Little-known temporary visas for foreign tech workers depress wages

At least 650,000 college-educated temporary foreign workers are employed in the United States through the H-1B visa program, mostly in the high-tech industry. The H-1B is a well-known guestworker program that is inadequately — but at least minimally — regulated, with an annual limit and a requirement that employers pay a “prevailing” wage. Other visa programs, like the L-1 and the F-1 Optional Practical Training (OPT) program, have almost no rules and receive little scrutiny, but are used to employ hundreds of thousands of foreign tech workers. Behind the scenes, the tech industry is pushing President Obama to expand them both as part of executive actions he’s considering on immigration. He should resist.

Multinational companies use the L-1 visa to transfer employees from their foreign offices to offices in the United States. Over the past five years, an average of 68,000 L-1 visas have been issued per year, but there is no annual limit. There are two types: the L-1A for managers or executives (valid for seven years), and the L-1B for employees that have qualifying “specialized knowledge” (valid for five years). According to government audits, the majority of L-1 workers are in occupations related to computers and information technology (IT), and the biggest users of the L-1 are also the biggest users of the H-1B — outsourcing tech firms like Tata, Cognizant and Infosys — firms whose business model focuses on sending jobs overseas.

{mosads}While multinational companies need flexibility to move key employees to the United States, employers take advantage of inadequate regulatory guidance, oversight and enforcement of the L-1 visa. The media have reported on major companies laying off U.S. tech workers and replacing them with L-1s (legally), after first forcing the U.S. workers to train their own replacements. And there is no requirement that employers pay L-1s the prevailing wage for the specific job they will fill, which allows employers to pay far below the market rate. This practice takes advantage of the foreign worker and hurts U.S. workers by pushing down wages for everyone employed in similar occupations.

A recent Labor Department investigation revealed that Electronics for Imaging (EFI) in Fremont, Calif. — which earned $200 million in revenues last quarter — required L-1s to work 120 hours a week installing computers, while paying them $1.21 an hour. EFI got into trouble, but only because it wasn’t paying them the California minimum wage of $8.00 an hour. Had EFI paid the minimum wage, it would have been compliant with immigration and labor laws, even though the average hourly wage in Fremont for a worker who installs or repairs computers is $19. If that worker is configuring the network as well, it’s $45.

Employers have a huge financial incentive to hire an L-1 worker instead of an American or an H-1B, and no law requires them to be audited or investigated. That’s why the tech industry has lobbied the administration for years to expand the definition of L-1B “specialized knowledge,” which would allow them to bring in countless more underpaid L-1 workers.

The Optional Practical Training program has a worthwhile goal but has morphed into an unregulated skilled temporary foreign worker program. It allows foreign graduates of U.S. universities on F-1 visas to work in the United States and get practical experience for up to one year immediately after graduation in a field related to their studies. If their degree is in a qualifying STEM (science, technology, engineering and mathematics) field, the work authorization can be extended to a total of 29 months. Over the past five years, the government has approved an average of more than 100,000 OPT workers per year; in 2013, about 20 percent of the total were STEM extensions. With a 96 percent approval rate, applications are essentially rubber-stamped.

OPT rivals the H-1B program in size but has no protections for college- and STEM-educated U.S. workers, such as a requirement that employers demonstrate no qualified U.S. worker was available for the job or a prevailing wage rule. As a result, OPT workers are much cheaper to employ than an American. OPT workers don’t even have to be paid the minimum wage — they can work without pay if classified as interns or be paid a “stipend” — and employers aren’t required to pay unemployment, Medicare or Social Security taxes for them. That’s probably why tech wants Obama to extend the duration of OPT.

OPT’s legality is questionable because the regulations that create it are arguably inconsistent with the F-1 visa statute. The only clear statutory authority that’s existed for an OPT-like program was a three-year pilot program created in 1990 that allowed foreign graduates to work in fields unrelated to their degree. That pilot program required employers to pay a prevailing wage and recruit U.S. workers for 60 days. It also mandated a report to Congress on the program’s impact: then-Immigration and Naturalization Service Commissioner Doris Meissner and Labor Secretary Robert Reich’s 1994 report advised Congress not to extend the pilot program because it “is inconsistent with the statutory intent of the F-1 nonimmigrant visa,” “run[s] counter … to an affirmative policy of U.S. labor force development,” and “may have adverse consequences for some U.S. workers.” Congress never renewed the pilot.

OPT differs from the pilot program in that each job must be related to the graduate’s degree, but the report’s findings nevertheless apply to OPT. Why? The Government Accountability Office (GAO) warns that basic data collection in OPT is so bad that Immigration and Customs Enforcement (ICE) “cannot determine whether students with employment authorization are working in jobs related to their studies and not exceeding regulatory limits on unemployment.” Since ICE doesn’t know if the job requirement is being complied with, it’s unlikely a distinction that makes a difference. Moreover, OPT is missing the basic worker protections the pilot program included.

President Obama is now considering how to improve the immigration system using his executive authority. Granting unauthorized immigrant workers in the United States a reprieve from deportation and issuing them work authorization will raise their wages and those of similarly skilled Americans. On the other hand, increasing L-1 visas and extending the OPT program will do the opposite for tech workers — lower wages by increasing the number of underpaid and exploited foreign workers in the industry. The president should improve labor standards for foreign and American tech workers, rather than exacerbate the race to the bottom.

Costa is the director of immigration law and policy research at the Economic Policy Institute, a think tank in Washington. You can follow him on Twitter @costadaniel.