pay for border security by making it more costly for a narrow band of perps to engage in a specific type of visa abuse. It is blatant protectionism, something that hurts all of us in the long run, as Milton Friedman reminded us soon before his death. President Obama and a number of world leaders were right last March when they said:
The G20 [nations] must go beyond merely advocating for trade and against protectionism. . . We must continue to resist protectionist pressures, and to promote liberalization of trade and investment through the national reduction of barriers . . .
Notwithstanding these anti-protectionist sentiments, each time the President has had the chance to sign a new bill containing immigration provisions, protectionist elements crept in. It happened with the Employ American Workers Act and now again with the border law. It's clear that NYU Law Professor, Samuel Estreicher, could have been speaking of the border law when he said:
Over the last several decades, trade unions in the United States increasingly have been unable to realize their objectives at the bargaining table and have turned more and more to politics.
It's little comfort to multinational businesses that they dodged a bullet this time. Free-trade opponents and their Congressional enablers have even more changes planned -- enfeebling amendments to the H-1B and L-1 visa categories that "carry a significant likelihood of being ruled inconsistent with U.S. commitments under the GATS [the General Agreement on Trade in Services]." Still, the H-1B category is not without its supporters. Even the vehemently anti-immigration organ, the Center for Immigration Studies, has found a reason to support the beleaguered visa category: The Center proposes H-1B visas for foreign judges who can be imported to the U.S. to help in ordering the deportation of removable aliens.
As Yakov Smirnoff, the Russian émigré, sardonically observed:
"What a country!"