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OSEC Congressional Testimony

Statement of Secretary of Labor Robert B. Reich before the Subcommittee on Immigration of the Senate Judiciary Committee [9/28/95]

Mr. Chairman and Members of the Subcommittee:

Let me begin today, Mr. Chairman, by expressing my sincere appreciation to you for affording me this opportunity to share my views regarding the H-1B nonimmigrant visa program. This category of visas, as you know, allows the temporary admission of foreign "professionals" for employment in "specialty occupations" in the United States. This visa program is seriously flawed in its current form, I believe, and urgently requires improvement. I would also like to acknowledge the Members of the full Committee, whose presence demonstrates their interest in reform of the Nation's immigration system.

Let me first attempt to state, as clearly as possible, what I see as the fundamental policy goal for employment-based immigration. Since work-

related temporary visas and work-related immigration are closely intertwined, in ways I will try to explain, it is impossible to discuss today's immediate topic without engaging the more fundamental question of what purpose our employment- or skill-based immigration policy is meant to serve. And on that question, I believe, there is great potential for an emerging bipartisan consensus, and for progress toward meaningful reform. There is great promise in some of the ideas you have recently put forward, Mr. Chairman, which parallel many of the proposals of the U.S. Commission on Immigration Reform.

This nation of immigrants always has and always will welcome new members into the American family, though at a different pace and in different ways to suit the times. This Administration shares the conviction of many in Congress that continued immigration both honors the heritage of our past and helps ensure the vitality of our future. There are many good reasons for welcoming a particular person. But one reason, often advanced, strikes me as troublesome.

Some say a primary purpose of immigration policy should be to suit the convenience of U.S.-based employers, who prefer to select from the whole world's workforce, not just the American workforce, when assembling the human resources needed to face global competition. Employment-based immigration to fill skill shortages, as well as the temporary admission of selected skilled foreign workers, is sometimes unavoidable. But I firmly believe that hiring foreign over domestic workers should be the rare exception, not the rule. And I believe such exceptions should be even rarer, and more tightly targeted on gaps in the domestic labor market, than is generally the case under current policy.

If employers must turn to foreign labor, this is a symptom signaling defects in America's skill-building system. Our system for giving employers access to global labor markets should be structured to remedy such defects, not acquiesce in them. And it should progressively diminish, not merely perpetuate, firms' dependence on the skills of foreign workers.

One idea contained in both your own draft legislation and in the Jordan Commission's report, Mr. Chairman, strikes me as highly promising in this regard -- requiring that employers make a meaningful contribution to the training of U.S. workers, so that skill-based immigration will become ever less necessary over time. Our immigration policy should embody the commitment that humanitarian, cultural, and family goals, and not employers' dissatisfaction with the domestic workforce, must govern how we enlarge our American community. My colleagues in the Administration and I are eager to work with Congress to encode this commitment into law.

In short, our immigration policy must provide real incentives for businesses to commit themselves to American workers and develop the domestic workforce for the high-skill jobs and high-performance workplaces of the future, while at the same time providing a safety valve of access to foreign labor markets to meet skill demands that the U.S. workforce cannot supply in sufficient quantity or with sufficient speed. Our primary public policy response to skills mismatches due to changing technologies and economic restructuring must be to prepare the U.S. workforce to meet new demands. Importing needed skills should usually be a short-term response to meet urgent needs while we actively adjust to quickly changing circumstances.

In light of the increasingly global economy and workforce -- and the serious danger that rapid changes in our economy and social policy will leave many working people in this country behind -- the Nation's immigration policy must carefully balance these imperatives. In recent years, our immigration system has tilted towards expanding employment-based immigration and to favoring higher-skilled workers, giving progressively more weight to employers' desire to tap global labor markets. However, as our immigration system has evolved within this overall framework, it has treated particular issues in quite different ways. For example, criteria governing access to immigrant workers vary depending on the preference category, and these criteria differ from those which apply to various employment-based nonimmigrant categories. Similarly, the manner in which the basic policy goals are implemented in law for employment-based nonimmigrants differ significantly among the various programs, some of which lack any meaningful labor market protections.

