April 19

President Trump’s ‘Buy American, Hire American’ Executive Order Will Lose American Jobs and Companies

On April 18, 2017, at a manufacturing plant in Kenosha, Wisconsin, President Donald Trump signed an Executive Order entitled “Buy American, Hire American.” He signed the order in Wisconsin to fulfil a campaign promise of bringing jobs back to the state and make “America First.”

The problem is the impact of this Order will not be to create jobs in America — it will lose them.

The “Buy American, Hire American” Order calls for a review and assessment of various federal departments and calls upon them to begin immigration reform. These reforms seem likely to lead to a significant reduction in the number of foreign technical workers who come to work in the United States.

A study by Professor Madeline Zavodny of Agnes Scott College concluded that, “immigrants with advanced degrees boost employment for U.S. natives.” In fact, 262 jobs for domestic workers were created for every 100 which went to foreign born workers with advanced U.S. STEM degrees.

Immigration is the foundation that America was built upon, and it continues to feed innovation in our country. This Executive Order, while lacking in detail, will likely slow growth in the tech sector (one of the most important sectors of the American economy) while providing little to support the manufacturing industry.

Of particular interest to the technology sector are any would be changes to the H-1B program under the “Hire American” portion of the Executive Order. Section 5 states that the Attorney General, Secretary of Labor and Secretary of Homeland Security shall propose new rules and guidance, that supersede previous rules, to protect the interests of U.S. workers in the administration of our immigration system, including through the prevention of fraud or abuse.

The Executive Order goes on to state that the agencies should help to promote the proper functioning of the H-1B program by suggesting reforms to help ensure that H-1B visas are awarded to the most skilled or highest-paid beneficiaries.

While these clauses do not reform the law themselves, President Trump signs this Executive Order on the heels of a number of agency policy changes, which will have a compounded impact.

  • Last week, U.S. Citizenship and Immigration Services issued a memo indicating Computer Programmers may not be eligible for H-1B visas.
  • Earlier, Premium Processing, which had provided U.S. companies with 15-day adjudication of their H-1B visas, will now take six to nine months. This will serve only to frustrate the hiring process through the inefficiency of the government’s inaction.

This Executive Order also follows the appointment of Kathy Nuebel Kovarik as the chief of the Office of Policy and Strategy on April 2, 2017, which indicates a clear focus of the Trump Administration to severely curb the H-1B visa as a tool of American companies to recruit the highly skilled professional workers needed to compete as the leaders of the technology industry.

Kovarik worked for the Senate Committee on the Judiciary under Chairman Chuck Grassley of Iowa and previously in Grassley’s personal office on Immigration issues. Senator Grassley has long been the champion of restricting laws regarding highly skilled work visas. He is the co-author of the H-1B and L-1 Visa Fraud and Abuse Prevention Act, which he has unsuccessfully been trying to get passed since 2007.

In appointing Grassley’s long-time staffer, who has been heavily involved in his agenda to restrict legal high skilled Immigration to head his policy for Homeland Security, President Trump may be ensuring that Grassley’s failed legislative agenda can finally be pushed through the agency.

Some notable tenets of the Grassley’s bills include:

Require recruitment of American workers and prohibiting preference to H-1B workers when filling open positions.

While this sounds like a great idea, it is unlikely this will reduce the unemployment rate, which according to February 2017 statistics for the Bureau of Labor and Statistics for professional positions in the U.S. is 1.9%, it would cause employers to expend thousands of dollars to search for employees in a market that is starved for workers and restrict U.S. companies from promoting people that have proven they are valuable to the company and forcing the company to engage someone they do not know.

Modify existing H-1B wage requirements, and establishes wage requirements for L-1 workers.

U.S. companies are already precluded from paying below the prevailing wage for H-1B workers. This clause promotes a government-determined arbitrary salary requirement instead of the market value of the job, based on government-based data.

Grassley and others have advocated creating an artificial very high salary. It is ironic that the same group that refuses to raise the minimum wage for Americans is demanding an artificially escalated salary for foreign workers. It is rumored these salaries could be set as high as $100,000-$130,000 per year.

