Why are 127 Silicon Valley technology companies challenging Trump’s immigration policy and filing suit against his temporary travel ban? What grounds do they have to claim that it will increase costs and make US companies less competitive? What is it that they are really trying to protect?
I suggest the answer is not about immigration policy but simply a desire to control labor costs. In short these highly profitable companies are looking to replace American workers with less expensive skilled temporary immigrants. Despite there being an abundance of qualified US, STEM graduates. In short our “technology titans” are looking for cheap educated labor that will, to a greater part, replace US citizens and legal residents.
The policy that enables this situation is the H1-B visa. Or perhaps it would be more accurate to say, it is the abuse of the H1-B visa program, particularly, by high technology and staff outsourcing firms. For many years US firms looking to reduce their labor costs for technology or scientific workers have been abusing this visa system by bringing in foreign workers and replacing American workers at a significantly less salary. An example of this abuse was published in the CIO magazine. Southern California Edison (now Eversource Energy) replaced US workers earning $110,000 with H1-B visa holders from Infosys and Tata (Indian based staffing firms) earning an average of $65,000 to $75,000. Not only were the salaries significantly lower but these replacement workers did not get any benefits. Another significant cost savings.
No doubt the election results shocked these “titans”, and would be “titans, of technology”. It was Hillary Clinton who was the champion of the H1-B visa with a promise to increase the number of H1-B visas available annually. With 66% of approved H1-B visas (2014 numbers, US Dept of Labor) being awarded to workers from India it is little wonder Clinton was called (Hillary Clinton, (D-Punjab).
In comparison President Trump campaigned on reforming this policy and the now Attorney General Sessions has been a strong advocate for reform and the elimination of abuses. Last year, Sessions and Senator Cruz proposed a reform bill (American Jobs First Act, S.2394) to provide safeguards that would prevent the exploitation of H1-B visas from lowering the average salary of US technology workers. There is even a bipartisan effort from Senators Grassley and Durbin attacking this issue.
Little wonder the executives in Silicon Valley are panicking. Rather than seeing their access to more H1-B visas, which was the promise of the Clinton campaign, they see their access to cheap labor being restricted if not evaporating.
Perhaps this is why technology companies are spending $15M each month in Washington, with Google being one of the top contributors, to fill the lobbyist coffers.
So in answer to the questions presented at the beginning of this blog, yes, it will impact costs if these technology companies are unable to replace American workers with cheaper foreign labor. However, the desire of these “titans” is dangerously myopic. While their motivation is to protect their bottom line, not an unreasonable objective, however this protection is at the expense of the American technology worker while doing nothing to develop the American, domestic technology sector.
In a recent report titled “The Impact of High-Skill Guestworker Programs and the STEM Workforce” by Professor Hal Salzman and his colleagues at Rutgers University, and presented to the Senate Committee on the Judiciary U.S. Senate 25 on February 2016, they stated that “H-1Bs substantially crowd out employment of other workers…has an insignificant effect on patenting…[and] H-1Bs lead to lower average employee wages while raising firm profits”.
This is globalization at its worst!