Abuse of H1-B visa program explains a lot about this economy

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High-tech firms such as Google and Facebook have lobbied strenuously for increasing the number of H1-B visas that allow highly trained immigrants to be brought here for six-year stretches to fill so-called specialty positions that otherwise might be hard to fill.

I don’t doubt that in some cases such visas are necessary and useful. I don’t doubt that the U.S. economy generally benefits from an influx of well-educated, talented workers.

But I also don’t doubt that the program can be and is being abused by companies seeking to maximize shareholder profit and minimize employee costs. In today’s New York Times, for example, Julia Preston documents numerous cases in which H-1B immigrants have been brought in to directly replace American workers who were already doing that job.

” …. about 250 Disney (computer technology) employees were told in late October that they would be laid off. Many of their jobs were transferred to immigrants on temporary visas for highly skilled technical workers, who were brought in by an outsourcing firm based in India. Over the next three months, some Disney employees were required to train their replacements to do the jobs they had lost.

“I just couldn’t believe they could fly people in to sit at our desks and take over our jobs exactly,” said one former worker, an American in his 40s who remains unemployed since his last day at Disney on Jan. 30. “It was so humiliating to train somebody else to take over your job. I still can’t grasp it.”

…. “The first 30 days was all capturing what I did,” said the American in his 40s, who worked 10 years in his Disney job. “The next 30 days they worked side by side with me, and the last 30 days they took over my job completely.” To receive his severance bonus, he said, “I had to make sure they were doing my job correctly.”

In applying for the right to hire H1-B workers, a company must stipulate that the hiring “will not adversely affect the working conditions of workers similarly employed” by the company.  It’s simply impossible to square that legal requirement with what has happened at Disney and elsewhere. But it also doesn’t appear to matter.

The experience at Disney, Southern California Edison and other companies provide real-life examples of a phenomenon discussed in a major new research paper published last month. Authored by Kirk Doran of Notre Dame, Alexander Gelber of UC Berkeley and the National Bureau of Economic Research, and Adam Isen of the Treasury Department’s Office of Tax Analysis, the study found no evidence that companies that had taken advantage of the H1-B program had increased scientific innovation or been issued a greater number of patents.

But according to the study, it did have other effects:

  • “New H-1Bs substantially and statistically significantly crowd out median employment of other workers.” In other words, they displace American workers who would otherwise be doing those jobs.
  • Consistent with the presumption that H-1Bs should increase firm profits, we find some degree of evidence that additional H-1B visas increase median profits.” And how do H1-Bs allow companies to raise profits? Through greater innovation?
  • Not exactly. “We also find some evidence that H-1Bs decrease median payroll per employee, which may be related to the increase in profits.”

If you want to understand how corporate after-tax profits are soaring to record levels, while the share of national income going to working people has fallen to record lows, the abuse of the H1-B visa program offers a window into that process. Its impact on the overall economy is pretty minor — we’re talking 85,000 new H1-B visas annually — but it is only one of myriad ways in which that process plays out.

If you want to comprehend how income inequality continues to grow, with investors, hedge funds and CEOs getting richer while employees struggle to stay afloat, again, the H1-B visa program gives you a tiny glimpse at the changing power dynamics underlying that transformation.

And if you want to know why no one is doing anything about it, look even deeper at the role that corporate money and influence is allowed to play in American politics. Look at the political power held by Disney, and look at the political power held by the 250 displaced employees and their families. (The former Disney employees would not even agree to be identified by name out of fear of repercussions.)

If you were a politician in this system, where do the incentives lie? To whom are you going to be responsive, and who are you going to ignore?

Reader Comments 0

377 comments
DougForbes
DougForbes

Labor Market Distortion and a Semi-Captive Labor Force


Any given H1-B visa allows one foreign national to work for one specified US employer AND THAT EMPLOYER ONLY. The H1-B worker is an indentured laborer who cannot change employers under that visa. Thus he cannot take a better job offer or effectively bargain for higher wages. This is how employers hold H1-B workers at lower than market wages. It is their main attraction to US employers. The H1-B visa program is government intervention in the labor market for the purpose of providing employers with a semi-captive labor force at artificially low wages.

DoubleDawg
DoubleDawg

@DougForbes visas can easily be transferred...  it can be difficult to obtain the visa itself but once you have it you can transfer it.  It simply involves paperwork and small fees.

