New Report Hides Subsidies Paid to Employers to Hire Foreign Grads

By David North on November 16, 2018

If you look carefully at the recent report on foreign student enrollment you will find that the number of real foreign students dropped by 1.3 percent over the last year, but that the number of foreign grads taking government-subsidized U.S. jobs while masquerading as students increased by almost 16 percent.

We are talking about the annual, highly promoted release of the "Open Doors" report of the Institute of International Education, funded by a multi-million dollar grant from the State Department. It is a comprehensive survey of foreign students in the United States, but as it always has in the past, it ignores the key facts that, without authorization from Congress, employers are granted billions in tax breaks for:

  • Not hiring more than 200,000 alien grads of U.S. colleges; and
  • Hiring an equal number of foreign grads of U.S. colleges instead; while
  • Taking money from America's trust funds for the elderly to pay for the tax breaks.

The report mentions the growth in the Optional Practical Training program, from 175,655 grads in the prior year to 203,462 in the more recent one, but does not bother to mention the fact that employers of foreign grads — but not American grads — are given a massive tax break for these hirings. Those employers need not pay about 8.25 percent in payroll taxes for OPT workers and those foreign grads do not pay their share of the payroll taxes, either.

A U.S. employer hiring a U.S. college grad, however, has to pay the full freight to the Medicare and Social Security trust funds (as does the and the U.S. grad him- or herself). The tax break for the foreign workers is created by the government's waving a magic wand over the foreign grads, ruling, in effect, that they are students again, and need not pay the payroll taxes that the rest of us pay. Congress never authorized this; it is a gimmick invented during the Bush administration and preserved ever since.

Here's how it works: Suppose the employer, in a high-tech field in which OPT can go on for three full years, is looking at two equally qualified recent college grads; suppose he can get either of them for $50,000/year and the job will last for three years.

If he hires the American, it will cost his company $162,375 in salary and payroll taxes for the three years.

If he hires the foreign grad, the total cost will be $150,000.

Uncle Sam is, in effect, giving the employer $12,375 for not hiring an American.

I suspect that the 203,462 reported OPT position is an undercount: First, some colleges, including many of the visa mills, do not cooperate with the IIE study, and the latter have a disproportionate number of OPT positions. Second, a CIS estimate based on a broader database, the issuance of employment documents by the Department of Homeland Security, showed some 240,000 OPT positions.

The IIE press release, but not the full report (you have to pay $79.95 for that), can be seen here.