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H1b Abuse And Reform: Destroy Those Who Speak Against

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There’s a polemic going around that the “reform” we need with H1b visas, which are issued to “smart people” from other nations, is to greatly increase their numbers.

That is a damned lie.

The H1b allegedly allows employers to fill jobs that there are no Americans to fill with a given set of skills.  It’s a goal that is on the surface good for the economy because the more innovation we have the more America advances, and if the gatekeeping factor on a particular innovation is that there are no Americans able to do a given set of work then allowing someone to come in from elsewhere to do it is a net positive — that person does a job otherwise unfilled, pays taxes, and contributes to America.

The problem with the current H1b program is that it in fact does none of the above.

The program allegedly requires that an employer must perform a diligent search for an American to do a given job before it can be filled by a foreigner, and that H1b employees cannot displace American workers.  But there are exemptions to those two rules when it comes to having to prove compliance, and they’re ugly for American jobs:

  • An immigrant with a Masters Degree is exempt OR
  • An immigrant paid $60,000 or more is exempt.

Here’s the problem with such exemptions: $60,000 is a spitting wage in places like Silicon Valley.  It’s not much above the median family income nationally, which is outrageous when you think about it — especially in high-cost locales such as Silicon Valley, New York or Washington DC.  Further, someone with a Masters Degree is exempt irrespective of wage.

Now let’s look at the educational situation in the United States.

First, grants and scholarships are almost exclusively limited to undergrad degrees.  That is, all post-grad degree work is for all intents and purposes not available on scholarship.  A Masters typically requires at least 2 years of study beyond the Bachelors all of which the student must find a way to fund.  For nearly everyone this means loans since the cost of said study can easily total $40,000 a year.

In 1989, when the exemption level was set, the cost of college at a private, four-year institution was approximately $22,000 a year in 2016 dollars.  Today that figure stands at more than $45,000 or more than a double.  The same is true for public, four year colleges — it too has doubled in cost during that time.

This is in inflation-adjusted money which means that’s the actual cost increase beyond the rate of inflation.

Allegedly H1b visa sponsors must show that they are not “displacing” American workers or attempting to lower their cost of labor — that is, they have a real need for the immigrant taking the position and that no Americans are available to do the job.

But the exemption level makes this alleged ‘protection’ laughable, and leads to situations like that at Disney where IT workers were forced to train their replacement H1b Visa employees in order to obtain a severance package.  This sort of thing would be blatantly illegal except for that exemption level, at which the employer is exempt from having to show they did not displace an American citizen (which it is clear, in the case of Disney, did actually happen.)

Another thing that happens frequently is that the alleged “job requirements” the H1b employee is “expected to fill” is laughably fraudulent.  For example, if you wished to hire me and I was an H1b immigrant you could advertise for a person who programs in “C”, embedded Postgres, Fortran-66 and Z-80 assembler, and also writes FreeBSD kernel and device-driver code.  The odds of a recent US University graduate being able to do all these things approach zero; in particular the Z-80 processor was a common device used in computers built in the 1970s and early 1980s!  But if you wanted to hire me, specifically, and I was a foreign national, that would be a really cute way to make sure that “there are no Americans who can do the job.”  These sorts of “tailored” job requirements in the IT industry, used as justification for H1b visa applications, is extremely common — I’ve seen hundreds of “job listings” with requirements that make exactly no sense on any objective basis and thus are almost-certainly written to fit a specific person that the company wishes to fill on an H1b — at a much lower salary.  This needs to be designated a felony criminal offense with both ruinous (e.g. $1 million/occurrence) fines and decade-long prison times.  These outrageously fraudulent “requirement lists” are trivially easy to both detect and prove, if anyone cares to do so.

