AILA’s Response to Ray Marshall on Why H-1Bs are Good for America

AILA President Chuck Kuck and AILA Business Committee Member Ted Ruthizer’s response to a letter from Prof. Ray Marshall, the Former Secretary of Labor under President Carter, who was critical of AILA’s April 17, 2009 statement on his proposal for the creation of an immigration commission.

AILA National Office
Suite 300,
1331 G Street NW,
Washington DC 20005

May 15, 2009
Professor Emeritus Ray Marshall
Audre and Bernard Rapoport Centennial Chair in Economics and Public Affairs
University of Texas
PO Box Y
Austin, Texas 78713

Re: Why H-1Bs Are Good for America

Dear Professor Marshall:

Your lengthy May 7 letter criticizing the H-1B and L-1 visa statuses deserves a thoughtful response. We appreciate your service to the country as our Secretary of Labor over 30 years ago. However, immigration was not central to your work then, nor during your time in academia. As a result, we take strong issue with the assertions and claims you make in your letter as well as with the characterizations of the H-1B and L-1 visa statuses you make in your report.

For starters, the H-1B status and its predecessor H-1 status have been a valuable part of our immigration system for almost 60 years, and the L-1 status for almost 40. And you might be surprised to learn that most economists who have studied these provisions disagree with you that H-1B professionals are hurting the American economy and the American worker. Rather, the vast majority of economists and business leaders who have looked at this issue, including Alan Greenspan, Jagdish Bhagwati, Nobel prize winning economist Gary Becker, Jack Welch, Michael Bloomberg, and Bill Gates are convinced that H-1B professionals (they're not "guest workers" and they're hardly "indentured" as you refer to them) have increased employment opportunities for all Americans, and their creativity and knowledge have furthered our national interest.

Here are additional points not mentioned in your letter that are worth noting. H-1Bs are designed for professionals, not for low level unskilled workers. Professor Richard Florida recently reported, "For management and business occupations - including hard-fit [sic] financial jobs - overall the unemployment rate is 4.0 percent; and for professional and technical occupations, it remains less than four percent (3.6 percent)." Those persons who are employed under H-1B visas can't depress U.S. wages, thanks to reforms made in the law in 1990 mandating that any foreign national professional coming in H-1B status would have to be paid at the HIGHER of either the actual wage paid by the employer to other workers OR the prevailing (i.e., the weighted average) wage paid by all U.S. employers in the geographic-specific area to all employees in the same position. As a former Labor Secretary you may know that the DOL has broad powers to investigate and punish employers who violate this strict law. Indeed over the last twenty years, a handful of violations have been discovered. No government-regulated program is free of problems but there have been relatively few in the H-1B arena. And most of the problems that do exist have been confined to "job shop" employers - an area where the DOL can and should do a better job of enforcing current law and regulations.

Of grave concern is that three times in your letter you say you really do not have data to back up your conclusions. More importantly, the studies you cite to have not been peer reviewed and have not been subject to critical analysis. Surely you are aware as an academic that without reliable data, it's rash and unfounded for you to condemn the entire H-1B program, particularly when the benefits of the H-1B status are so strong. These benefits are not just intangibly based on opinion. Peer-reviewed studies, such as those conducted by Vivek Wadhwa, Executive in Residence, Pratt School of Engineering, Duke University, support the conclusion that the H-1B visa programs are good for America.

A couple of other important points you failed to note: H-1B professionals aren't just computer scientists. They are also physicists, mathematicians, financial analysts, lawyers, economists, teachers, physicians serving in health professional shortage areas, and, like you, professors at virtually all American colleges and universities. Most of these H-1Bs aren't recent arrivals. They are products of our finest universities, including your University of Texas. As New York Times columnist Thomas Friedman has noted, we have a hard time channeling Americans to go into academically rigorous fields like the sciences, engineering, and mathematics, and we should be welcoming foreign national professionals who offer these talents to America. Look at any of our graduate programs and you'll find a solid percentage, if not majority, of international students. These are the best and brightest students from all over the world, who actually want to study here and then stay and contribute to this great experiment that is America.

Since the inception of the category over 60 years ago, the H-1B employers have never had to demonstrate that U.S. workers be unavailable for a position. The whole H-1B concept is based on a meritocracy-- that companies should be able to hire the most talented workforce they can find. Clearly and unquestionably, a General Electric, a Google, a Microsoft, or any other Fortune 500 company should be able to hire the top student at the Harvard Business School instead of a C minus graduate of a fourth tier business school. For many years the whole idea of the H-1 status has been to allow U.S. employers to tap into this international workforce to find the greatest talent to help our economy grow and prosper. Professor Richard Florida understands the global competition for talent and the need for attracting and keeping the talented pool of foreign national professionals who want to make the U.S. their home. His most recent book, "The Flight of the Creative Class" bemoans the loss of the technological edge that America has had, caused, in large measure, by "Know-Nothing" immigration policies that make it so hard for foreign national professionals to come to our country.

