Some Lost Jobs Never Leave Home

Skilled Foreigners Flow In to Fill Them

By Jessica M. Vaughan on May 2, 2004

The Washington Post, May 2, 2004

A couple of weeks ago, Nandan M. Nilekani of Bangalore, India, threw a huge party for more than 10,000 people. Nilekani is the CEO of Infosys Technologies, a leading Indian software services company, and his employees and guests were celebrating a major milestone: reaching the billion-dollar mark in annual sales. Noticeably absent from the party, though, were the employees most responsible for the company's spectacular success. Those Indian workers were half a world away, here in the United States, where they labor as guest workers for Infosys's U.S. clients.

The growth of India's IT industry has been phenomenal. Two other companies, Wipro Technologies and Satyam Computer Systems, are poised to hit the billion-dollar mark soon, and another, Tata Consultancy Services, has already done so. And the lion's share of their impressive revenues is generated by contracts in the United States. These firms and others like them have blazed a new trail in international trade, selling services instead of goods. The liberalization of this kind of trade has led to more off-shoring of American jobs and increased our unemployment. Less remarked upon, though, is another, even more worrisome, trend -- the importation into the United States of hundreds of thousands of professional guest workers each year to fill jobs and do work that Americans once did.

This sort of on-shore offshoring is known in the parlance of the World Trade Organization (WTO) as "movement of natural persons" and is considered to be a form of trade in services. But it, too, contributes to American job losses and disadvantages our workers in significant ways. And yet facilitating this activity is a primary item on the global free-trade agenda being actively promoted by both the Office of the U.S. Trade Representative (USTR) and the WTO.

Through its participation in the WTO and other free-trade agreements, the United States has signed on to an international framework for trade in services that binds us to dysfunctional immigration policies, notably professional guest worker programs. Unless our current guest worker policies are adjusted, new trade agreements could result in wide-open access for foreign workers under terms dictated by an international organization rather than our own democratically evolving immigration laws -- with potentially disastrous consequences in a number of professions, such as technology, nursing and teaching.

All of the major trade agreements ratified by the United States -- NAFTA, deals signed with Chile and Singapore last year, and various WTO accords -- include provisions for foreign professional guest workers. Temporary visas have been a standard component of trade agreements since the 18th century, when traders needed access to other countries to ply their wares. But as part of the recent trade pacts, the United States has also agreed to freeze in place existing regulations covering guest workers. Since then, use of these programs has exploded -- while about 150,000 guest workers were admitted in 1997, more than 865,000 were in 2003.

There are currently three major professional guest worker programs, none of which require sponsoring employers to try to hire American workers first.

The largest and most controversial is the H-1B visa program. It was created in the early 1990s to allow companies and universities to hire foreign professionals. The program is nominally capped at 65,000 a year, but workers at nonprofits and in higher education, who make up three-fifths of the total, are exempt from the cap, so many more than 65,000 are admitted each year. Another category, the L, is intended to allow multinational companies to transfer overseas employees temporarily to U.S. offices. It has no cap, and visas are good for up to seven years. Over the last few years, use of these two categories has been dominated by technology services companies. Infosys's projects, for instance, are populated mainly by bargain-basement Indian workers here on H-1B and L visas. According to the company's records, it had nearly 3,000 workers on temporary U.S. visas in September 2002.

The TN visa was created by NAFTA and originally included a cap of 5,500 on Mexican entries (but unlimited admissions for Canadians). The cap expired in January, and now Mexican admissions are also unlimited. TN guest workers can renew their visas every year, pretty much forever.

With the unemployment rate in the IT sector at an all-time high, Congress has begun to look at tightening the immigration laws on guest worker programs to help U.S. IT workers. But it is proceeding gingerly, for fear of launching a trade dispute. This isn't such a far-fetched prospect. After all, one man's professional credentialing process can be another man's trade barrier.

