Wherefore Art Thou, Labor Shortage?

According to the Wall Street Journal, there were 171,000 fewer Information Technology (IT)-related jobs across companies in the United States in June. This caused a .3% increase in the IT unemployment rate in just one month. IT job postings on employment site Indeed are down 61 percent from the same time last year. This follows the IT jobs market retracting for the first time in two years this past February. It’s also consistent with mass layoffs across the tech sector. At the same time, tech companies broke their record from last year for most H-1B visa applications. So, how can there be a labor shortage when layoffs rise and job postings are flat?

This is a fairly high stakes question for American IT workers. They are facing a bleak job market while companies are replacing them with foreign workers through both the H-1B visa and the illegal (because it was created by administrative fiat, rather than by Congress) Optional Practical Training (OPT) program. In addition to the fact that the IT job opportunities are shrinking, there are numerous examples of tech companies discriminating against American workers in their job advertisements. It is clear in the tech world that American workers are on the chopping block.

The myth of a labor shortage is the foundation for the persistent demands for increasing the numerical cap on H-1B visas. The myth’s purveyors claim there is a talent gap in the American workforce that can only be filled by increasing the importation of foreign workers. The argument is that there is higher demand for tech workers than the American labor supply can meet. Where is the evidence for this high demand for American tech workers? The ones who are not being fired are being discriminated against in the few job postings still out there.

The only evidence for high demand is in the H-1B visa application pool. There were over 780,000 H-1B applications this year. More evidence of this demand for foreign workers can be seen in the extensive lobbying efforts of the tech companies to convince Congress to allow them to import more foreign workers. While they talk of labor shortages of Americans, their actions suggest they simply want foreign workers for the jobs. That leads to the ultimate question: Why are they so focused on importing foreign labor?

There are several potential answers to that question. One answer could be that foreign workers are just superior to American workers and that’s why tech companies are so keen to hire them. If this were true, the wages paid to foreign workers would be skyrocketing. Another possibility is that Americans just do not want to do IT work (another “job Americans won’t do”). However, the most plausible answer is that H-1B and OPT employees are simply cheaper and more exploitable, as they depend on their employer so they can keep their status in this country.

Let’s start with exploitation. There is evidence of massive wage theft from H-1B workers. The Economic Policy Institute (EPI) found that H-1B workers were being underpaid by $95 million while working as subcontractors for major tech companies. Some H-1B employers are third-party contracting companies that pay the workers low wages and then farm them out to the actual companies that use their talents. This type of action demonstrates they are cheaper than American workers. As for OPT employees, they are exempt from FICA taxes on Social Security and Medicare. That is a massive subsidy for employers that incentivizes them to hire foreign workers rather than recent American graduates. Both H-1B and OPT employees are in the United States at the pleasure of their employer, which means they are less likely to complain or defend their rights for fear of losing their status. This is undoubtedly a great set-up for tech employers. They have a cheap workforce that cannot quit or ask for better wages or working conditions.

In the end, the labor shortage myth is just a way to justify targeting a vulnerable workforce. It is certainly economically rational for companies to seek the cheapest possible employee to do the job. If that employee also cannot quit for fear of losing status, all the better. What doesn’t make sense is why the Federal government would be enabling this business practice at the expense of its own citizens. Congress needs to eliminate OPT and reduce the annual number of H-1B visas. In addition, they need to bar third-party contracting companies from eligibility while requiring H-1B visas be allocated to employers offering the highest wage level. Until then, the tech sector is just using the American immigration system to shut out American workers with the assistance of the American government.

JARED CULVER is a Legal Analyst for NumbersUSA