Sometimes the Immigration System Fails: The $105K Job Lost to OPT

By David North on April 18, 2017

Here are the facts:

  • The alien worker will have a brand-new MBA from a U.S. university by May.
  • He has already landed a new job in the States that will pay $105,000 a year.
  • The U.S. government is encouraging the alien's employment by giving his employer a subsidy of $8,032 a year for hiring him instead of one of the multitude of citizens with new MBAs.

So the net cost to the employer (a nationally known and prosperous bank) will be $105,000; but had the bank hired an American the cost would be have been $105,000 plus $8,032 in Social Security and Medicare taxes, for a total of $113,032 for the year. (The young man involved, incidentally, appears, after a brief interview, to be both competent and pleasant. He will work in risk management for the bank.) So a similarly talented U.S. MBA has lost a good job, and the Social Security and Medicare trust funds have lost more than $8,000. Is that good public policy? How did it come to pass?

My responses to those two questions can be answered in two or three letters, with an O in each; "no" to the first one, and "OPT", to the second.

The Optional Training Program (OPT) was created out of whole cloth by the Bush II administration, and then expanded by the Obama administration — there is not a word in the law that calls for this kind of alien preference. OPT, in effect, waves a magic wand over foreign alumni of our colleges and changes them back to students again (with F-1 visas) so that these aliens not only get work permission, they carry the previously described subsidy.

While I am sure that only a few OPTs get $105,000 salaries (though some will get even more), all employers of these workers will receive the no-payroll-taxes subsidy at 7.65 percent a year. In cases where the aliens have training in the STEM fields (science, technology, engineering, and math) this level of subsidy can persist for three full years. Had the young man I met been in IT, for instance, rather than having an MBA, and was paid the same salary, his OPT work would have been subsidized by the government by as much as $24,096.

The program, despite, its name, has no training elements in it; it is simply a subsidized foreign worker program. (I am not one of those who reacts badly to any government subsidy of a worker; but I would prefer that such subsidies go only to citizens or green card holders, who are substantially disabled. I do object to a subsidy for someone who is clearly able-bodied and whose employer gets the tax break on the peculiar grounds that the worker is not a citizen.)

In this specific case, both the employer and employee are hoping that the initial hire as an OPT will lead to an appointment as an H-1B. The employer filed a petition for the latter program earlier this year; if that does not work because of a failure to win the first of the lotteries, those for people with advanced degrees, the petition will join the second and larger lottery, for those with either bachelor's or advanced degrees.

If this year's two chances do not pan out for the young man, two more chances will be open to him and his employer in next year's H-1B lotteries. The OPT program thus gives him an opportunity to work in the United States — at $105,000 a year — while waiting out the four lotteries. The first of each of the lotteries has 20,000 slots in it; the second has 65,000 openings, for a total of 170,000 chances in a 12-month span.

That the OPT program serves as a handmaiden to the H-1B program in this manner is rarely discussed.

Earlier I wrote a mirror piece on an example of how — in the case of a Balkans woman with really extraordinary talent who had come to the United States to work at the PhD level on public health matters — sometimes the immigration system works as planned.

In the case of the OPT hire, I don't think anyone planned to create substantial subsidies for employers hiring alien workers in the $100K-plus a year range, all at the expense of American college grads, and of America's elderly.

I met both products of the immigration program while volunteering to help grad students with their income tax returns at a nearby university.