Indeed, Canada, which sends between 5,000 and 7,000 nurses here each year, has considered registering a complaint over new licensing rules for foreign nurses that include a requirement that they speak English, which would exclude some nurses from French-speaking Quebec. The Indian government has grumbled to the WTO about the H-1B cap, saying it blocks access for its IT services companies, which have applied for nearly 300,000 visas over a three-year period. These companies, which bank on the availability of guest worker visas to enable them to keep their labor costs lower than their competitors' by hiring foreign workers for lesser salaries, want a category for Indians and others that is just like the TN, with no annual caps and no limits on how long workers can stay. Other Indian recruiting agencies are pressuring their government to demand through the WTO that the United States ease teacher certification requirements.

Like IT professionals, American nurses and teachers are starting to feel the pinch from foreign competition. The health care and education establishments, much like the IT industry, say they need guest worker programs to address a shortage of U.S. workers, which is admittedly a problem. The U.S. Labor Department calls nursing, for instance, a "permanent shortage profession." But the interest in foreign guest workers goes beyond the need to make up a shortage. It's also about cost. Stephanie Tabone, of the Texas Nurses Association, charges that hospitals choose to hire foreign nurses to avoid improving working conditions and raising pay for American nurses. "Hospitals can bring in even very experienced nurses from abroad, and call them entry level, so they can get away with paying them less," she says.

The lifting of the TN cap has resulted in a rush on Mexican nurses. One Mexican headhunting firm has a contract with hospitals in four U.S. states to provide 3,000 nurses. The government of the state of Chihuahua is even helping the firm recruit. In places such as Ciudad Juarez, across the border from El Paso, a common sight at the state unemployment offices nowadays are long lunchtime lines of nurses in scrubs, hoping to give up their steady $400-a-month jobs for a chance to improve their prospects and make more money on the other side of the Rio Grande.

The National Education Association, too, worries about the growing number of public school systems hiring foreign teachers. Anyone can do the math -- even if a school system offers the guest worker the same salary that it would pay an American teacher, it saves by not paying for health benefits, a retirement plan, or even, frequently, Social Security.

The WTO list of services that can be traded is extensive, and includes accounting, legal services, architecture, midwifery, insurance, mortgage lending, asset management, catering, library services, transportation and journalism, to name a few. Though we're getting few guest workers in these categories now, it's not hard to imagine how enticing this could be to enterprising foreign professionals who would like to hang out their shingles in America.

Robert Zoellick, the U.S. trade representative, would probably tell anyone whose job is on that list to relax -- guest worker visas are temporary, after all, so they have no lasting impact on the U.S. labor market. But in fact, most guest workers end up staying on in the country one way or another, and U.S. law doesn't discourage that; it even provides a few loopholes to make it easier. Roughly 100,000 "temporary" guest workers get permanent residency (green cards) every year, and the numbers would be even higher if the law didn't limit the number of green cards issued annually. The TN visas can be renewed indefinitely, and the H-1B visas can be renewed until the worker gets a green card. As Intel Corp. human resources attorney Patrick Duffy said last year in reference to the company's guest workers (more than 8,000 in 2002 in the H-1B category alone), "These are not temporary workers to us. The H-1B visa is just one step in making these workers U.S. workers."

Of course, it's not really up to Zoellick to ensure that the visa programs he offers our trading partners are working as intended. That's Congress's job. And while Congress already may have signed away some of its options with the trade agreements, there's still plenty it can do. The argument can be made that H-1Bs do not belong in trade agreements at all, because the treaties weren't meant to cover access to job markets. But since we've already promised to allow in at least 65,000 H-1Bs a year, we can control the damage and avoid international rows simply by holding fast to that numerical limit. Though caps may be arbitrary, they're still easier to administer than the alternative, which would be even more complicated -- and essentially unenforceable -- immigration regulations aimed at keeping the numbers of guest workers down by controlling companies' salary levels and recruiting practices. Lawmakers should also ensure that temporary visas are truly temporary, and not used as short cuts to a green card.

Last month, Zoellick told Congress that there are trade agreements with 30 more countries in the pipeline, and that he plans to continue working with the WTO to promote more international trade in services. We don't need to scrap our involvement in these efforts. But while American workers scramble for employment, it behooves Congress to clean up our immigration laws and fix these visa programs now, to allow for the legitimate conduct of trade without unleashing a flood of permanent "guest workers" in the future.

Jessica Vaughan is a senior policy analyst at the Center for Immigration Studies.