If companies have to pay more for employees, they will clearly either have to raise prices or will outsource the jobs to other countries. Another irony is that a Republican administration that wants to bring jobs back to America would create additional arbitrary intrusion into the process of hiring the best workers for the country’s leading industry sector that already has a low unemployment rate and is starved of qualified workers.

Prohibiting employers from outsourcing H-1B and L-1 visa holders to other sites unless the employer obtains a waiver, which is available only in limited circumstances when the rights of American workers are protected.

This would cause additional costs and delays to many U.S. companies that used H-1B visa workers on a project basis to cease that process. Outsourcing jobs to American companies is a multi-billion industry, that could be curbed significantly with the stroke of a government pen. Curbing it will not reduce the negligible unemployment rate in the industry, but it will likely further force American companies to outsource jobs to other countries instead of outsourcing them within the U.S. economy. And of course, with the outsourcing of the tech jobs, the managerial and ancillary jobs related to them will also vanish.

Creating a new H-1B visa allocation system that gives top priority to workers who have earned advanced science, technology, engineering or mathematics (STEM) degrees from U.S. institutions.

It is not a bad idea to reward those that obtained their education in the U.S. by putting them at the front of the line, but a better solution is to eliminate the arbitrary cap altogether and allow the market to determine how many workers are needed by U.S. companies to remain competitive.

We could even see a scenario where graduates, who have expended significant monies to study in U.S. schools, who then obtain an offer from a U.S. company may be forced to take their talent and education out of the U.S.

This kind of Immigration reform could make it harder for U.S. companies to compete instead of easier. If so, it will have a devastating impact on U.S. companies, U.S. employees employed at these companies, and the national economy.

According to “Facts You Can Use To Prove That High-Skilled Immigration is Good for America’s Workforce and Economy,” prepared by American Immigration Lawyers Association and a number of organizations:

  • For every H-1B worker, 1.83 new jobs are created for native-born Americans.
  • The H-1B visas awarded between 2010-2013 will create more than 700,000 jobs for U.S. born workers by 2020.
  • H-1B visa holders are particularly valuable to small businesses.
  • Companies with less than 5,000 employees were found to hire an additional 7.5 workers for each H-1B worker hired.
  • Employers tend to use foreign-born workers to fill more technical roles, which allows more U.S.-born employees to assume managerial and leadership positions.

Others in Congress are proposing yet more extensive changes to the H-1B program.

A bill coauthored by Senator Bill Nelson (D-FL) would slash 15,000 visas from the annual cap. Senator Ted Cruz (R-TX) has called for a minimum $110,000 salary for all H-1B holders, alleging this is the equivalent of what Americans are paid for these roles.

On February 9th Senators Tom Cotton, Arkansas (R), and David Perdue, Georgia (R) proposed legislation that would reduce immigration by reducing green cards. “The net effect is to cut American immigration in half,” Cotton told Fox News’ “Fox & Friends.” Hence the intent to have a discussion about immigration beyond the immediate ban. (Sources: Fox News and CNN). It will be interesting to see if Congress jumps into the fray of further curbing high-skilled visas.

With today’s Order, President Trump proves that he has missed the fact that not all American jobs are the same. This Executive Order was signed at a manufacturing facility in Wisconsin, an industry in the Midwest, an area which has lost a lot of manufacturing jobs, but its impact will be most heavily felt in Silicon Valley. The H-1B visa is simply not used by assembly line workers or most other manufacturing positions, it is specifically for professionals that require university degrees, and two thirds of these visas are obtained by the tech industry.

Restricting H-1B’s will not mean any more Americans get jobs in manufacturing.

What the Trump Administration is missing is that US companies are already being prevented from filling open jobs in the US because of arbitrary and onerous governmental regulations such as the numeric limit of H-1B visas — which is capped at only 65,000 annually with an additional 20,000 for advanced degree graduates from US universities, across all industries.

