GAO Worries about a Foreign Worker Population — Recent Students

By David North on March 12, 2014

The good news is that Sen. Chuck Grassley (R-Iowa) has caused the Government Accountability Office (GAO) to pay attention to a problematic foreign worker population — alien recent college graduates.

The bad news is that GAO does not seem to understand how many of the 150,000 or so young foreign workers in the program of interest are screwing things up for young and old Americans alike. Or how the program in question gives billions in tax breaks to undeserving employers — those who are paid by our government to hire recent foreign college grads rather than American ones. More on that later.

GAO, in short, has written a needlessly narrow study on a major, hidden labor-market/immigration problem. It is the approach of a guy in green eye shades, when we really need a community organizer or a sharp-elbowed advocate. It's like writing about gun control without mentioning murders or suicides.

The scheme in question is an aspect of the F-1 visa program for alien college students. After the students get their diplomas, they are free to work for as long as 29 months in American jobs. It is called OPT, for Optional Practical Training. The former students are supposed to round out their educations in the United States by working in the field for which they were trained.

What the GAO Gets

What the GAO does understand — and this is a major plus — is that the Department of Homeland Security (DHS) entity that is supposed to police the program is asleep at the switch and has been for years. That is the Student and Exchange Visitor Program (SEVP), which, in turn, is a passive bit of Immigration and Customs Enforcement (ICE). For an earlier CIS study of this somnolent agency, see here.

The GAO report shows (in its usual muted tones) that SEVP does not follow the OPT workers with care and does not know whether they are working in the fields where they studied, if at all. In about half the cases, SEVP does not even have the name of the aliens' employers. Many, many OPT workers are thus presumably out of status and the government has denied itself the capability of knowing which ones are illegals.

SEVP runs the program through colleges and universities who, in turn, have little, if any, contact with their former students (the OPT workers). It is a program that almost seems designed to be ineffective, a point that GAO fails to make.

GAO does, however, offer us some highly useful data on the subject. The report points out that the number of work permits issued to OPT workers has soared from 28,497 in FY 2008 to 123,328 in FY 2013. It also indicates that the program is handled so carelessly that there are only a handful of permit denials and a minuscule number of OPT revocations (presumably this happens only if the ex-student does something remarkable, like robbing a bank). Here is what GAO found:


 

USCIS Receipts of Employment Authorization Applications for OPT & Adjudication Results, FYs 2008–2013

 

 

Fiscal Year Receipts Approvals Denials Revocations
2008 38,730 28,497 360 1
2009 87,636 90,896 2,125 71
2010 99,876 96,916 1,731 57
2011 109,895 105,357 2,226 67
2012 117,141 115,303 2,801 71
2013 128,591 123,328 3,400 77
Total 581,869 560,297 12,643 344

Source: GAO report, Table 2.


Two quick notes on the table: Since this deals with agency actions, rather than measures of a population, it is possible, as in 2009, to have more approvals than receipts as some 2008 applications must have been approved in the following year. On the other hand, having DHS approve more applications from migrants than there were applications is almost a parody given how undemanding that agency is.

Secondly, these decisions are for OPT applications already approved by colleges and universities and the refusal rate at those places is likely to be very low as well. It is interesting that GAO did not publish statistics on that variable; perhaps they do not exist.

What was the total OPT population at the end of FY 2013? Was it 560,297, a number taken from the table? No, but it was a large fraction of that.

There are two major subsets of OPT students, and a minor third one; the most numerous, about 80 percent of the total, have 12 months after graduation during which they can work in the United States. Another 19 percent or so are science, technology, engineering, and math (STEM) grads who can work for an additional 17 months beyond the original 12. A few get OPT status while still studying.

So let's assume that, at the end of FY 2013, 120,000 of those who had been granted 12-month status during the year were still here, and that there were some 30,000 or so STEM grads left over from prior years, for a rough total of 150,000 in legal OPT status. This would also include some hundreds or thousands of long-stayers who were beneficiaries of various grace periods granted by SEVP.

