How to Keep the People the U.S. Needs

Don't slash the H1B visa program for highly skilled workers. Make it work better -- and crack down on corporate abusers

By Spencer E. Ante

Meet Dr. Rajat Bhatt, a 28-year-old physician from Bombay who came to the U.S. on a coveted H1B visa in 2000. In June, he's set to finish his residency in internal medicine at the Bronx Veterans Administration Hospital, affiliated with New York's prestigious Mount Sinai Medical Center. Bhatt says he has a job offer as an internist at the Arizona Heart Institute in Phoenix to begin work in July.

Just one problem: Bhatt fears he won't be able to get an extension of his visa -- and he may be right. Congress sharply curtailed the quota on outstanding H1Bs -- popular with high-end and high-tech professionals from overseas -- to 65,000 for fiscal year 2004 (starting in October, 2003), vs. 195,000 last year. Already, no more are to be had this fiscal year, announced the U.S. Citizenship & Immigration Service (the Immigration & Naturalization Service's new name after being subsumed under the Homeland Security Dept.) on Feb. 17. "The system needs some reevaluation," says Bhatt.


  In an election year dominated by concerns about weak job creation at home and securing our borders against terrorism, the idea of letting more foreign professionals work in the U.S. might seem like a lost cause. But Bhatt is right. The H1B program needs a reevaluation. Congress and the Labor Dept. should fine-tune the program to attract the best and the brightest while preventing abuses by companies that have flouted the law.

The current cap is too low, and the fact that it has maxed out so quickly for this fiscal year has reignited the debate over the controversial program. In 1990, Congress created the H1B visa as a way to help businesses meet shortages of specialized workers, especially in the technology, health-care, and education fields, for up to six years.

Ingersoll-Rand (IR ), Indian tech outfits such as Wipro (WIT ), and the National Association of Software & Service Companies, the Indian tech trade group, want to lift the cap entirely and let an unlimited number of foreign workers into the U.S. On the other hand, Representative Tom Tancredo (R-Colo.) and some worker-rights groups want to abolish the H1B program altogether. Both positions are too extreme. But with tech-worker unemployment at 6%-and-rising and the cap maxed out after only five months, it's clear the system needs to be reformed.


  One of the strongest arguments for modest increases in H1B visas lies in one of the hottest political issues this year: Increasing competition from rapidly developing nations such as India and China, as well as the hundreds of thousands of jobs multinationals are outsourcing overseas. Restricting H1Bs too tightly will only accelerate offshoring.

The most important argument for boosting these permits concerns brainpower. In an era of rising global competition, the U.S. needs to make it easier to attract and keep the crème de la crème from the world's talent pool. This is especially crucial in a post-September 11 era in which the U.S. is seen as hostile to the rest of the world. Many of the immigrants who are here on H1B visas have made significant contributions to the nation. Indian and Chinese entrepreneurs alone -- many who used H1Bs -- head 29% of Silicon Valley's businesses, according to the University of California at Berkeley.

Until recently, the U.S. has had a monopoly on the world's best talent. Not so anymore. "Many PhDs have gone back to their home countries," says James Breyer, a managing partner of venture-capital firm Accel Partners. Fact is, the H1B can be a great tool to keep the word's most able people in the U.S. while they apply for permanent residency or citizenship. By Spencer E. Ante


  What to do? First, Congress should exempt foreign graduate students attending U.S. universities from the annual cap. In 2001, nonresident aliens received 13% of all masters degrees and 24% of all doctorates. The numbers are higher in the sciences: Foreign nationals accounted for nearly half of all masters and PhDs in computer science. All told, in 2002 American universities issued 65,000 graduate degrees to foreign nationals.

Not all will choose to stay here, but these are exactly the kind of people the country should hold onto. Tech concerns such as Intel (INTC ) and Motorola (MOT ) are now lobbying on Capitol Hill to put grad students into a category not counted against the cap.

Second, Congress should give the Labor Dept. more flexibility to increase H1B numbers when the need arises, either because of critical need in certain fields or strong economic growth. Congress certainly plays carrot-and-stick games with H1Bs -- 7,000 have been allotted to Singapore and Chile in 2004 based simply on new trade-expansion agreements with those countries. The bureaucracy needs some discretion, too. Even an ardent H1B critic like University of California-Davis computer science professor Norman Matloff recommends giving Labor the power to increase the cap by up to 20% in a given year if "unusually rapid economic expansion warranted it."


  Third, to ensure that only the best and brightest get H1Bs, Uncle Sam ought to crack down on abuses. The critics are right: It's too easy for companies to flout the law by using H1B visas to hire overseas workers at lower wages -- and Labor has neither the will nor the authority to go after corporate offenders.

In 1996, when Labor last took an activist position under Secretary Robert Reich, an audit by the department's inspector general found that almost 20% of foreign workers with an H1B weren't being paid the wage their employers had promised on their visa applications. A September, 2000, report by the General Accounting Office concluded that "Labor's limited legal authority to enforce the program's requirements and weaknesses in INS's program administration leave the program vulnerable to abuse."

While Labor points to an increase in investigations, its power has been diluted. For example, it no longer has the authority to require past H1B violators to attest that they tried to hire an American worker (the legal authority to ask the question recently expired). Labor "is becoming a shill for Corporate America," worries Marcus Courtney, head of the Washington Alliance for Technology Workers, a worker-rights group.


  Congress and Labor should now rewrite the law so that all employers -- not just previous violators -- be required to attest that they made a good-faith effort to hire an American worker first. No such requirement exists now. And when certifying requests for H1B workers, Labor needs real authority to determine if information provided by employees on wages and labor conditions is correct. As it stands now, the department is restricted to ensuring the application has no "obvious" errors or omissions. This won't cut it.

Finally, under current law, Labor can't initiate an investigation, not even if it has evidence of wrongdoing. It must first receive a complaint from a worker. At the very least, Congress needs to give Labor the power to conduct independent "spot" investigations, along with subpoena power to obtain necessary internal records. Even business agrees. "There should be strong enforcement, and abusers should be penalized," says Texas Instruments' (TXN ) lobbyist Paula Collins.

Immigration has been the lifeblood of the U.S. for more than a century. Now, in an increasingly competitive global economy, the H1B could play a model role in attracting skilled foreign professionals like Bhatt. For a U.S. workforce of more than 100 million, providing residency visas for, say, 100,000 or so of the best minds in the technology or health-care fields is no threat to American workers. But for the H1B program to work as intended, Congress must refashion a more nuanced policy that increases openness to top talent while rooting out the bad apples.

Ante is computers editor for BusinessWeek in New York

Edited by Douglas Harbrecht

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