With this broader context thus established, and my hopes for bipartisan consensus once again affirmed, let me turn to the need for reform of our employment-based nonimmigrant system, and especially the H-1B nonimmigrant program.

Employment-based Nonimmigrant Program Reform

Any reform of our legal immigration system must also address the nonimmigrant programs which allow temporary entry of individuals to the U.S., in many cases for employment purposes. While many acknowledge this need, few proposals have yet been offered. The Subcommittee's draft legal immigration reform bill does not contain any provisions affecting employment-based nonimmigrant programs. We would again urge that it be expanded to include such provisions, for two main reasons.

First, many more foreign workers legally enter the U.S. for temporary employment than enter as permanent employment-based immigrants. These "temporary" workers often legally stay employed here for many years, and in practice some stay on, illegally, for much longer. Over the three years from fiscal year 1992 to 1994 (the last full year for which data are available), fewer than 150,000 workers were given permanent status as employment-based immigrants. In that same three-year period, however, nearly 570,000 workers -- nearly four times as many -- were "temporarily" admitted as employment-based nonimmigrants. (This latter figure excludes traders and investors admissible under our international treaty obligations, and intra-company transferees.) All of these nonimmigrants can work in the U.S. and have impacts -- both positive and negative -- on our labor markets. Given the relative numbers and the fact that many nonimmigrant workers are tied to one employer as a condition of admission, the temporary nonimmigrant workforce has to be considered a very significant factor in our workforce development policies.

The second reason that the nonimmigrant programs must be encompassed in legal immigration reform is that most petitions for permanent employment-based immigrants are filed by employers on behalf of temporary foreign workers during or after a period in nonimmigrant status -- which often follows completion of their education at U.S. colleges and universities. As you heard in our earlier testimony, of the current employment-based immigrants who are subject to the Department of Labor-administered permanent labor certification process, we estimate that over 90 percent are already in the U.S. and about two-thirds are already working -- sometimes illegally -- for the employer which files the immigrant petition on their behalf. Nonimmigrant foreign students and workers already in the U.S. (many of whom were previously foreign students) are predominantly those whom U.S. employers subsequently seek for permanent residency for employment purposes. In fiscal year 1994, more than one-half of those granted permanent resident status are known to have adjusted from nonimmigrant status as foreign students or "professional" workers admitted as H-1s or under directly related temporary entry provisions.

In other words, our employment-based immigrant selection system mostly deals with decisions about which foreign students and workers will be allowed to remain to live and work permanently in the U.S., not who will be allowed to enter to work in the U.S. The actual employment-based immigrant selection occurs much earlier in the process, when students are admitted to our universities and when employers seek temporary nonimmigrant workers from abroad. A coherent employment-based immigration policy must recognize these facts and, therefore, address real deficiencies in the nonimmigrant programs through which the first-level selection is really made.

Again, in our recent testimony before the Subcommittee, we offered several suggestions to establish a workable framework for reform of the multiplicity of diverse and inconsistent employment-based nonimmigrant programs that currently exist. I hope that the Committee finds this perspective useful, and I would renew our offer to continue to work with you as our ideas are considered.

H-1B Nonimmigrant Program

While I have stressed that our current system of employment-based immigration needs reform, including both the permanent and various nonimmigrant programs, the most urgent candidate for reform is the H-1B nonimmigrant program.

To briefly recap, the H-1B program allows the admission of up to 65,000 workers each year (to stay for as long as six years), ostensibly to meet short-term, high-skill employment needs in the domestic labor market. In principle, this can be an appropriate purpose, consistent with the overall goals of our employment-based immigration policy. Our experience with the practical operation of the H-1B program has raised serious concerns, however, that what was conceived as a means to meet temporary business needs for unique, highly-skilled professionals from abroad is, in fact, being used by some employers to bring in relatively large numbers of foreign workers who may well be displacing U.S. workers and eroding employers' commitment to the domestic workforce. Some employers -- though a minority of those who use the H-1B program -- seek the admission of scores, even hundreds of foreign workers, especially for work in relatively low-level computer-related and health care occupations. These employers include "job contractors," some of which have a workforce composed predominantly or even entirely of H-1B workers, which then lease these employees to other U.S. companies or use them to provide services previously provided by laid off U.S. workers.

