Companies Want to Hire the Best Employees. Can Changes to the H-1B Visa Program Help?
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Policy Careers Feb 6, 2017

Com­pa­nies Want to Hire the Best Employ­ees. Can Changes to the H-1B Visa Pro­gram Help?

The cur­rent lot­tery is not opti­mal for top for­eign appli­cants or the com­pa­nies that want to hire them.

A highly skilled worker repairs the H-1B visa lottery machine.

Yevgenia Nayberg

Based on insights from

Daniel Aobdia

For years, the U.S. visa pro­gram for high­ly skilled for­eign work­ers has been a hot-but­ton issue. Sil­i­con Val­ley CEOs have lob­bied for its expan­sion, oppo­nents of out­sourc­ing” labor have made it the tar­get of their ire, and politi­cians on both sides of the issue have promised reform. In fact, Pres­i­dent Trump is expect­ed to pro­pose changes to the pro­gram in the next few weeks. 

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In Daniel Aobdia’s view, the pro­gram should be revamped to bet­ter serve the most qual­i­fied for­eign employ­ees — espe­cial­ly those who pos­sess spe­cial, hard-to-repli­cate skills — and the com­pa­nies who want to hire them. 

The major flaw with the sys­tem is that it’s one-size-fits-all,” says Aob­dia, an assis­tant pro­fes­sor of account­ing infor­ma­tion and man­age­ment at the Kel­logg School, who has stud­ied the impact of reg­u­la­tion on high-skilled immi­gra­tion. It isn’t designed to help the best peo­ple fill the right jobs.” 

Every year, the gov­ern­ment grants up to 85,000 tem­po­rary visas (offi­cial­ly classed as H-1B) through a first-come, first-served lot­tery sys­tem. Demand almost always exceeds sup­ply: in 2016, more than 230,000 for­eign work­ers applied, and the cap was reached in a mat­ter of days. 

Because the pro­gram is run like a lot­tery, it’s less about how much a com­pa­ny real­ly needs a par­tic­u­lar for­eign employ­ee and more about how to game the sys­tem,” he says. It tends to ben­e­fit com­pa­nies who’ve learned how to take advan­tage of loopholes.” 

For Aob­dia, the solu­tion is to build a more respon­sive pro­gram — one that takes a more sophis­ti­cat­ed approach to sort­ing the vast pool of work­ers in the high-skilled” cat­e­go­ry. This would reduce stress and uncer­tain­ty for the most desir­able for­eign appli­cants, many of whom grad­u­ate from top-tier MBA, PhD, and engi­neer­ing pro­grams hop­ing to stay in the coun­try, as well as for the com­pa­nies that wish to invest in these employ­ees. This would also dis­cour­age com­pa­nies from abus­ing the pro­gram, and stig­ma­tiz­ing it in the process. 

The ide­al sys­tem would be tai­lored to meet the actu­al needs of com­pa­nies and attract the kinds of peo­ple who would tru­ly dri­ve the U.S. econ­o­my,” he says. 

Lot­tery or Auction?

The H-1B visa pro­gram, first intro­duced in 1990, was meant to allow U.S. com­pa­nies to hire for­eign work­ers with desir­able skills, to fill the gaps in the labor mar­ket and help boost the econ­o­my. But over the last decade, a num­ber of IT out­sourc­ing firms began to use the pro­gram as a means to employ for­eign work­ers at low­er salary rates. Despite amend­ments to the law, Aob­dia says, that strat­e­gy has endured. Last year, Walt Dis­ney caused a scan­dal when it fired 200 IT work­ers and replaced them with for­eign work­ers hold­ing H-1B visas. The util­i­ty com­pa­ny South­ern Cal­i­for­nia Edi­son made a sim­i­lar move, fir­ing more than 400 IT workers. 

For busi­ness­es where it doesn’t mat­ter whom exact­ly they hire, as long as they get the right num­ber of legal employ­ees, there’s a clear incen­tive to apply for more visas than they need,” Aob­dia says. 

This means that a com­pa­ny look­ing to hire 100 employ­ees might apply for 300 visas, essen­tial­ly gam­bling that enough of those employ­ees will win the lot­tery. Because the sys­tem treats every visa appli­cant iden­ti­cal­ly, it favors com­pa­nies hir­ing work­ers with inter­change­able skills en masse over those with a press­ing need to hire spe­cif­ic for­eign experts. 

So what is the best solution? 

You need a way to pri­or­i­tize those with tru­ly unique and valu­able skills.”

Aob­dia says it makes more sense to run the visa pro­gram like an auc­tion instead of a lot­tery. If H-1B visas were auc­tioned to employ­ers each year, sup­ply and demand would deter­mine the val­ue of skilled for­eign workers. 