Perturbed Pundit
Perturbed Pundit

@DoubleDawg They can be transferred.  However, if the foreign national has an outstanding Green Card application pending, processing of which can (and usually does) take years, the foreign national has to go to the back of the line because when he changes jobs, the Green Card application process starts from square one - potentially wasting years, and jeopardizing the foreign national's wish for permanent residency.

Exacta
Exacta

Hey Jay—It's designated an H-1B Visa. Look it up.

Exacta
Exacta

In addition to work permits, Social Security cards, and quasi legal status, illegal aliens who benefit under Pres. Obama's November 2014 executive actions would also receive up to three years of tax credits even if they worked in the country illegally during those years. IRS Commissioner, John Koskinen, has confirmed this in a letter to Sen. Chuck Grassley.

The administration continues to sell the president's executive actions as simply a "relief from deportation", but this news proves that it's much more than that.

alexander2
alexander2

Unfortunately for the people loosing jobs this is a common issue in easily replicated, digital jobs; another is accountants where outsourcing to India may account for a 90% decrease in cost to company . Let's not forget the cost of healthcare which begs the ?, do the companies need to cover health insurance and 401K for these people..

GaBlue
GaBlue

Importsourcing is the new outsourcing.


Look to the medical field for more examples. While medical school is out of reach for so many American students, hospitals and clinics in many areas are being filled with foreign doctors hired by the giant "health care" corporations that dominate the business that our medical system has become. 


alexander2
alexander2

@GaBlue Medicare reimbursements will be cut by 30 billion dollars ro hospitals in the next few years, how are they going to make up the loss.....

DoubleDawg
DoubleDawg

“to fill so-called specialty positions that otherwise might be hard to fill. I don’t doubt that in some cases such visas are necessary and useful. I don’t doubt that the U.S. economy generally benefits from an influx of well-educated, talented workers.”

This really can’t be understated… The majority of the time it takes far too long and costs far too much money to fill many IT/Software positions throughout the US.The article makes it sound like there are Sr Java Architects hanging out on street corners looking for work.Give me a break…Odd the angle seemingly against legal immigrants while illegal immigrants seem to be more than welcome to take jobs here.

If Disney outsourced 250 jobs in order to save 1000 other jobs in other departments or 2-3 children programs or whatever the real story is people would likely understand.

DoubleDawg
DoubleDawg

@Tuna Meowt @DoubleDawg wait a minute... you mean a for-profit business is trying to increase it's profits?!?!? 


Increasing profits... minimizing losses... etc.. it is what businesses do to run a healthy business. 

DoubleDawg
DoubleDawg

@MaryElizabethSings @DoubleDawg I would agree that the decision to have laid off employees train their replacements was a poor and borderline disgusting decision.  I would not however agree that the decision to outsource the team was a poor one.  None of us know enough of the behind the scenes reasons to have an informed opinion on that.

Tuna Meowt
Tuna Meowt

@DoubleDawg "If Disney outsourced 250 jobs in order to save 1000 other jobs in other departments or 2-3 children programs or whatever the real story is people would likely understand."


Given Disney's sheer PROFITABILITY over the long term, do you have any idea how ludicrous you sound?


Disney's making fat bank off of The Avengers right now, so just how many positions do you HONESTLY think they need to shed in order to "save 1000 other jobs in other departments?"


Disney's not looking to save positions; Disney's looking to increase its profitability, its earnings per share and thus its glittery image when it comes to potential shareholders.  Nothing more.


lvg
lvg

According to GOP immigration rules, Indians, Chinese, Russians  and Cubans cannot be illegal immigrants They are ether highly skilled workers or asylum seekers from Communism.  Tsarnaev family being a good exaqmple.

_GodlessHeathen_
_GodlessHeathen_

And how many of those Disney employees turned down a raise when it was offered?

Greedy?

JeffreyEav
JeffreyEav

If any of my employees turned down a raise I'd fire them for being unamerican.

DoubleDawg
DoubleDawg

@_GodlessHeathen_ @JeffreyEav in most cases it's actually minimizing losses rather than maximizing profits.  Consumers want everything dirt cheap but then don't understand what corporations must do in order to provide a low cost product/service.

DoubleDawg
DoubleDawg

@Point @DoubleDawg @_GodlessHeathen_ @JeffreyEav you can nickel and dime your way through Disney if you want to but no that is not what I am saying.  Consumers want cheap prices and high quality products and services but can't understand when business decisions are made in order to support those wants and needs.


The cost to run Disney is extremely high.  The price to attend Disney is moderately high.  You do the math.

