What Is the New H1B Regulation, and Why It Should Be Stopped
Introduction
Tough on illegal immigration has always been the signature policy preference of this administration since the first day that Donald Trump declared his candidacy for President, but what about legal immigration? What about a fraction of the one million international students studying in the US who intend to stay here for work? There is a relatively limited amount of attention and literature dedicated to this topic in the mainstream news coverage outside of the international community in the US because it concerns morality to a lesser degree compared to the family separation of asylum seekers. President Trump claims that he welcomes and embraces legal immigrants using the example that the first lady herself is a legal immigrant from Slovenia. However, this administration has been relentlessly pushing its anti-immigration agenda by enacting a series of policies that limits legal international workers and students. Specifically, this article intends to introduce you to the new H-1B regulations, and how the newly enacted policy is misguided by unsound economic theories. I argue that these arbitrary restrictions against international talents will not only worsen the unemployment crisis caused by the pandemic, but that they are also fundamentally contradictory to the American identity and ideals.
What is the H1B Visa and the new regulations on it?
For high-skilled internationals who wish to work in the United States, they are required to apply for the H-1B visa, which allows American employers to temporarily hire foreign workers in “specialty occupations.” This means that a job must requires the application of specialized knowledge and expertise that furthers a genuine business interest that American workers cannot necessarily fulfill. Typically, this visa requires a minimum of Bachelor’s degree or equivalent work experience for white-collar jobs such as engineers, lawyers, financial analysts, accountants etc. Typically, many H-1B visa holders subsequently apply for green cards and citizenship, and therefore it is one of the most common sources of legal immigrants to the US.
In order to protect the US worker from the international competition it may introduced, the application process of the visa is designed to be extremely competitive: apart from satisfying multiple requirements regarding the nature of the job, there are only a limited amount of visa issued in total each year, and the applicants must also go through a lottery system that on average only considers less than half of the candidates. In addition, the employers are required to pay the US government extra fees in order to make the employees legally working in the US. As a result, this policy has already dissuaded the majority of American employers from sponsoring H-1B visas, rejecting international candidates in their recruiting process in the first place.
For the remaining employers who open the doors for international talent, one of the criteria for the application is called the “prevailing wage” standard in the attestation stage. This means that the employer is required to show that the wage of this foreign worker must be greater or equal to a certain standard set by the Department of Labor, and the wage must be comparable to that of similar roles in similar companies. Specifically, the prevailing wage standard is designed differently in order to accommodate diverse backgrounds and roles of the H-1B candidates. Additionally, it only accounts for base salaries, excluding bonuses and other employment benefits. For instance, an applicant wishing to work in New York as a partner of a law firm will have a much higher prevailing wage standard than an entry level applicant intending to work as a civil engineer in Alabama. In general, the previous standard can be summarized as the following: for seniority level 1 to 4, the prevailing wage is set to be the 17th, 34th, 50th, and 67th percentile respectively, of the wage level for similar roles in the same geographic location. For instance, if you are an entry level worker (seniority level 1) applying for H-1B visa, your annual wage must be higher than 17% of people doing similar jobs in the same city you intend to work in. As you become more and more senior in your job, the prevailing wage goes up and up correspondingly.
However, the Department of Labor and the Department of Homeland Security has recently enacted two new regulations that will disruptively change this system. These rules are issued without the opportunity for public comment and scrutiny. Claiming that these actions are designed to “strengthening wage protection,” the regulation RIN 1205-AC00 and RIN1615-AC13 impose multiple restrictions and limitations against H-1B applicants. Among other things, these new rules significantly increase the prevailing wage standard to the 45th, 62nd, 78th, and 95thpercentile for seniority level 1 to 4 respectively. Compared to the previous one, this means that the new level 1 prevailing wage is almost the same as the previous level 3 standard. For new graduates typically classified as level 1 in seniority, it requires them to find a job that pays higher than almost half of the entire industry in order to be eligible for the visa application. Intuitively, at least for the entry level, the wage requirement is too high that virtually no company can meet.
To put this into perspective, we choose some of the most typical work of international students and compare the salaries with the prevailing wage standards: for entry level software developers in Seattle, the prevailing wage is set to be 140,000 dollars annually; 90,000 dollars for entry level accountants in New York City; 73,000 dollars for junior architects in Los Angeles; and 93,000 dollars for junior financial analysts in San Francisco. These requirements not only dwarf the average pay for new college graduates, which is 50,000 dollars, they also exceed the salary of the best companies. Compared to the highest paying firms in their respective industry, Google only pays 120,000 dollars for software engineers; PwC pays 68,000 for accountants; Gensler pays 58,000 dollars for entry level architects; and Goldman Sachs pays 80,000 dollars for junior analysts. Evidently, even these highest paying firms have failed to meet the new standards by a 17,500 dollars margin on average, meaning that other less competitive firms are even less likely to hire international employees if this rule is enforced. Intuitively, the new statute will almost mean a total ban for new international students to work in the US legally after graduation. Homeland Security Officer Ken Cuccinelli says that this change of rule is expected to result in rejecting at least one-third of the visa applications that are currently processed.
