Trump Is Right: Silicon Valley Is Using H-1B Visas To Pay Low Wages To Immigrants

This drafted executive order could actually mean higher wages for both foreign workers and Americans working in Silicon Valley.
This post was published on the now-closed HuffPost Contributor platform. Contributors control their own work and posted freely to our site. If you need to flag this entry as abusive, send us an email.
Open Image Modal
(L-R) Eric Trump, Amazon's chief Jeff Bezos, Larry Page of Alphabet, Facebook COO Sheryl Sandberg, Pence, Trump and Peter Thiel, co-founder and former CEO of PayPal, meet at Trump Tower Dec. 14, 2016 in New York.
TIMOTHY A. CLARY via Getty Images

On the heels on its controversial immigration ban targeting seven Muslim-majority countries, the Trump administration has drafted a new executive order that could actually mean higher wages for both foreign workers and Americans working in Silicon Valley. The Silicon Valley companies, of course, will not be happy if it goes into effect. 

The order aims to overhaul and limit work visas, notably the H-1B visa program. Tech companies rely on these to bring in foreign talent. Their lobbyists claim there is a “talent shortage” among Americans and thus that the industry needs more of such work visas. This is patently false. The truth is that they want an expansion of the H-1B work visa program because they want to hire cheap, immobile labor — i.e., foreign workers.

To see how this works, note that most Silicon Valley firms sponsor their H-1B workers, who hold a temporary visa, for U.S. permanent residency (green card) under the employment-based program in immigration law. EB sponsorship renders the workers de facto indentured servants; though they have the right to move to another employer, they do not dare do so, as it would mean starting the lengthy green card process all over again.

This immobility is of huge value to many employers, as it means that a foreign worker can’t leave them in the lurch in the midst of an urgent project. In a 2012 meeting between Google and several researchers, including myself, the firm explained the advantage of hiring foreign workers: the company can’t prevent the departure of Americans, but the foreign workers are stuck. David Swaim, an immigration lawyer who designed Texas Instruments’ immigration policy and is now in private practice, overtly urges employers to hire foreign students instead of Americans.

This stranglehold on foreign workers enables firms to pay low wages. Academics with industry funding claim otherwise, but one can see how it makes basic economic sense: If a worker is not a free agent in the labor market, she cannot swing the best salary deal. And while the industry’s clout gives it bipartisan congressional support concerning H-1B and green card policy, Congress’s own commissioned report found that H-1B workers “received lower wages, less senior job titles, smaller signing bonuses and smaller pay and compensation increases than would be typical for the work they actually did.”

“Congress's report found that the H-1Bs 'received lower wages, less senior job titles and smaller signing bonuses.'”

Salaries of software engineers are basically flat, rising at 2 percent or so per year for established workers. The rates are similarly mild for new graduates. This belies the industry’s claim of a tech labor shortage. And while Silicon Valley wages appear high on the surface, they come nowhere near matching the astronomical local real estate prices. 

Another dirty little secret in all this is that the H-1B program is an enabler of rampant age discrimination in the tech industry. Age is actually one of the core issues in H-1B. Mind you, we are talking about age 35 as being “old” here, not 55. Almost all the H-1Bs are young, and younger is cheaper. And young H-1Bs are even cheaper than young Americans.

Age gives employers an excuse to shun American applicants, on the grounds that a given job opening requires only three to five years of experience, rendering the Americans “overqualified.” Or the employer will load the job description with unnecessary requirements, making the Americans simultaneously under- and overqualified. That doesn’t leave much room, does it?

“Almost all H-1Bs are young, and younger is cheaper. And young H-1Bs are even cheaper than young Americans.”

A popular tack taken by industry lobbyists and their congressional allies is to blame Indian firms that hire H-1Bs and “rent” them out to mainstream companies. The message is that the Indian outsourcing firms abuse the visa while the mainstream firms use it responsibly. This is pure scapegoating and a veiled appeal to xenophobia. It’s an attempt by Silicon Valley firms to distract attention from their own abuses of the system. The data show that the Silicon Valley firms do indeed underpay their H-1Bs, and individual examples of abuse by household-name firms are disturbing, to say the least. 

