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The new Grassley-Durbin bill would weaken the economy. Here's how to let the H-1B visa program strengthen the U.S. instead

By Vivek Wadhwa

Like watching the Nationals play and the cherry trees blossom, assailing the rights of immigrant workers has become a rite of spring for powerful players in the U.S. Senate. For the third year running, Senators Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.) have taken aim at immigrant labor. On Ap. 23, Grassley and Durbin reintroduced the H-1B and L-1 Visa Fraud & Abuse Prevention Act of 2009, which puts new restrictions on the widely used H-1B and L-1 visa programs that respectively let skilled foreign workers and foreign employees of American corporations work in the U.S. Earlier versions of the proposed legislation didn't pass.

The senators say the bill merely seeks to reduce abuses of programs that, according to critics, let technology companies hire cheap immigrant labor to replace more expensive U.S. citizens. The bill's backers say it doesn't seek to reduce the number of visas issued or impede proper use of H-1Bs and L-1s. Companies will still be able to freely use these visas to obtain workers with key skill sets that are lacking or hard to find at home.

But as with all political undertakings, the devil is in the details of this visa legislation. The bill mandates that any employer seeking to hire workers using the H-1B program must swear that it has already made a "good faith" effort to hire U.S. citizens and that the new H-1B visa employee will not displace a U.S. citizen. This mandate, under current law, is required only of heavy H-1B users. Additionally, the new bill requires that the Labor Dept. must perform random audits every year of at least 1% of companies using the H-1B program. Lastly, the reintroduced bill requires employers to advertise a job opening on a Labor Dept. Web site for at least 30 days prior to requesting an H-1B visa to fill a position.

This collection of rules constitutes a gradual clampdown on the H-1B program that will further discourage companies from seeking new H-1B hires. For large technology companies like Microsoft (MSFT), Google (GOOG), and IBM (IBM), where employees are constantly coming and going, proving definitively that an H-1B hire is not displacing a U.S. citizen is next to impossible. And what exactly is a "good faith" effort to hire a U.S. citizen?

exactly the wrong effect
Yet should the new bill become law, violations of either of these provisions could constitute grounds not only for government enforcement but also for the filing of lawsuits claiming H-1B abuse and employment discrimination. The random-audit provision is a business nightmare as well. The potential of an invasive audit, while remote under the proposed law, serves as further discouragement to companies already spooked by the same xenophobic environment that has led to public castigation of big banks for hiring smart foreign MBAs on H-1Bs.

I have a suggestion for Grassley and Durbin. Pass a bill to deregulate the H-1B visa program, and eliminate the restrictions that make it difficult for H-1B holders to travel, switch jobs, or get promoted. Create a fast-track status to U.S. citizenship for H-1B holders providing they launch a company that employs more than 10 American workers within three years. And grant residency to the nearly 1 million H-1B holders and their families waiting in limbo to obtain permanent residency. Under the current system, that wait can last a decade—with no guaranteed outcome.

By eliminating the more onerous characteristics of the H-1B program, such a bill would probably diminish abuses. If H-1B workers could accept a job from a competitor for a higher wage, it's likely their real wages would match market rates. Critics might argue that an influx of workers would depress wages, but that seems to espouse the notion that IT workers are no better than factory employees, subject to strict laws of supply and demand. I don't think that's the case, and I believe that more smart people in the U.S. will actually create jobs and therefore benefit all U.S. tech workers by growing the total knowledge-employment pie.

Here are four reasons I believe this: Immigrant workers are significantly more likely to launch new companies. Immigrant workers are also far more likely to launch technology companies. Technology companies have accounted for a disproportionate percentage of economic growth in the U.S. in the past four decades. And new companies hire far more new employees than old companies. In fact, companies less than five years old accounted for nearly all of the net jobs growth in the U.S. over the past two decades. Add those four facts together and it's easy to conclude that what the U.S. needs are more immigrant technology workers rather than fewer.

Many economists have begun to discuss this theme, and not surprisingly, they find the Grassley approach counterproductive. Gary Shilling, a prominent economist, envisions a new visa program that would expand the existing EB-5 visa program, which allows visas to be issued to a foreigner who has invested $1 million in a new enterprise that hires at least 10 new employees. The program allows for as many as 10,000 visas a year and grants foreigners permanent residence after two years.

Econoblogger Tyler Cowen, a professor of economics at George Mason University, proposes that foreigners who buy homes be granted an employment visa, a mechanism he feels might even buoy the U.S. housing market. Melding a home purchase with an expanded H-1B program and a clear, fast-track path to citizenship might be an effective way to not only bring in these immigrant knowledge workers but also harness their economic growth to help the entire country regain some of its lost housing value. Beyond creating more jobs and potentially underpinning the housing market, this infusion of smart immigrants would most likely have other salutary effects, such as expanding the U.S. tax base and boosting the number of patents filed in the U.S. by both immigrant workers and U.S. citizens.

The key idea behind all of this is simple. Competition is good even when it might be scary. To put up walls that block the best and brightest from coming to America is bad policy in both the short and the long term. I'm reminded of something Klaus Kleinfeld, CEO of Alcoa (AA) and a German citizen living in the U.S., said recently. "Down through U.S. history, the competition from succeeding waves of immigrants created the force that drove Americans to excel," Kleinfeld wrote in an e-mail. "It seems to me that the U.S. will continue to thrive as long as the best and brightest from other lands continue to contribute to America's progress and compete for its opportunities" I hope Senators Grassley and Durbin pay heed to these wise words.

Wadhwa is senior research associate at the Labor & Worklife Program at Harvard Law School and executive in residence at Duke University. He is an entrepreneur who founded two technology companies. His research can be found at www.globalizationresearch.com.

Source: BusinessWeek