Economic Analysis: Why Rejecting H-1B visas Is Bad for the Economy
Apparently, this statute is just another desperate attempt of this administration trying to limit international students and workers. Before RIN 1205-AC00 and RIN1615-AC13, the Trump administration has already enacted a series of legislation over the summer targeting international students such as restriction of travel, shortening the duration of stay, and limiting the application for permission of internship and jobs. Supposedly, these legislations are designed for the sake of reducing the unemployment rate given the economic context of the pandemic.
However, can these policies really designed to realize their economic goals, or they are simply an anti-immigration gesture for President Trump to boost his support among conservative voters in the midst of the surging nationalism and xenophobia? It seems quite obvious that the latter has more merit in argument. There is an overwhelming amount of macroeconomic research suggesting that the admission of H-1B workers is unrelated to the economy and the unemployment crisis in America.
Evidently, the US is facing a shortage of high-skill work force especially in the STEM field (Science, Technology, Engineering, and Math). A report made by National Association of Manufacturing and Deloitte suggests that the demand for high-skill jobs for the US will reach 3.5 million by 2025, yet more than 2 million will be unfilled due to the lack of candidate. Unable to meet this demand means not only losing an edge to other competing countries, but also stagnant growth and unemployment for others. Introducing foreign workers to this field will help significantly for the benefit of US economy. Renee Reichl argues that the benefit of the H-1B visa is also beyond the effects of wage and unemployment. Instead of providing cheap labor simply driving the labor market more competitive for American job seekers, H-1B applicants are “flexible labor” inserted into the American economy where it needs. The flexible labor helps to compliment many US companies to fill in the gap with up-to-date skills and flexible working hours which are crucial to many industries for a genuine business interest. Similarly, Danielle M. Drago suggests that Congress should adopt immigration reform that embraces high-skill immigrants especially in the technology sector. She noticed in empirical analysis that the growing restriction imposed by the US government against these foreign workers, namely the extra cost for employers to hire internationals, are deterring the “best and brightest” from choosing to enter the US H-1B process.
On the other hand, Trump’s attempt to restrict these students will likely be ineffective. Theresa Cardinal Brown from the Bipartisan Policy Center call the new rule of H-1B “a bank shot at best” and claiming that there is no estimate of the amount of jobs the policy would actually free up for US workers. On the other hand, it will most definitely hurt innovation especially in the high-tech industry, because smaller firms and start-up companies that relies on international talents are less likely to meet the increased wage requirement. But why would the administration introduce such policy if it is deemed to be counter-productive to solving the unemployment crisis? Expert attribute this to political consideration for elections. Anthony Sherick recognizes that politicians tend to cap immigration even though it may inflict harm on the economy overall, because such actions links to populist sentiments, and it runs in favor of the election. In other words, the current administration enacts such policies seeking for reelection, regardless of the long-term economic consequences.
Cultural Analysis: The American Identity and Immigration Tradition
However, the surging populism and nationalism are essentially contradictory to the ideal of the United States. The American identity is deeply rooted in the tradition of embracing immigration and reliance on international talents. From the very beginning, the founding father, creator of the financial system and co-writer of the federalist paper, Alexander Hamilton was born outside the US and brought to the US as a student. The founding principle of the Constitution of the United States is to reject any orthodoxy conviction of culture, religion, or philosophy. Subsequently, the freedom it created and the idea of the “American dream” has inspired generations of immigrants to come to the US and contribute to the American diversity and excellence we have today. Immigrants have contributed significantly to the American advancement in art, culture, technology, and virtually everything. They contribute more than 75% of patents issued and founded 40% of Fortune 500 firms. In fact, President Donald Trump himself is a second-generation immigrant. Thus, it is virtually impossible to draw the clear line between native and immigrant family in America, because everyone except for the native Americans immigrated here at some point. This suggests that the American identity is not and should not be a concept established on ethnic origin, which is the uniqueness of this nation.
Conclusion and Proposal
In a nutshell, it is clear that the new H-1B policies, like many others Trump had on the topic of immigration, is misguided by unsound economic principles and motivated by political reasons especially in the context of surging nationalism and xenophobia. But how do we address this? It is easier for Trump to invoke nationalism propaganda than for economist to explain intricate economic theories and research to regular workers and voters. Therefore, without proper reform on immigration and economic policy, the existence of division among Americans will continue. Many economists suggest that bad economy and growing inequality usually give rise to nationalist and populist sentiments. Economically vulnerable groups often feel marginalized and resort to populism. Therefore, we must act together and rethink our society regarding fairness, humane economic system, and redistribution policy to address the crisis we have today.