A new study warns that raising the cost of hiring foreign workers on H-1B visa in a bid to prevent them from displacing local Americans may end up driving those same jobs abroad.
The study by Dartmouth College’s Tuck school of business says frustrated by rising costs employers often keep job openings vacant, unable to find the right talent locally.
If they are unable to fill those positions over a period of time — longer than 30 days harms operations, they said — they may consider relocating abroad, with those jobs.
And, by tightening the screws on freeing workers, this effort could impair irreparably American innovation fuelled largely by immigrants, who account for 25% of Silicon Valley start-ups.
US congress levied last December a new $4,000 fee on H-1B ($4,500 for L-1) applications for firms with 50 employees that have at least 50% of them on an H-1B or L-1 visa.
While H-1B visa allows US companies to hire highly skilled foreign workers if they are unable to find the required talent locally, L-1 is for intra-company transfer.
Indian tech giants TCS, Infosys and Wipro are among the heaviest users of both visa programmes and have been alarmed by rising costs, accompanied by growing backlash.
Recent layoffs, for instance at Disney, after those jobs were outsourced to Indian companies, have led to calls for a clampdown and figured in a Republican presidential debate.
Tuck school dean Matthew Slaughter, who conducted this study, said there is not enough data to link layoffs to the H-1B hirings because of the “dynamism” in the labour market.
“Around 30,000 jobs are being created or destroyed every single hour that America does business 40 hours week,” Slaughter said stressing the lack of direct data to prove the case either way.
Critics of the programme, including some lawmakers, argue employers use H-1Bs to hire foreign workers as they come cheaper than similarly skilled Americans, due to lower wages.
Removing the cost differential, they contend, will force employers to stay with American workers. Raising the cost of H-1B hiring through levies was one way of doing it.
As was done by US congress in December 2015.
The other option, proposed by some lawmakers including Ted Cruz, the republican running for White House, was to make employers pay foreigners the same wages as Americans.
But Slaughter’s report cited multiple other studies that showed with numbers that H-1B workers are already being paid as much as their American counterparts, if not more.
In 2010, one of those studies showed, H-1B workers earned an annual average of $76,356 — 13.4% more than the $67,301 average of their native-born counterparts.
And then there are other costs incurred on hiring them, fee on visa, lawyers and others that can run into thousands of dollars, according to a government report cited by the study.
In fact. 75% of the 400 companies surveyed for the study — all users of the H-1B programme, occasional or frequent — said they found the “overall H-1B program costs are too high”.