One reason why the tech sector has taken the lead in challenging President Donald Trump’s recent travel-ban executive order is that Silicon Valley relies on a global talent pool and its business interests are affected any time it becomes more difficult for foreigners to enter the United States. However, while the travel ban itself has had some impact on the workforce—a recent pulse survey by the Institute for Corporate Productivity found that more than one third of organizations were directly affected—Silicon Valley’s main concern is about what Trump intends to do next in fulfilling his campaign promise to curtail both legal and illegal immigration.
Another draft executive order that has been in the works at the White House for several weeks now could force significant changes to several US skilled worker visa programs, including the H-1B, L-1, J-1, B, and OPT visas. The tech sector has hired large numbers of employees from abroad using these visas, particularly the H-1B; indeed, Trump has accused Silicon Valley of abusing that program. Accordingly, many tech leaders are concerned that a reduction in the number of visas would be harmful to growth and innovation in their industry. This concern was on display in an open letter to Trump signed by over 200 tech startups, investors, and entrepreneurs and published at Recode last week:
The order calls for the evaluation and rolling back of various worker visa and parole programs, and is based on the concerning and misguided presumption that visa programs are harmful to American workers and the broader economy. In reality, it is well-established that immigrant workers at all skill levels make a positive impact on the U.S. economy. Research that specifically analyzes the impact of H-1B workers has found that for every 100 immigrants with advanced degrees in STEM fields, an additional 86 jobs are created among U.S. natives. Consequently, in limiting job opportunities for immigrants, your administration faces the possibility of reducing jobs for American citizens, in addition to suppressing growth in the startup economy.
Startups depend on the talents of immigrants to address significant shortfalls in the availability of technical, skilled IT professionals. The fact that so many startups rely on H-1B visas only serves to illustrate this fact, since no sensible, time-constrained startup would opt to rely on a bureaucratically difficult process for hiring foreign-born employees if simply hiring qualified American workers was an option.
One reason why US companies fear losing access to the global market for tech talent is that other countries need these skilled workers, too, Bloomberg View columnist Leonid Bershidsky explains. If tomorrow’s potential tech stars are no longer able to work in the US, Bershidsky writes, talent-starved European economies will be happy to take them in:
The European Commission estimates that the continent will have 750,000 unfilled IT jobs by 2020. European nations have already relaxed visa requirements for tech professionals. If the U.S. moves in the opposite direction — and there are indications that Trump’s next move will make it more difficult to get H-1B visas — European companies and global employers with operations in the EU won’t even have to compete on pay. That’s one reason it makes sense for the tech companies to draw red lines early on, before the worst happens and they start losing in the competition for talent.
Trump and other critics of H-1Bs say that employers use them to replace American workers with cheaper immigrant labor, and one of the solutions they have proposed is to only grant these visas for high-salary employees, but as BuzzFeed’s Caroline O’Donovan recently pointed out, many H-1B holders tend to already make a lot of money:
In the past, Trump has called high-skilled visa holders “temporary foreign workers, imported from abroad, for the explicit purpose of substituting for American workers at lower pay.” But the reality is, many high-skilled immigrants working for major US tech companies are already earning at least $100,000 a year. More than 90% of 2015 visa applications for software developer positions filed by Facebook, Google, Apple, and Microsoft paid more than $100,000 a year (at Uber, that figure was around 84%),* according to an analysis by JobsInTech.io, a searchable database of over 7 million applications for various visas dating back to 2000. Meanwhile, immigrants working for the India-based staffing agencies that are historically awarded the most visas and would be hardest hit by such a regulatory crackdown are earning much less.
So cracking down on H-1Bs won’t necessarily force companies to hire US talent, Michael Schutzler, the CEO of Washington Technology Industry Association, argues at GeekWire:
First and foremost, these visas are not designed to displace American workers. The H-1B visa, for example, represents less than four percent of our tech workforce in Washington. They are among the best and brightest in the world and each of them help to create another seven jobs in the state economy.
The draft executive order restricting these three work visas, combined with another Presidential directive shutting off the entrepreneur visa work-around, (aka Entrepreneur Parole) limits our ability to develop new technologies, restricts our ability to train our future entrepreneurs and wreaks havoc on our ability to export apples, potatoes and beef to feed the world. Having said that, it’s a smart move to adjust the H-1B visa to focus on highly skilled tech workers and eliminate misuse by some outsourcing firms. The tech industry supports that change. However, closing our borders to entrepreneurs who create jobs for Americans is a self-inflicted mortal wound.
On the other hand, not everyone in the tech sector likes these visas, the New York Times noted in a recent story, and some American employees have indeed been replaced by immigrants on H-1Bs:
The H-1B program’s critics say the system provides a way for American companies to turn over technology departments to outsourcing companies. These are gaming the system to snap up the visas so they can replace American workers with less expensive, temporary staff members. A research report by Goldman Sachs estimates that 900,000 to a million H-1B visa holders now reside in the United States, and that they account for up to 13 percent of American technology jobs.
In 2014, 13 outsourcing firms accounted for one-third of all H-1B visas. They use a loophole in the current first-come, first-served lottery system to flood the applicant pool with their candidates. In many cases, those candidates are paid slightly more than the $60,000-a-year minimum salary required by the program for dependent companies seeking a waiver from having to recruit Americans first — but less than what American technology workers make.
Back in December, Alexia Fernández-Campbell at the Atlantic took a look at the history of H-1B visas and how a loophole in the law that created them opened the way for certain employers to abuse them:
In 1998—during the tech bubble—lawmakers amended the [Immigration Act of 1990] to provide more visas at the request of the growing tech industry. … Under the amended law, companies that rely heavily on H-1B workers (more than 15 percent of their workforce) would now face additional scrutiny when applying for visas. These companies would have to promise not only that their H-1B workers would not replace American employees at their own company, but that they wouldn’t be used as replacements at firms that the company had contracts with either.
The new requirement would have provided some additional security for American workers, but a seemingly small, yet significant exemption was also written into the law. It allows those same H-1B reliant companies to ignore the requirements about protecting American jobs as long as they pay the foreign workers at least $60,000 a year, or hire a foreign worker with a master’s degree. It’s unclear why this exemption was included, though critics of the H-1B program say tech companies lobbied for it to undermine the new, tougher restrictions that might impact their ability to hire foreign workers. Considering the average IT worker in the United States makes far more than $60,000, that exemption makes it lucrative—and legal—for companies to displace American workers with cheaper H-1B workers. And it effectively undoes the additional protections of the 1998 bill.
Several bills are being circulated in Congress to fix the H-1B program, which Fortune’s Jeremy Quittner helpfully summarizes. One contender would raise that $60,000 threshold to $100,000, while another would replace the lottery system currently used to issue the visas with one that gives preference to immigrants with advanced degrees or who are studying in the US.
Again, there is still a lot of uncertainty around what the Trump Administration and Congress will do, or be able to do, and what that will mean for employers. Rest assured , we’ll continue to follow the story closely. You can also catch up on the rest of our coverage regarding how Trump Administration immigration policies might impact employers and the workforce here.