Many employers, to be sure, do use the H-1B nonimmigrant program for its stated purpose: to provide U.S. businesses with timely access to the "best and the brightest" in the international labor market to meet urgent but generally temporary business needs. I hope it is clear that we recognize the need for such use of the program. But reform of the H-1B program is needed because its actual operation is out of synch with its primary purpose and design, in at least three important respects.

First, it has become increasingly evident that the H-1B program is being utilized by some as the basis for building businesses which are dependent on the labors of foreign workers, in some cases in unfair competition with U.S. workers and those U.S. businesses that employ mostly domestic workers.

As you may know, access to the international labor market through the H-1B program does not require any test of the domestic labor market for the availability of qualified U.S. workers, because the program is supposed to be used to meet urgent, short-term employment needs. The growth of "job contractors" with work forces composed predominantly or even entirely of H-1B workers, which then lease these employees to other U.S. companies or use them to provide services previously provided by laid off U.S. workers, is cause for serious concern. Let me give you two cases in point from our enforcement experience.

In the computer field, Syntel, Inc. is a Michigan company with a workforce that is more than 80 percent H-1B nonimmigrants, in this case computer analysts from India. Among its business operations, Syntel contracts to provide computer personnel or services to other companies. In its operations in New Jersey, Syntel contracted with American International Group, Inc. (AIG), a huge insurance company, to provide computer services in the place of nearly 250 U.S. workers, which AIG laid off. In fact, the laid off U.S. workers were required to train their H-1B nonimmigrant replacements during their last few weeks of employment. Displacing laid-off workers was perfectly legal under the rules that then existed for the H-1B program, and that still exist today.

In this case, the desire to cut labor costs led Syntel beyond the wide limits of what current law permits and into actual illegality. In carrying out its contracts in the State of New Jersey, our Wage and Hour Division found Syntel had willfully underpaid its Indian computer programmers by nearly 20 percent below the wage they were required under the law to be paid--about $34,000 per year instead of the prevailing wage rate of more than $41,000 per year. As a result of this case, Syntel agreed to pay nearly $78,000 in back wages to 40 H-1B employees and take other steps to develop U.S. workers to reduce its dependence on a nonimmigrant workforce. This is but one of 19 enforcement cases involving H-1B workers in computer-related occupations where we have found more than $200,000 in back wages owing to 89 H-1B nonimmigrant workers, mostly employed by contractors.

In the health care field, Rehab One is a Michigan company which went into the business of providing temporary physical therapists -- in this case, exclusively H-1B workers from Poland -- to health care facilities primarily in Texas. Our investigation of a complaint against Rehab One resulted in the company agreeing to pay more than $460,000 in back wages to 54 therapist employees. The company had actually paid its Polish therapists as little as $500 per month during certain periods though it was required to pay a prevailing wage of as much as $2,800 per month. This is but one of fourteen enforcement cases involving employers of H-1B physical and occupational therapists, nearly all of which are contractors, in which we found nearly $2 million in back wages owing to nearly 400 temporary foreign workers in these occupations.

These cases, which some might perceive as examples of enforcement "successes" as envisioned by the program's design, merely illustrate the potential -- unfortunately, the unknowably large potential -- for the kinds of abuse that inflicts real competitive harm on skilled U.S. workers.

