Volume 4, No.1
Spring 1998

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High-Tech firms seek to increase use of foreign workers

Mass Layoffs

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HIGH-TECH FIRMS SEEK TO IMPORT MORE FOREIGN WORKERS
By: Franklin D. Latin

In February 1998, the nationwide unemployment rate dipped to a 24 year low of 4.6 percent, followed by a rate of 4.7 percent for the month of March. Moreover, for the past nine months the national unemployment rate has remained below 5.0 percent. The numbers suggest that labor markets are tight. Many economists (including Federal Reserve Board Chairman, Alan Greenspan) worry that tight labor markets and rising wages will cause inflation while others view tight labor markets with optimism and believe that they are good for the economy since, to attract and retain skilled workers, tight labor markets may lead employers to raise wages, improve working conditions, and provide increased training. Tight labor markets may also be effective in enticing more workers into the labor market and, with the increased demand for trained workers, educational and job training institutions are inspired to teach new skills. Because of the rise in training opportunities, workers are able to obtain the skills needed to land higher paying, more secure jobs, thereby creating job opportunities for those just entering or reentering the labor market. With all these incentives, many of the unemployed-dislocated workers, welfare recipients and young people-are moving into jobs. The big questions are: Are there enough skilled workers in the nation to fill available jobs? How long will it take for workers in training programs to attain the necessary skills? And what will businesses seeking skilled workers do in the interim? One proposed answer: The American Competitiveness Bill.

Congress gets into the act

Some businesses argue that, in reality, labor markets are slow to respond to skill shortages. They reason that foreign temporary workers are needed to provide necessary skills while the labor market adjusts and U.S. workers obtain the necessary training. After heavy lobbying in Congress to voice concerns of labor shortages, employers from Silicon Valley and other high-tech industries were pleased with the introduction of The American Competitiveness Bill. Proposed by Senator Spencer Abraham (R-Mich), chairman of the immigration subcommittee, the bill calls for a drastic increase in the number of highly skilled foreign workers that could be brought in to fill jobs in the U.S.

Previous legislation may no longer work

In 1991 The U.S. Department of Labor's Labor Condition Application program was created to provide U.S. businesses with timely access to the best and brightest in the international labor market to meet urgent but generally temporary business needs. It was also intended to protect the wages of U.S. workers. Foreign workers who possess a theoretical and practical application of a body of highly specialized knowledge and who have attained at least a bachelor's degree or equivalent in the specific specialty are granted H-1B visas. These visas are good for three years and are renewable once, which allows a foreigner to remain employed in the U.S. for a total of six years. Currently there is a cap set at 65,000 on H-1B visas for all industries. Last year for the first time ever, the cap was reached before the end of the fiscal year which runs from October I thru September 30. Industry advocates feel that if no action is taken, the cap could be reached as early as May of this fiscal year (last year it was reached in August). They say that firms would then be left with job vacancies in essential positions, a condition that could be damaging to U.S. competitiveness in today's global economy.

The American Competitiveness Bill attempts to alleviate this concern by increasing the cap from 65,000 to approximately 90,000 and also allowing into the U.S. up to 25,000 more skilled workers under a different visa category if the cap is exhausted. The Bureau of Labor Statistics (BLS) estimates that the computer and data processing services sector in the U.S. will create 1.3 million new jobs by the year 2006.* While the economy will generate job opportunities at all educational and skill levels, the increasing role of technology means that the fastest growing jobs are likely to be those requiring relatively more education and training.

Dual-purpose legislation

In addition to offering immediate relief to hightech firms by increasing the cap, the proposed legislation also attempts to address the long-term issue of increasing the number of U.S. graduates in the fields of math, computer science and engineering. $100 million for new college scholarships targeted at low income U.S. students will be made available to address the issue.

Supporters of the bill believe that everything possible should be done to ensure that U.S. firms remain on the cutting edge of technology; this is viewed as urgent given the vital role that high-tech industries play in raising the standard of living in this country. Without access to the best and brightest in the international labor market, many industry experts feel that highly-skilled foreign workers, trained in U.S. schools, will return abroad and make new breakthroughs in science and technology for U.S. competitors. In addition, they argue that U.S. firms may adjust to skill shortages either by reducing job creation or by moving jobs abroad, neither of which serves the needs of U.S. workers. So far the measure has received some meaningful support on Capital Hill. One supporter, Senator Orrin Hatch (R-Utah), chairman of the Senate Judiciary Committee, states "It is in everyone's individual interest as well as in the overall interest of the country to enter the next century with a well trained workforce that will help American companies in the global economy."

Opposing Viewpoint

On the other side of the argument critics of the American Competitiveness Bill argue that the use of foreign temporary workers interferes with the normal adjustment mechanism of the labor market. They are concerned that the presence of foreign workers will reduce the incentive for U.S. employers to offer more training and education. Organized labor and other opponents of the bill stress that our first and foremost response to skill shortages should be to prepare the U.S. workforce to meet the new demands of the information age. Immigration they feel, should be the last not the first public policy response to skill shortages. Opponents claim that high-tech industries drastically overstate the problem by inflating job vacancies and equating those figures to skill shortages. They argue that industries are flooding the market with foreign labor to keep labor costs down and to avoid hiring tens of thousands of U.S. workers who have been affected by mass layoffs. Dan Stein, executive director of the Federation for American Immigration Reform, views the American Competitiveness Act as devastating to U.S. workers. He states "It is legislation by and for a powerful group of employers, meant to ensure their continuing access to cheap labor. As thousands of highly qualified mid-career engineers whose wage expectations have risen are being shoved out the front door, employers want Congress to open the back door to foreign engineers."

The controversy surrounding the American Competitiveness Bill centers around its effect on U.S. workers. Employers and industry experts contend that foreign workers are needed in order for U.S. firms to remain on the cutting edge in science and technology. This is necessary, they say, until the labor market adjusts and U.S. workers acquire the needed skills. At that point there will no longer be a need to import such workers, as U.S. workers would then be able to fill these high-tech positions. Conversely, opponents of the American Competitiveness Bill believe that in order for American high-tech industries to remain competitive, what is needed is a stable work force whose skills are constantly upgraded. Joe Daleiden, Executive Director of the Midwest Coalition to Reform Immigration, candidly states "with access to a constant supply of newly trained technicians, companies will dump their mid-career employees like an obsolete computer and society must bear the cost. A far wiser policy from a social perspective is to retrain employees. It might reduce corporate profits slightly, but it will also reduce social costs." As Congress decides how to act on the proposed legislation, the debate intensifies among economists and industry analysts.