Cisco, for instance, was exposed as routing job applications from American engineers to an immigration law office, rather than to engineering managers, apparently to gather evidence that no qualified Americans were available for the job taken by a foreign worker. The immigration lawyer was deciding who was “qualified.” A former manager at Oracle accused the firm of justifying underpayment of an H-1B by saying, “It’s good money for an Indian.”

The industry especially asserts a need to hire H-1Bs with a PhD, citing the fact that 50 percent of computer science doctorates in the U.S. are granted to foreign students. What they are hiding in that claim is that it simply doesn’t pay for an American student (i.e. U.S. citizen or permanent resident) to pursue doctoral study, as the salary premium for a doctorate is too small. That small wage premium is due to the flooding of the market by foreign applicants, something correctly forecast (with approbation) by the National Science Foundation years ago. The industry claim is doubly deceptive, as they are not very keen to hire PhDs because this level of study just isn’t needed. We actually have a surplus of computer science PhDs; 11.3 percent of them are involuntarily working in a non-computer science field.

“A former manager at Oracle accused the firm of justifying underpayment of an H-1B by saying, 'It's good money for an Indian.'”

The industry lobbyists’ ace-in-the-hole argument is that if they can’t hire more H-1Bs, they’ll ship the work overseas. But for projects on which H-1Bs are hired in the U.S., face-to-face interaction (between themselves and their American coworkers) is crucial. That is why employers bring H-1Bs to the U.S. in the first place rather than sending the work abroad, where the wages are even cheaper.

Aside from the reduced wages and reduced job opportunities H-1B and EB inflict on American workers, there is a broader impact that is far worse. We should of course support facilitating the immigration of “the best and the brightest.” But research performed at the University of Michigan and Rutgers University, as well as my own work for the Economic Policy Institute, shows that the former foreign students now in the U.S. workforce tend to be weaker than their American peers. On a per capita basis, the former foreign students in computer science file fewer patents, are less likely to work in research and development and have degrees from less selective U.S. universities.

Given the indirect and direct displacement of Americans by foreign workers, this amounts to replacing stronger people with weaker ones in science, technology, engineering and mathematics — the STEM fields. The harm this brings to our economy, our ability to innovate and our general national interest is immense.

“We have a surplus of computer science PhDs; 11.3 percent of them are involuntarily working in a non-computer science field.”

This problem can be easily solved, with political will and foresight. The Trump administration is reportedly considering doling out H-1Bs to the employers offering the highest salaries. This would be only a partial solution, though still a useful step. But this would need to be done strictly in order of salary, not in the emasculated form in the bill introduced by Rep. Zoe Lofgren (D-Calif.), whose salary ordering would be intertwined with the four experience levels defined in current law. Most H-1Bs are in the bottom two levels, again a major enabler of the age discrimination problem that forms the core of the abuse.

Employers claim that they hire H-1Bs for rare skill sets or outstanding talent ― traits that they would need to pay a premium for on the open market. Yet current law requires only that they pay the average wage. Worse, it is the average wage within one of those four experience levels. Instead, we should replace this with a single wage floor set at the 75 percentile of the overall wage distribution for the given occupation and region.

This approach would give the visas to those who can truly make exceptional contributions to our economy and society. If there is real interest in draining the swamp, this is a great place to start.