The second reason that the H-1B program needs to be reformed is that it has also become increasingly evident that employers commonly use the H-1B program as a form of transitional or probationary employment, either to accommodate foreign students who have started working for a U.S. employer during or just after completing their education at a U.S. institution, or as a way-station for foreign workers to be employed in the U.S. while awaiting adjudication of a permanent immigrant petition. I have already noted that most employment-based immigrants are already working in the U.S. when they gain permanent status -- in fiscal year 1994, 42 percent of these were already working in H-1 status alone. While non-immigrant programs have many potentially valid purposes, there is no consensus that providing a holding pattern for aspiring employment-based immigrants is among them. Yet that has become a significant aspect of the programs' operation.

The third reason that justifies immediate reform of this program is that it simply does not provide the needed balance in our employment-based immigration system between timely access to the international labor market and adequate protection of U.S. workers' job opportunities, wages and working conditions. I have already noted that the H-1B program does not require any test for the availability of qualified U.S. workers in the domestic labor market. What is more, a U.S. employer can now lay off U.S. workers and replace them with H-1B workers. I simply do not believe this is right. Moreover, the H-1B program does almost nothing to encourage U.S. employers to develop domestic workers to perform the jobs for which they are seeking nonimmigrants, or to limit their dependency on a nonimmigrant workforce. I do not know if any members of this Committee can explain the rationale of this policy to struggling U.S. workers. I know that I cannot.

Mr. Chairman, two years ago I asked the Congress to amend the conditions which still regulate access to the international labor market through the H-1B nonimmigrant program. Unfortunately for many U.S. businesses and workers, the Congress has yet to act on these proposals -- but another important opportunity is now before you, and I am most grateful for the opportunity to tell you personally how important it is to the working people of this country that you not miss this opportunity.

The amendments I requested in 1993 were carefully designed to assure continued business access to needed high-skill workers in the international labor market while decreasing the H-1B program's susceptibility to misuse to the detriment of U.S. workers and the businesses which employ them. Briefly stated, the two amendments I proposed would require employers which seek access to temporary foreign "professional" workers to attest that:

(1)they have not laid off or otherwise displaced U.S. workers in the occupations for which they seek nonimmigrant workers in the periods preceding and following their seeking such workers; and,

(2)in certain circumstances, they have taken timely and significant steps to recruit and retain U.S. workers in these occupations.

These amendments were modeled on similar provisions applicable to the temporary admission of foreign registered nurses (this program has just expired), and are targeted especially to those employers which seek to obtain relatively low-skilled "professional" workers.

As we laid out in our recent testimony, enactment of these amendments is increasingly critical. Abuses of this program have become increasingly well-documented. There appears to be a trend of growth of companies which are predominantly or entirely dependent on nonimmigrant workers and are thus able to compete unfairly with U.S. companies which employ mostly U.S. workers. The nonimmigrant registered nurses (H-1A) program has recently expired and some foreign nurses will now be entering under the H-1B program, which has significantly lesser protections for U.S. workers than the predecessor program. Finally, I think all would agree that in nearly all situations it is entirely unreasonable that -- as a matter of public policy -- an employer in this country not only does not have to test the domestic labor market for the availability of qualified U.S. workers before gaining access to foreign workers, but is actually able to lay off U.S. workers to replace them with temporary foreign workers, either in their own employ or through contract. As I have emphasized, this is exactly what is happening now. Our public policy tolerates it, perhaps encourages it. This must change.

In addition to the amendments I proposed in 1993, I would also urge enactment of another amendment that would reduce the allowable period of stay under the H-1B program from six to three years to better reflect the "temporary" nature of the presumed employment need. It is difficult to imagine why these changes would be hard to swallow for businesses which want to use the H-1B program for the purposes for which it was intended.

Further, Mr. Chairman, if this and other employment-based nonimmigrant programs are actually meant to serve as "probationary" employment situations to transition foreign students and temporary workers into the permanent labor force as employment-based immigrants, then the programs ought to be redesigned to reflect that purpose, and we should abandon the fiction that they are intended to meet specific, urgent, short-term demands.