Finally there are “jobshops” that provide contract workers to various employers that have effectively no protection whatsoever.  These shops provide an important service in that they make possible the short-term employment of people for various purposes without the risk of reassignment of what would otherwise be 1099 arrangements retroactively.  These arrangements serve an important role because true 1099 compliance for individuals is somewhat difficult and when you’re only working for one person at a time there is a significant risk of being reassigned retroactively by the IRS to the employer.  Such a risk damages the market for short-term engagements in technical fields and the “jobshop” mitigates that by hiring the person and performing the compliance functions; the client is billed on a commercial contract where the job shop takes the risk of non-compliance actions; the employee is typically paid on an hourly or weekly wage.  This is fine but it’s very easy for these job shops to hire a bunch of H1b people under the existing rules and effectively screw Americans out of entry-level and short-term work they could — and would — do.

The use of H1b employees where no true competition exists, that is, to hire true geniuses in their field, is arguably very good for America.  But its abuse to bring in cheap immigrant labor and destroy the value of domestic STEM degrees is another matter entirely.  Executives and firms that do the latter ought to be imprisoned and their firms destroyed as they are intentionally destroying the value of educational paths that our children have been routinely told is the path to a good middle-class or better lifestyle.

Indeed, as a direct consequence of these abuses I can not recommend to any teen today that they go into a STEM field, particularly a computer-related field.  The odds of them being screwed either right up front or a few years down the road exactly as has occurred dozens of times in the United States, including, it is alleged, at Disney is enormous and there is effectively no means of defense available to mitigate the risk.

The bottom line is that the only justification for H1b visas at the present time is to radically drive down wages in the marketplace by importing cheap labor.  H1b visas particularly disadvantage American technology workers and graduates, especially those with moderate skill levels, despite alleged protections in the law to prevent that very thing from happening.

Fixing this problem and ending H1b abuse permanently is not terribly difficult.

First, the exemption level must be dramatically raised.  It was inadequate in 1989 to prevent the displacement of American workers and is laughably so now, given the ridiculous escalation in college cost.  Said wage must also be indexed automatically to prevailing wages so there is no further requirement for Congressional intervention.  This abuse has grossly expanded in the last 20+ years as a direct result of Congressional malfeasance and “lobbying”, better known as bribery, by high-tech firms.

Second, the Masters exemption must be entirely removed.  There should be no exemption for formal education if the goal is to actually employ geniuses.  While many in this class have advanced degrees a degree of any sort is neither necessary nor evidence of being a genius!  There are many examples through history of people who were unquestionably geniuses yet had no formal higher education at all and more than a few who never finished High School.  Thomas Edison anyone?  This also will destroy the ability to use educational cost arbitrage across national boundaries to bring in foreigners.

Finally, the rampant and outrageous abuse of this program by “outsourcing” jobshops must be ended by eliminating the ability of firms to use H1bs for any sort of contract worker that is to be assigned and re-billed to a client.  Any such use of H1b employees must be absolutely barred.

Zoe Lofgren of California has written such a bill.

On first blush it looks to hit all the important points.  You can bet there will be much screaming from Silly Valley and elsewhere but the simple reality is that if you are truly using H1bs to bring in “the best of the best” then you won’t object to paying them $130,000 a year or more, nor will you try to argue that if someone has a Masters they’re exempt and “no American can compete for that job.”

Those who speak against reforming this widely abused program that screws Americans by the tens of thousands a year out of good-paying tech jobs must be shunned and to the extent they run firms in the high tech space consumers must boycott and trash their firms as their actions are unAmerican and seek to intentionally replace Americans with cheaper foreign labor.

Story courtesy of Market Ticker.

Karl Denninger founded The Market Ticker® (, a blog dedicated to uncovering market mischievousness. He is also a columnist on and has appeared on MSNBC with Dylan Ratigan, on CNBC, and is a frequent guest on WBAL talk radio in Baltimore. He produces a weekly Internet radio segment on BlogTalkRadio with real-time call-ins from listeners and occasional invited guests. Karl is also one of the original founders of the Tea Party movement, and, along with FedUpUSA, launched the first financial protests related to the bailout of banking institutions after the failure and forced takeover of Bear Stearns. Previously, he was CEO of Macro Computer Solutions, and is a self-made entrepreneur and millionaire.