The demand is so high that US companies that must apply six months prior to the beginning of the fiscal year, spend thousands of dollars on legal and filing fees for jobs they will not be able to fill for six more months. Further, the demand is so high a lottery is imposed. This year 199,000 applied for H-1B visas. That means, after expending the money and time, only 43% of the visas submitted will even be accepted for processing. With the new memo and policies from US Immigration, it is expected a higher number of the visas that make it through the lottery will be approved.

Lost in the analysis of the Executive Order is the current scarcity of workers educated in Science, Technology, Engineering and Math (STEM) fields in the United States.

According to “Understanding and Improving the H-1B Visa Program,” 2015 Briefing, prepared by Compete America, Partnership for a New Economy and U.S. Chamber of Commerce.

  • By 2018 the US will face a shortfall of more than 223,000 workers in STEM fields.
  • Census Bureau data shows that only about 19% of U.S. born students earning a bachelor’s degree complete a major in a core STEM field, roughly half that found in many developed nations.
  • The Government Accountability Office (GAO) found that between 2002 and 2012 academic years, foreign students who graduated with majors in STEM fields, ten times more than US citizens.

IT outsourcer Harvey Nash and auditing firm KPMG polled over 3,000 technology leaders. 65% said that hiring restrictions hurt the technology sector. The President’s Council of Advisors on Science and Technology reports that the U.S. will face a shortage of one million STEM workers by 2022 while foreign-born graduates earn 1 out of every 3 STEM graduate degrees each year.

In 2016 there were 13 STEM jobs posted online for every unemployed STEM worker. America simply does not produce enough homegrown tech talent to fill the positions needed for U.S. companies to continue to lead the world in innovation. The country depends on hiring foreign talent but further restrictions to non-immigrant visa programs will clearly limit American companies’ ability to staff themselves, without proposing a creative solution to fill these gaps.

So in a gesture to American manufacturing workers that promises to bring jobs back to America but offering no specifics on how that will be achieved, this Trump Executive Order will in fact drive away American tech jobs and companies.

The obvious outcomes may be more U.S. jobs being outsourced away from the U.S. and U.S. companies moving to countries with friendlier legislation. And there are plenty of suitors. Canada, for one, will likely be a major beneficiary.

  • USA Today February 2, 2017, article titled, “Canada seizes chance to skim talent from disaffected U.S. tech companies,” and features venture capitalist Sunil Sharma and his company Extreme Venture Partners, which offers a new fund that will help up to five start-up founders and their families move to Toronto and Waterloo, Canada, and even invest $100,000 in each if they are accepted to the VC’s accelerator.
  • The article goes on to state that, in western Canada, a group of co-founders have formed a company, called True North, to help American companies quickly create subsidiaries in Canada and shift workers to a new business complex in Vancouver. They are even offering $6,000 in round trip expenses to U.S. companies to come and make their case.
  • Another organization, Michael Trippett of Go North Canada, has been featured in numerous articles since the Trump travel ban urging companies to relocate to Montreal and Canadian natives to return home to further establish Canada as a tech destination.

But the debate is not over; exact policies have yet to be drafted and we know this President is a negotiator. We may see Congress weigh in for an even more restrictive process, but will also likely see on-going negotiation with employers in the tech sector in the search for a better version of the H-1B visa program.

While there is little argument that Immigration needs to be reformed, if you look at the issues from the perspective of economic and job growth (a typically Republican viewpoint)the Congressional Budget Office (CBO) itself states that increasing H-1B visa issuance from the current arbitrary government-imposed cap, and instead letting the market drive the demand, highly skilled immigration will increase and with it improve economic growth by more than $100 billion over the next decade (according to “Facts You Can Use To Prove That High-Skilled Immigration is Good for America’s Workforce and Economy”).

About the author: Jon Velie has practiced Immigration law since 1993. He is CEO of OnlineVisas

Jon is an Amazon number one best-selling author of H-1B Visa: Application & Approval, is regularly covered by major media and has won a number of international awards. Jon was also pivotal in the Cherokee Freedmen Supreme Court case.

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