Mr. Chairman, I also want to briefly discuss the treatment of the H-1B program under H.R. 2202, which is now being marked up by the House Judiciary Committee. The only provision of H.R. 2202 which modifies current law affecting nonimmigrant categories (Title VIII, Section 806) makes a number of changes in the H-1B program. While still evolving, these provisions generally would weaken protections for U.S. workers. However, one of the changes in the program currently being considered would require employers filing H-1B applications to attest that they have not laid off workers with substantially similar qualifications and experience in the specific employment for which an H-1B nonimmigrant is being sought during limited time periods unless the employer pays an actual wage to each nonimmigrant that is at least 110 percent of the mean of the last wage earned by the laid off employees. In addition, a "job contractor" would have to attest that it will not place an H-1B worker with another employer unless the other employer has executed an attestation that it is complying and will continue to comply with this requirement in the same manner as it applies to the contractor.

This proposed change represent a welcome effort to implement one of the modifications in the H-1B program which I previously requested -- to prevent U.S. workers from being laid off or otherwise displaced by nonimmigrants -- and I applaud the intent. But it is considerably weaker than the change I requested, because it provides a means of circumventing the essential protection. This provision would allow a U.S. employer to lay off U.S. workers and replace them with foreign workers in the same job so long as the employer paid the foreign workers a little more than it had paid its U.S. workers. The bill does not prohibit an employer from laying off U.S. workers to replace them with nonimmigrant workers during certain time periods, it merely provides a modest disincentive to doing so. So it goes in the right direction, but not nearly far enough. Further, H.R. 2202 does not include the additional change to the H-1B program I asked for -- a requirement that certain H-1B employers attest to taking timely and significant steps to recruit and retain U.S. workers in the jobs for which they are seeking foreign workers. In addition, the proposed changes in H.R. 2202 need to be consistent with U.S. international obligations in the General Agreement on Trade in Services under the World Trade Organization.

While we have a number of serious concerns about the changes to the

H-1B program contained in H.R. 2202 -- and, as I have said, would like to see any reform legislation address more nonimmigrant programs, and in the broader context of the array of nonimmigrant programs for which the Department has responsibility -- we find promise in the general framework provided in the bill and have been working with the Committee and interested parties to address our concerns and attempt to fashion H-1B amendments which the Administration could endorse. We look forward to working with you in the Senate to this same end.

Permanent Employment-based Immigration Changes

Mr. Chairman, I would also ask your indulgence today to briefly comment on proposals contained in the Subcommittee's draft reform bill -- which generally reflect the recommendations of the Commission on Immigration Reform -- to change the "labor certification" process used to admit or, more commonly, adjust individuals to permanent immigrant status for employment reasons. Our earlier testimony before the Subcommittee raised several important questions and suggestions regarding the proposed new labor certification systems set out in the draft bill. The larger point, however, merits emphasis: We share the view that reform is required, and we support a shift towards an immigration system which relies more on market-type incentives to discourage employers from abandoning the domestic workforce in favor of foreign labor. A fee levied on employers sponsoring skill-based immigrants, with the proceeds dedicated to building the skills of American workers, forges an admirably direct and efficient link between the problem of skill shortages, and the only valid long-term solution, which is investment in the U.S. workforce. While we have some important concerns about the draft bill's approach, we want to work with you to further. I know you are anxious to move ahead with the bill; we are prepared and eager to help.


Mr. Chairman, let me conclude by repeating that reform of the employment-based nonimmigrant programs, and the H-1B program in particular, is so integral and essential to effective reform of our entire system of legal immigration that it should be included in any such legislation.

I appreciate the interest shown by the Subcommittee Members and staff in our views, and their thoughtful consideration. The Department looks forward to continuing to work closely and cooperatively with you and your staff as the legislation moves forward. In this regard, I understand that you will be spending some time today hearing testimony regarding the perceived need for nonimmigrant program reform to import new agricultural "guestworkers." While I have not addressed this subject in my testimony today, the President and I strongly oppose such a new guestworker program. I will follow-up this hearing with a further statement of our views and rationale on this important subject.

Mr. Chairman, that concludes my statement. Thank you again for inviting me to testify today, and I will be pleased to respond to the Members' questions.

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