Want more evidence? Take a look at the recent scholarly paper produced by two Harvard Business School professors (Kerr and Lincoln) showing how H-1B professionals have furthered American innovation and have had almost zero effect on the wages of U.S, workers in their fields. Or read what Newsweek's Editor in Chief, Fareed Zakaria (himself an immigrant who came to America and helped America prosper) has to say: "The U.S. currently has a brain-dead immigration system...turning away from our shores thousands of talented students who want to stay and work here. The brightest Chinese and Indian software engineers are attracted to the United States, trained by American universities, then thrown out of the country and picked up by Canada - where most of them will work, innovate and pay taxes for the rest of their lives." Let's also remember that we're talking about a minuscule H-1B quota (woefully inadequate once the economy starts revving up again) of 65,000 visas per year, plus an anemic 20,000 extra for advanced degree graduates of America's universities. These numbers, even if they were quadrupled, would be way too small to have any impact on U.S. wages in an economy with more than 153 million workers.

Who says so? Research economist Madeline Zavodny ought to know. She is an economist paid to study these subjects for the Federal Reserve Bank of Atlanta. She studied the H-1B visa program and wrote about her conclusions in the Federal Reserve of Atlanta Economic Review, 3rd Quarter 2003. Economist Zavodny crunched the numbers and found no adverse effects of H-1B professionals on the U.S. workforce. More importantly, as we learned this April, the market actually works! We are now six weeks out from the filing date for H-1Bs visas starting on October 1, 2009, and there are still some 20,000 visas available. Compared to last year when all available visas were gone on the first day, this is evidence that businesses and users of the H-1B program are self-regulating on usage. But, still, as of October 1, there will be another year delay in hiring a needed expert. This is not the kind of limitation that will help us recover from an economic downturn.

You also had some harsh words about the multinational executives, managers, and specialized knowledge persons transferred here on L visas by their international companies abroad (many times the foreign subsidiaries of U.S. companies) to impart their leadership and technical know-how to American industry. Congress recognized the importance of a global workforce way back in 1970 when it enacted the L-1 status into law. It is what has permitted the very critical "insourcing" of having foreign headquartered multinational companies invest in America and operate subsidiaries here. Imagine how dire our economy would be today if we had effectively prevented Toyota or Honda from manufacturing here. Dartmouth's Tuck School of Business Professor Matthew Slaughter studied insourcing and concluded that it has provided jobs for more than 5.4 million U.S. workers. Yet without the ability of foreign companies to bring essential managers, executives and a small number of specialized knowledge workers to the U.S., this would never have happened.

You rely on Senators Durbin and Grassley to bolster your protectionist arguments. If bills that are introduced in Congress represent the situation as it exists in the real world why not cite bills introduced by Senator Cornyn and Congressman Shadegg from the 110th Congress that would have increased the availability of H-1B visas and employment based green cards? Measures that restrict H-1B and L-1 visa usage miss the point-- these statuses have nothing to do with shortages of U.S. positions. What they do is give U.S. employers the ability to hire a select number of creative talented stars of the future. Our current immigration law has a status for the Nobel winners of the world--the O-1 visa for persons of extraordinary ability. But that is for persons who have already reached the very top of their fields, not for the Einsteins or indeed the Fareed Zakarias of tomorrow.

You would like to do away with H-1Bs and L-1s, as well as the labor certification system for permanent employment-based immigration. Let's be honest- the problems with the current system can't be traced to the H-1B or L-1 visa category. The problem is with woefully inadequate quotas both for H-1Bs and for permanent residents. And the problem is compounded by a Labor Department that is once again taking years to decide many of the permanent residence labor certification applications. The solution to having talented Chinese or Indian professionals waiting 8 or 10 years for visa numbers to become available to them isn't to set up a commission to determine labor shortages. The answer is to increase the quotas to go beyond the plainly inadequate 65,000 for H-1Bs and 140,000 (including spouses and minor children) for all employment-based immigrants.

Your report, which you tout as a step forward on business immigration reform, is anything but. It would substitute a national economic planning system for the current system that allows individual employers to try to meet their individualized needs for professional workers. Other than those who are willing to accept a non-peer reviewed report, and who do not recognize the need to continue to attract top quality talent to the United States, we doubt that too many others want the government to decide what the hiring needs are for American businesses and universities.

Employment-based immigration has been one of America's great strengths. It is what has fueled the greatest scientific and technological advances over the past 50 years. We cannot sit idly by while you call for legislative actions that would destroy this incredible asset by falling for a line of bunkum that we have been hearing from a curious coalition of cultural and political restrictionists. We need more H-1Bs, more L-1s, and more permanent employment-based immigration. Sadly, if Congress does not heed this message, these promising young professionals will continue to go to Canada, New Zealand, the United Kingdom, Australia and other countries that are competing fiercely with us for this talent. The United States will be the poorer for this loss of incredible talent.


Charles H. Kuck
AILA President

Theodore Ruthizer
AILA Immigration Business Committee

Cc: The Honorable Nancy Pelosi, Madam Speaker of the House
The Honorable Harry Reid, Senate Majority Leader
The Honorable George Miller
The Honorable Dick Durbin
The Honorable Chuck Grassley
The Honorable Hilda Solis, Secretary of Labor
The Honorable Janet Napolitano, Secretary of Homeland Security
Dr. Lawrence Mishel

Cite as AILA Doc. No. 09051930.