Go To Homepage

Before You Go

9 Prominent Indian-Americans In Silicon Valley
Satya Nadella(01 of 08)
Open Image Modal
Satya Nadella, 47, became CEO of Microsoft in 2014, after 20 years with the company. Since then he has steered the software behemoth away from its singular focus on Office products, to mobile and cloud-centred growth. Nadella was born in Hyderabad, the son of an IAS officer. He got his engineering degree from the Manipal Institute of Technology in 1988, followed by a masters in computer science at the University of Wisconsin, Milwaukee. He then worked at Sun Microsystems as part of their tech team, before completing an MBA from the Chicago Booth School of Business. (credit: ASSOCIATED PRESS)
Shantanu Narayen(02 of 08)
Open Image Modal
Shantanu Narayen, 52, became CEO of Adobe in 2005 after seven years with the company. Narayen is also the co-founder of Pictra, which pioneered photo sharing over the internet. At Adobe, Narayen has led a transformation of the company from being a licensor of products such as Photoshop and Illustrator to a cloud-based subscription service. Like Nadella, Narayen grew up in Hyderabad. He graduated in electronics engineering from Osmania University and then moved to the University of California, Berkeley, for his MBA. Narayen started his Silicon Valley career with Apple, before moving to Silicon Graphics. He left the job to co-found Pictra. (credit: ASSOCIATED PRESS)
Padmasree Warrior(03 of 08)
Open Image Modal
Padmasree Warrior, chief technology officer at Cisco Systems, was born in 1961 in Vijayawada. She grew up in India, and graduated from the elite Indian Institute of Technology, Delhi in 1982. Warrior did a masters in chemical engineering at Cornell, and then embarked on a 23-year-long career with Motorola, where she rose to become one of its top executives and among the few women leaders in male-dominated Silicon Valley. Warrior left Motorola in 2007 to become the chief technology officer at Cisco. She was considered among the front-runners to succeed John Chambers as CEO, a job that was eventually taken up by Chuck Robbins. (credit: ASSOCIATED PRESS)
Amit Singhal(04 of 08)
Open Image Modal
Amit Singhal manages the product that made Google a dominant force worldwide: the search engine. Away from the limelight, Singhal is responsible for the algorithm that governs Google Search, still the biggest revenue earner for the company. Singhal was born in 1968 in Jhansi, the son of a government bureaucrat. He got his bachelors degree from IIT Roorkee in 1989 and then moved to the U.S. for a masters at the University of Minnesota. He then got a Ph.D. from Cornell, where he worked with Gerad Salton, considered the father of digital search. He then joined AT&T Labs in 1996, until his friend Krishna Bharat, who was then working on creating Google News, got him to join the company in 2000. (credit: Amy E. Price via Getty Images)
Ruchi Sanghvi(05 of 08)
Open Image Modal
Ruchi Sanghvi, 33, was the first woman engineer to be hired by social media giant Facebook as product manager. She was responsible for news feed, the crucial algorithm that governed what users saw on the site. Sanghvi left Facebook and started Cove, a collaboration startup, in 2011, with fellow Carnegie Mellon alumni Aditya Agarwal. Dropbox acquired the firm a year later, and Sanghvi continued working there until 2013 as vice president of operations. (credit: Steve Jennings via Getty Images)
Deepak Ahuja(06 of 08)
Open Image Modal
Tesla and SpaceX founder Elon Musk is known to be among the most demanding bosses in the valley. Among his most trusted executives is Deepak Ahuja, who joined Tesla since inception. Ahuja got his bachelors degree in ceramics engineering from the Indian Institute of Technology (Banaras Hindu University), Varanasi in 1985. He then moved to the U.S. and earned an MBA from Carnegie Mellon in 1993. Ahuja joined Tesla in 2008, after a long career at Ford. In June 2015, he said that he would be leaving Tesla, which has revolutionized the electric car industry, to pursue other interests. (credit: LinkedIn)
Pooja Sankar(07 of 08)
Open Image Modal
Pooja Sankar started Piazza, an online platform that enabled teaches and students to collaborate, after working with Facebook and Oracle. The idea for Piazza developed while she was in Stanford's MBA program. Since its inception in 2009, the startup has raised $8 million from Khosla Ventures and Bessemer in its latest round. (credit: Twitter)
Kavitark Ram Shriram(08 of 08)
Open Image Modal
Kavitark Ram Shriram, founder and managing partner of Sherpalo Ventures, was among the first investors in Google. Like Khosla, his influence in the valley came with successes in the startups that he put his money in. He sold $400 million worth of stock when Google went public, taking his net worth to $1.6 billion. He is also an investor in InMobi, the global mobile ad network and StumbleUpon. Shriram, who holds a bachelor degree in science from Loyola College, Chennai, started his career in the Valley working with Netscape, the first internet browser. He then founded ad-bot portal Junglee, which Amazon bought in 1998 for $185 million. He invested much of that into Google, then, still a startup operating out of a garage in Menlo Park. (credit: The India Today Group via Getty Images)
Suggest a correction
View Comments