On Thursday, the Senate Judiciary Committee is scheduled to mark up a technical amendment to the Immigration and Nationality Act as part of a reconciliation bill that would recapture unused H-1B and immigrant employment ("EB") visas from previous years. Chief among the benefits of this reform are that it would increase flexibility in hiring foreign workers, would reduce the current visa backlog, and could serve as a basis for future immigration reform, such as a more comprehensive guest worker bill in 2006.

As the Judiciary Committee works on language this week, it should stick to the principle of enhanced flexibility, but with the understanding that the legislation is only a short-term fix that will need to be made permanent in the future.

Background

Employment-based immigration visas are a popular way for companies to hire high-skilled labor from abroad for domestic operations in the United States. H-1B visas allow professional, technical, and other high-skilled immigrants to enter the United States and work. With an H-1B visa, these workers can stay in the United States for up to three years, or up to six years with an extension.

Currently, only 65,000 of these workers are allowed into the country each year through the H-1B program. Over the past three fiscal years (FY 2004-2006), the cap was reached before the end of the fiscal year. For the current fiscal year, the annual cap was reached before the end of August. A similar shortage occurred in the mid-1990s, when demand for high-skilled workers outpaced supply. Congress increased the cap to 115,000 for FY 1999 and 2000 and then to 195,000 for FY 2001-03. After FY 2003, the cap reverted to 65,000, its previous level.

In the recent history of the program, the number of H-1B visas issued in a year has sometimes fallen beneath the cap. For example, when the economy cooled because of the recession earlier this decade, the number of H-1B visas issued decreased as well (see Table 1). Because of a quirk in current law, any H-1B visa not issued in a given year effectively vanishes and cannot be issued in a future year.

The Judiciary Committee Proposal

This expiration provision is problematic for two reasons. First, it unnecessarily rations the available foreign labor coming into the United States, which encourages employers looking for foreign workers to take part in gamesmanship to get the visa slots that they need. Unsurprisingly, the visa cap is now being reached many weeks before the start of the fiscal year, as companies that want foreign workers apply earlier and earlier. Second, current law lacks any flexibility for hiring foreign workers. In times of economic slowdown, like in FY 2002, one would expect that the number of visas demanded would be low compared to the heady tech boom times of the late 1990s. That, indeed, was the case, but when demand increased, the cap quickly went from being no impediment to being too low.

The proposal that the Senate Judiciary Committee is considering this week would help to alleviate these problems. It has two basic provisions:

1. Previously authorized but unused H-1B visas could be recaptured and used in FY 2006 or beyond, with a maximum of 60,000 additional visas to be issued per year. Businesses that wish to avail themselves of these recaptured H-1B visas could do so for a $500 fee.
    
2. In a similar vein, unused immigrant employment EB visas could be recaptured, again for a fee of $500. The maximum issued would be an additional 90,000 per year.

Above all, this proposal would inject significant flexibility into the current law by allowing the flow of immigrant labor to be driven by supply and demand, rather than by an arbitrary cap each fiscal year. Additionally, the proposal would not increase the aggregate number of visas previously authorized by Congress; it would simply recapture those that had not yet been issued.

Predictable Opposition

Undoubtedly, labor unions and trade associations such as the IEEE-USA will oppose the proposal, on grounds that it will reduce job opportunities for Americans or replace American workers with cheaper labor from abroad. A 2003 study by the Federal Reserve Bank in Atlanta disputes the notion that foreign professional workers reduce the wages of American workers.[1] This research finding makes sense; after all, by law, H-1B visa holders must be paid market wages.

Naturally, it is not costless to locate, hire, and document immigrant labor, and these costs reach upwards of $6,000 per worker.[2] Given that the Senate Judiciary Committee proposal includes an additional $500 "recapture fee" per additional visa, the costs to employers using recaptured visas will rise. Immigrant labor will actually be more expensive than domestic labor.

Additionally, as the Wall Street Journal observed last August, if companies were solely interested in hiring cheap labor from abroad to replace American workers, the H-1B cap would have been met every single year.[3] The fact that the number of foreign workers brought in on H-1B visas has fluctuated is evidence that these workers are complementing, not replacing, American workers.

Finally, importing foreign guest workers is better than the alternative, accelerating outsourcing. If U.S. companies are unable to staff their facilities in America, they will look abroad. Foreign workers employed in the United States pay taxes in the United States and contribute to the U.S. GDP. Even if they send some of their earnings back to family in their home countries (as often is the case), this is preferable to the job itself leaving the country.

Not the Final Word on Immigrant Labor

Legislators should keep in mind that the Senate Judiciary Committee proposal is only a stopgap measure and should not be the final policy change in the H-1B and EB visa programs. While the proposal would free up an additional 300,000 or more H-1B visas in coming years, at some point these will undoubtedly become exhausted as well.

Congress, therefore, will need to enact a more permanent fix in the near future. Such a bill should include a more general guest worker program, based on a few broad principles:

1. A more effective foreign labor policy should be flexible and respond to market needs. Allowing unused visas to float forward, from years of low demand to years of high demand, is one type of flexibility. However, flexibility should not be code for any type of industrial policy that rewards some industries over others. If Congress decides to retain the current cap structure, the caps should be considerably higher than in current law. For example, the H-1B cap should be at least double the current level and should allow for a rollover of unused visas from one year to the next.
    
2. User fees associated with any immigrant program should be used to reduce the backlog of cases and otherwise minimize the processing delays that are often found in these programs. Provisions for admitting the spouses and children of workers in the U.S. on employment visas should also be streamlined. These family-related delays make up a large part of the backlog problem.
    
3. No guest worker or other immigrant labor program should reward illegal behavior by offering amnesty. Therefore, any illegal or undocumented worker currently in the United States should have to return to his or her home country to apply for guest worker status, just like any other foreigner.

The United States continues to be the land of opportunity, and immigrants want to come here to take part in the American Dream. Foreign workers factor prominently into that philosophy, and Congress should make sure that America continues to allow productive individuals into the country.

Kirk A. Johnson, Ph.D., is a Senior Policy Analyst, and Tim Kane, Ph.D., is Bradley Research Fellow in Labor Policy, in the Center for Data Analysis at The Heritage Foundation.