Many others once in the OPT category have moved on to other legal migrant categories, mostly H-1B. (The OPT program is designed to be linked to it, as we noted in a previous blog.) Others have returned to their homelands or moved on to a third nation; and still others have stayed in the United States in illegal status. It is hard to estimate the size of all of these other subpopulations and GAO made no effort to do so. Let's stick with the guestimate of 150,000 in current, legal OPT status.

What GAO Misses

There are at least three major aspects of this immigration program that have been totally ignored in the GAO report:

  1. The substantial bonus given to U.S. employers who hire OPT students, because they come without the payroll taxes that are attached to all other U.S. workers;
     
  2. The resulting adverse impact on the job prospects of young citizen and green-card college grads who come with the usual payroll taxes that have to be paid by employers; and
     
  3. The odd fact that a private, for-profit educational institution that most people have not heard of seems to have produced more OPT workers than any other place in the country. You know about Harvard and Stanford and MIT, but how about Stratford University?

The Payroll Tax Bonus. Federal payroll taxes for American workers generally come to 7.65 percent to be paid by the employer and an equal amount to be paid by the worker. These are the FICA taxes for Social Security (6.2 percent) and Medicare (1.45 percent).

OPT workers, because they are still regarded as F-1 students (though they are no longer in college) do not have to pay these taxes, nor do their employers. This means that an employer who decides to hire an OPT recent college graduate over a citizen recent college grad is given a bonus by Uncle Sam for making that decision.

For STEM grads, who are relatively well paid, that can be a $10,000 bonus to the employer for the full 29 months of OPT eligibility. If a former student then moves on to an H-1B job, that payroll tax bonus disappears.

Using very rough figures of 150,000 OPT students in the labor market and with a guess of $50,000 yearly salaries (some STEM graduates are well paid, but some OPT students get little more than the minimum wage) that's an annual savings for the employers of some $573.75 million a year — and an equal savings for the workers as a group.

That's also, by definition, a raid of more than a billion dollars a year on the Social Security and Medicare trust funds, both of which can use all the help they can get.

GAO misses this completely.

The Impact on the Labor Market for U.S. College Grads. If an employer can save as much as $10,000 by hiring an OPT worker as opposed to a similarly talented citizen, green-card, or H-1B worker, he probably would do so. This makes the OPT worker that much more attractive to employers — and obviously hurts the job prospects of other workers in the labor market.

GAO does not mention this.

Stratford Uber Alles. One of the intriguing — and worrisome — elements of the OPT program for STEM graduates are some numbers unveiled three years ago by Computer World, one of America's best trade papers. That publication unearthed data from DHS on what institutions produced the most STEM graduates in the OPT program.

In first place was Stratford University with 727 such placements at that time, followed by the University of Bridgeport in Connecticut with 533. The Stratford total was twice that of all the Ivy League universities put together. Similarly, 18th on this same list was the now-closed University of Northern Virginia (UNVA), a private, for-profit institution once raided by ICE.

Stratford, like UNVA, is a private, for-profit entity in the Virginia suburbs of Washington; Stratford is owned by the closely held and mysterious American Transportation Institute, Inc. Bridgeport got into the headlines when it was taken over by an arm of the Unification Church of the Rev. Sun Myung Moon.

Why are these three entities so prominent in the OPT field?

The GAO report, which had a small army of 11 co-authors, did not even mention the variable of for-profit vs. non-profit educational institutions in its report, much less explore why Stratford and the two others had so many graduates in the OPT program.

It was useful for GAO to venture into this field; let's hope they do a little more digging the next time.

I should add that it is a great idea to have substantial numbers of foreign students study in America — and then return home, hopefully with a good educational experience and a pleasant view of this country. It is a completely different matter if a large proportion of them decide to stay in this country and enter our labor market — and OPT is designed (without any congressional input) to facilitate that.