If a com­pa­ny real­ly wants to hire a spe­cif­ic indi­vid­ual who it knows will bring in a lot of val­ue, that com­pa­ny should be will­ing to pay more,” says Aob­dia. It would cer­tain­ly make the sys­tem less arbitrary.” 

An auc­tion sys­tem by itself would not solve every prob­lem. One major crit­i­cism of the cur­rent pro­gram is that because an employee’s visa sta­tus is linked to a sin­gle employ­er, he or she is more or less at the mer­cy of that com­pa­ny. When research­ing H-1B visa hold­ers employed by U.S. audit­ing com­pa­nies, Aob­dia found that many of them were work­ing in unde­sir­able locations. 

The down­side of the auc­tion sys­tem is that it could leave employ­ees even more cap­tive,” Aob­dia says If the com­pa­ny that bids the most for the visa decides to pay the employ­ee less, espe­cial­ly if that worker’s abil­i­ty to move to anoth­er com­pa­ny remains lim­it­ed by the visa’s cur­rent con­straints, the work­er has very lit­tle bar­gain­ing power.” 

Tak­ing a Cue from Canada

Anoth­er poten­tial solu­tion would be to estab­lish a point-based sys­tem as a way to select the high­est-skilled and most desir­able applicants. 

Cur­rent­ly, almost every­one is treat­ed more or less the same, no mat­ter what their lev­el of exper­tise or edu­ca­tion may be,” Aob­dia says. Although 20,000 of the 85,000 annu­al H-1B visas are reserved for those with at least a master’s degree from an Amer­i­can uni­ver­si­ty, there is no oth­er sort­ing mech­a­nism built into the cur­rent system. 

You need a way to pri­or­i­tize those with tru­ly unique and valu­able skills,” he says. 

Aob­dia looks to Cana­da for an exam­ple of how this might work. Cana­da assigns each immi­grant appli­ca­tion a score from 1 – 100 on the basis of edu­ca­tion, work expe­ri­ence, age, com­mand of lan­guages, and var­i­ous oth­er fac­tors. While such a mer­it-based sys­tem has its pit­falls when applied to the immi­gra­tion pol­i­cy as a whole, Aob­dia says that a ver­sion of it might help improve the already-mer­it-based H-1B visa program. 

At the very least, a point sys­tem would allow the U.S. gov­ern­ment to bet­ter define what high-skilled” means in the con­text of tem­po­rary work visas, and what kind of edu­ca­tion it prizes. An appli­cant with an MBA from a top uni­ver­si­ty would have a high­er score than an appli­cant with an online Bachelor’s degree from a less pres­ti­gious one. 

A Glob­al Appli­cant Pool

What­ev­er reforms the gov­ern­ment makes to its H-1B visa pro­gram — an auc­tion fea­ture, a points-based sys­tem, or some com­bi­na­tion of the two — Aob­dia says the goal should be to cre­ate a sit­u­a­tion in which Amer­i­can com­pa­nies feel encour­aged to hire the best and bright­est, no mat­ter what their coun­try of ori­gin may be. Under the cur­rent sys­tem, U.S. com­pa­nies are often dis­cour­aged from even attempt­ing to hire a for­eign work­er, despite how unique­ly qual­i­fied he or she might be. 

A lot of for­eign grad­u­ates don’t receive offers for the jobs they are qual­i­fied for, sim­ply because there’s a risk that the visa process won’t work out,” Aob­dia says. It also means the U.S. is los­ing the kinds of peo­ple who could dri­ve new indus­tries or start new com­pa­nies. It’s keep­ing entire indus­tries from expand­ing or diver­si­fy­ing their workforce.” 

Con­sid­er the invest­ment man­age­ment indus­try, where many large com­pa­nies do not spon­sor visas. It’s a prob­lem because a lot of those com­pa­nies need peo­ple with deep knowl­edge of glob­al com­pa­nies,” Aob­dia says. They may be leav­ing mon­ey on the table by lim­it­ing their appli­cant pool. 

The fact that cer­tain com­pa­nies game the sys­tem has stig­ma­tized the H-1B visa pro­gram, says Aobdia. 

In part, this per­cep­tion arose from the fact that the cur­rent visa pro­gram does not always bring in the right peo­ple. So you hear about work­ers in Cal­i­for­nia los­ing their IT jobs, but less about the for­eign entre­pre­neur who cre­ates a great com­pa­ny — maybe because it’s less appar­ent, or less politi­cized, or maybe because this isn’t hap­pen­ing as much as it could under a more effi­cient visa program.” 

Featured Faculty

Daniel Aobdia

Associate Professor of Accounting Information & Management

About the Writer

Drew Calvert is a freelance writer based in Iowa City, Iowa.

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