Politics

Congress is considering a bill that will increase the minimum wage for H-1B visa holders to $100,000 per year. This is an attempt to discourage businesses from hiring immigrants who require sponsorship, instead of hiring American workers¹. At least that’s what congress says H.R. 170 will do. However, I think what we’ll actually see are large companies in tech hubs like the bay area, Seattle, Chicago, New York and others, start to absorb the largest swatches of the immigrant talent pool, while shorting smaller companies and public sector jobs from the same access to skilled workers.

The current minimum salary for workers on an H-1B visa is $60,000 per year. Senior programmers in the big markets like San Francisco, already start at considerably more than that. Huge companies have capital they can leverage for offering high salaries to potentially qualified staff. Meanwhile, cities that are not thought of as tech centers struggle to fill positions. Massachusetts has salaries of $90,000 for junior developers, and tech executives claim their hiring environment is more brutal than it was during the dot-com era of the late 1990s².

In my own career, I have worked for a state run University. I accepted a lower wage than I had received in previous positions because I wanted to work in the public sector, away from the stress often found in for-profit corporations. I enjoyed my work, but did notice how the school struggled to find employees willing to work at the wages they offered. Many talented people would leave for companies able to pay them six figure salaries, showing that even in smaller cities, talent pools can be absorbed by larger corporations who offered substantial wage increases.

With the proposed changes under H.R. 170, the Protect and Grow American Jobs Act, the university I worked for would not be able to afford H-1B workers, and therefore not be able to use H-1B visa holders to replace the talent pool they loose to larger companies. In fact in the smaller markets, the only people who will be able to afford to hire people on H-1B visas are larger businesses. It grants players like Microsoft, Intel, IBM and others almost exclusive access to a resource pool that smaller companies, public sector departments and startups won’t even be able to touch.

Yes, there is abuse within the current visa system. Most people in tech are familiar with the case of Disney, who in 2015, had current employees train their H-1B sponsored replacements before laying them off³. However, even with the cases of abuse, demand is still high in the tech sector. Recruiters are still relentless and salaries for experienced workers at a premium.

On top of that, the higher wages given to people in the tech sector push up housing costs and increase the difficulties for people in service jobs. Bus drivers contracted by some of the larger Silicon Valley companies often sleep in their cars and struggle to afford rent⁴. The proposed changes would increase wages for both American and sponsored workers, thereby increasing the already growing income inequality between the software engineer at his or her desk and the janitor that struggles while cleaning staff bathrooms.

In the 2008 financial collapse, there were many local and regional banks that fell into trouble, but were not allowed to apply for TARP bailout funding. National City Bank of Ohio was not given the opportunity to apply for TARP funding, but instead was purchased by PNC for $5 billion. PNC was then given a $5 billion tax credit, essentially purchasing National City for free⁵. In the same way that people thought the bailouts were necessary, there are some within the tech sector who believe this will improve job security and wages for American workers. The bailouts essentially consolidated power, allowing larger banks to absorb their competitors with the help of congress. In the same way, H.R. 170 may allow large tech and consulting companies to absorb the most valuable human resources for a very high demand market.

Computer-related industries made up 47% of H-1B visas in 2012. The top ten companies who hired people with H-1B visas were split between large tech firms such as Microsoft, IBM, Oracle, and consulting/staffing companies such as Tata Consultancy Services, Infosys and Wipro⁶. Could this law help the other half of H-1B sectors by encouraging employers to seek out American workers at higher wages first? Potentially. It depends on the average wages per industry and demand for those skills. Still, I think even in other non-tech fields, this type of change will lead to more consolidation in other industries that utilize H1-B workers as well.

People who apply for the H-1B visa process are seeking positions that are in demand in America. If these positions were not in high demand, I could see the case for increasing the minimum wage as H.R. 170 proposes, as companies may hire H-1B workers in order to cut costs. In theory, H.R. 170 may help junior job seekers in less demanding markets with starting annual salaries for fresh graduates higher than $60,000 per year (plus $10,000 to $20,000 in benefits and social security, which are often not paid to contractors and H-1B staff), but lower than $100,000.

I haven’t been able to find numbers of the percentage of H-1B workers hired for junior versus senior positions. In the specific Disney example, senior positions were replaced with immigrants to cut costs, however I wonder if this management decision was thought all the way through. H-1B visas are only issued for three years, meaning permanently replacing departments also requires HR for those companies to work on paths to full residency for those new employees. There is also a significant time cost in spinning up a new team and getting familiar with new systems. It would be interesting to take a look at the specific Disney case and see if project throughput decreases or if the overall costs end up being higher after several years. We may never know since these metrics are difficult to measure, and are usually held private by the companies, unless they are made public during litigation.

Big companies and contracting agencies are already able to hire what they believe to be the most talented Americas and foreign workers. H.R. 170, will not change that. As those same companies layoff workers who don’t meet expectations, smaller business are left to pay more, both for American and sponsored workers. In effect, larger companies will be able to consolidate skill pools and keep talented engineers away from their smaller competitors. H.R. 170 could increase wages, both for American workers and immigrants, but it is also likely to drive up the staffing costs, increase income inequality, stifle competition and ultimately benefit the large tech and contracting companies that already rely heavily on H-1B visa holders.