Ask the Expert: Dan Griswold on Work Visas

Andrew Min, a homeschool student who will graduate in 2011 asks:

"In light of the recent economic recession, many have advocated banning foreign companies from getting access to the H-1B temporary work visa, especially in light of the fact that many foreign companies top the list of H-1B users. What is Cato's take on this?"

Dan Griswold, Director of the Center for Trade Policy Studies at the Cato Institute, answers:

American companies need to be able to compete for top talent in the world. Our producers need to be able to hire the right workers with the right skills to compete in the global marketplace. Leaders of the current Congress talk about enhancing America's competitiveness, but they have done nothing so far to lift or repeal the absurd cap on H1-B visas of 85,000 a year. The Economist was right to call our current H1-B cap quote "a policy of self-sabotage."

For every H1-B visa requested by an S&P or technology company, the company typically added five additional workers. H1-B workers complement U.S. workers. They create employment opportunities for native-born Americans by increasing research and development, production and exports. For all the same reasons, restricting H1-B visas restricts the ability of U.S. companies to expand their activities in the United States. If U.S. companies cannot find all the skilled workers they need here at home, they will understandably go looking abroad to find their workforce. This only gives U.S. companies one more reason to consider foreign outsourcing and offshoring. It's absurd to scold U.S. companies for seeking the human capital they need abroad while at the same time denying them the ability to expand their skilled workforce at home.

American companies do not fire U.S. workers so they can hire lower-paid foreign born H1-B workers. First, by law they cannot pay them less than the market rate, and a Cato study from 2000 found that violations of the law have been rare. Second, the competitive labor makes it difficult for companies to under pay H1-B workers even if they could. In a relatively free labor market, workers will tend to be paid according to the value of what they produce. If an H1-B worker is being underpaid by their current employer, another employer will have an incentive to bid them away from their competitor by offering a higher salary.

Third, U.S. companies pay a premium for hiring H1-B workers. When you add up government fees, the lawyer bills, travel costs and paperwork, employers are paying $6,000 to $10,000 extra before the H1-B worker has shown up for her first day on the job. Fourth, if what the critics charge were true, we would expect U.S. companies to hire more H1-B workers in difficult times to cut costs. In fact, we've seen the opposite. During the dot-com bust earlier this decade, we saw requests for H1-B visas plunge. U.S. companies apply for an H1-B visa only when they cannot find an American worker who is right for the job.