Numbers_R_Us
Numbers_R_Us

I see Kansas Republicans have once again been forced to concede that tax cuts do not increase tax revenues.  They have given in and raised sales taxes.  Brownback and his Republicans must keep the Koch boys happy or else so they are making everyone else in their state suffer.  How long will the people of Kansas let this go on.  Time will tell. 

ZAZ
ZAZ

@Numbers_R_Us About as long as the people of Chicago will let it go on.

Jimmyliscious
Jimmyliscious

@Numbers_R_Us  I see Kansas Republicans have once again been forced to concede that tax cuts do not increase tax revenues.


Idiots. Who in the he!! wants to live there in the first place..

kitty72
kitty72

@Numbers_R_Us  The Kochs don't care about sales tax. That hurts the poor. They only care about the 1%.

Fl0ydLiberal
Fl0ydLiberal

Does Disney hold the passports of these indentured servants? It does sound like they have learned a lot from the Arab Emirates about how to keep foreign employees working regardless of the conditions.

Doggone_GA
Doggone_GA

Interesting...I got an email notification that Jay had posted a new piece, but I'm not seeing it yet

IReportYouWhine#1
IReportYouWhine#1

By the way, spineless wonders bohner and the turtle are just as much responsible for this as obozo is, because they don't stop it.

Visual_Cortex
Visual_Cortex

@IReportYouWhine#1

Hey, tell us about how you can't swing a cat in de ghetto without hittin' a Borshun Clinic. 

That's always a jolly time.

Visual_Cortex
Visual_Cortex

Hey, I know the answer!

Maybe we need to breed more of "our own." And put those who are super good at breeding on a pedestal.



IReportYouWhine#1
IReportYouWhine#1

Even illegal immigrants don't want illegal immigration but democrats need their voters, so give up that job for the good of the party, gruberian.

Peachs
Peachs

@IReportYouWhine#1 if there were no jobs when they come here they would stop, those rich Democrats need to stop feeding them at the back door and they will go away...

Numbers_R_Us
Numbers_R_Us

I'm ok with Republicans giving corporations more freedom to replace Republican workers with cheap legal immigrants so long as my dividends keep growing.

Peachs
Peachs

Illegal immigration is a lot like drugs, if the masses of this country didn't want it we wouldn't have it, we are always good at misdirecting our problems to the effect and not the cause.

kitty72
kitty72

@Peachs  Masses? More like employers...those with money....they want it, we got it. The rest is just lip service.

Jimmyliscious
Jimmyliscious

So these companies send the jobs to India like computer programming and call center which used to be nice jobs here in the U.S. Then if they need a fanny onsite to actually fix something local they bring them in from India and kick the skilled American worker to the curb. The trades have been ruined by the illegals, which Americans used to be able to earn a middle class wage. If you are graduating high school and plan on attending college, what field would you pick to get a degree AND pay your student loans back? I think in my lifetime, the middle class will be so diminished that they won't be able to afford trips to Disney, high dollar cable packages, the latest Iphone, etc. What will happen the profits of these companies cr@pping all over the working folks here?

kitty72
kitty72

@Jimmyliscious 


So these companies send the jobs to India like computer programming and call center which used to be nice jobs here in the U.S. Then if they need a fanny onsite to actually fix something local they bring them in from India and kick the skilled American worker to the curb. The trades have been ruined by the illegals, which Americans used to be able to earn a middle class wage.


What does H1-B visas have to do with illegal immigration? What you posted above has nothing to do with illegal immigration. These are legal immigrants.

john80224
john80224

@kitty72 He's connecting dots.  This comment:


Then if they need a fanny onsite to actually fix something local they bring them in from India and kick the skilled American worker to the curb.


speaks to the article.  He then connects where other uses of immigration are combining to squeeze out US workers.

IReportYouWhine#1
IReportYouWhine#1

Now the fascists don't have to toil in the fields but, as usual, they forgot that they got paid to toil in the fields. Commence the "unintended" blubbering.

Doggone_GA
Doggone_GA

@IReportYouWhine#1 Now the communists don't have to toil in the fields but, as usual, they forgot that they got paid to toil in the fields. Commence the "unintended" blubbering

Peachs
Peachs

We really don't have a community of people who care in this country like we advertise.  The corporate structure is not a patriotic structure, yet so many come from the U.S. They are more powerful than the citizen of this country yet so many are not citizens of this country and the corporation has no bounties. They can override us in elections by spending, out lobby us in Congress for their self interest, and probably are obviously above the laws we all adhere too. 

IReportYouWhine#1
IReportYouWhine#1

Notice how the fascists don't deny they are responsible for the flood of low wage immigrants?