Wednesday, November 7, 2018

To Reduce Dependence on H1B Foreign Workers, We Need to Aggressively Promote STEM Education Here

Studies show that almost 2 million H-1B visas have been distributed between 2000 and 2018. Here are some basic facts about the H1B visa program:

a. The program was created by the Immigration Act of 1990.
b. It allows employers to hire foreigners to work on a temporary basis, for up to 6 years, with two 3-year back-to-back stints.
c. It allows foreigners to work in jobs that require highly specialized knowledge and a bachelor’s degree or higher.
d. Visas are awarded to employers on a first-come, first-served basis, with applications accepted each year beginning in April. 
e. If the number of applications exceeds the annual cap set by Congress (currently at 85,000) during the first five business days of April, visas are awarded through a lottery system.
g. Though it's a temporary non-immigrant visa, many workers have been allowed to adjust to permanent status with greencards (adjustment data are unavailable).  


How to Reduce Dependence on H1B Workers   

 1. Provide Corporations Significant Tax Benefits to Hire Local STEM Graduates - Instead of incentivizing the US corporations to hire more of H1B workers, the federal government should allow them significant tax incentives to hire local STEM (Science, Technology, Engineering and Math) graduates at the prevailing rate. This special tax incentive should last, say, up to five years (or the longevity of the employee, whichever comes first), thus vastly negating the incentive to hire foreign workers at a reduced rate. Of course, in order to neutralize the arbitrage (lower hiring rate vs. additional tax advantage), it must remain effective for the proposed tax incentive period (could be more or less). This tax incentive will also encourage future STEM students, foreseeing a fast levelling playing field. Without this assurance, it would be difficult to entice our students to venture into the STEM field. Today, the qualified American workers are training their far-less qualified foreign counterparts to take their jobs. Hopefully, the tax incentive would force our corporations to hire local STEMs while a renewed interest among future students would reinvigorate the field, the sum of which would reduce the dependence on H1Bs.      
   
2. Introduce Higher Educational Qualifications for H1B Applicants - According to the 2018 Congressional mandate, 65,000 H1B applicants need only bachelor's degrees while another 20,000 require master's or higher. Unfortunately, a bachelor's degree in SE Asia (which accounts for 80%+ applicants) is not equivalent to an US bachelor's. In order to effectively meet our standard, Congress should consider transposing the degree requirements, meaning 65,000 applicants with master's+ and 20,000 with bachelor's. It makes no sense to displace a truly qualified American degree-holder with a much lesser qualified foreign degree-holder. That is why, the replacement wages tend to be much lesser for foreign workers. Since H1B is meant for the highly skilled foreign workers, Congress should gradually move to an all-master's+ requirement, at least levelling the playing field.
      
3. Until Higher Educational Requirements are Established, Congress must Insist on Degree Evaluation by ETS (and Other Entities) - While Congress debates on upping the ante on degree requirements, they must require that the foreign degrees are properly vetted and evaluated, a priori, by well-known education evaluation organizations like Educational Testing Service (ETS), thus forcing the sponsoring organizations to prove that their selected candidates, at least, satisfy the basic educational requirements. This simple yet independent step will surgically (identify and) disqualify many applicants from the export-oriented private schools as they will not meet the US degree requirements. Ideally, Congress must additionally require all applicants to pass a US-administered standardized test (good for 3 years), along the lines of Foreign Medical Graduates Exam (FMGE). Conversely, these requirements will work to the advantage of the truly qualified candidates as they will pre-qualify themselves (by getting their degrees evaluated and passing the exam in advance). Needless to say, the rouge employers will not be able to abuse the truly qualified workers either (by forcing them to work outside of the US labor laws, etc.).
    
   4. Let the Sponsoring Companies Recruit Foreign Students Graduating from the Major US Universities First - Foreign students graduating from the major US Colleges and Universities are more valuable candidates for these unfilled jobs than their all-foreign counterparts. There are other advantages to this hiring approach too: (a) No need for the equivalency assessment; (b) Since the vast majority of them undergo internship or practical training in the US, they are already acquainted to the requirements of the American workplace and work ethics; (c) Graduates from the major US schools are at least as good as the best and brightest from foreign nations; (d) They will command the prevailing wages, negating the aforesaid arbitrage that many sponsors have been trading on; (e) Rouge sponsors will be discouraged; (f) Will foster the enrollment of foreign student population, benefiting the US Schools; (g) Better English proficiency (both verbal and written) and so forth.

5. Let the Annual H1B Quotas Steadily Decline as we Promote STEM Education - If we switch to a merit-based immigration, H1B will be a thing of the past. Whether that comes to pass or not, the rapid and aggressive promotion of STEM education here will help lower the quotas steadily. Hopefully, the current 85,000 level would decline by 10,000 annually, leading to a total phase-out in 8-9 years. In fact, if we are able to promote STEM education the way I envision, this phase-out could take place even sooner. Of course, the promotion (of the positives) of STEM education must start early in high school so the students are always in the know of the unrestricted domain of opportunity the STEM universe offers. Just think about it: Producing thousands more of home-grown engineers, scientists and technologists (by far, the best on earth!) every year. Just think about it: We won't need a debate everyday whether the spouses of the H1Bs need work permits or not. Just think about it: Our politicians won't be able to convince us of the need to admit 85,000 (yes, per year!) foreign engineers and scientists at the expense of our own.      

6. Encourage Ivy League and other Renowned Schools to Eradicate "Legacy" Admission - Though Harvard is a legacy school for my family (my son has graduated from Harvard), I am opposed to the legacy admission system as it tantamounts to a "privileged" quota system. Any quota system is detrimental to overall growth and equality. Yes, applicants from the poorer families must not be discriminated against, but that financial hand-holding must come in the form of added financial aids. Therefore, the better way to handle that event is to increase the family income limit from $60K to $100K for full free-ships. Even a geo-indexed multiplier could be experimented (Case in point: The purchasing power of $100K family income in NYC is significantly lower than that of Wichita, KS, so to say). In a free society, merit must never be compromised. For instance, if a particular ethnic group qualifies for 60% of all admissions at Harvard, they must be admitted as such, unconditionally. Of course, to promote STEM education, Ivys and other major schools should offer financial aids to qualified STEM applicants ahead of the other disciplines, for a period of time, until our home-grown STEMs are well-represented on the labor force.    


Promoting STEM Education in the US

7. Interest-free Student Loans must be provided to All Qualified STEM Candidates – Instead of enticing foreign STEM graduates with visa adjustments, we must learn to nurture our own. And, it must start with an awareness movement at the middle and high school. At the core of this movement lies the marketing of the awareness to the female students in that they have “equal access” to this career domain. Until and unless our young daughters are convinced of the equal access, we will have no choice but to depend on foreign employees. In promoting STEM education, teachers and counselors must also explain to the students that 10’s of thousands of STEM jobs remain unfilled and, as a result, our “volume” employers are forced to hire foreign employees to fill voids. Interest-free student loans could be a big incentive to entice more students to look into this colossal and unrestricted career domain. Obviously, once accepted, the qualified yet economically disadvantaged students, irrespective of ethnicity, must continue to receive (full) free STEM education, at both public and private institutions.     

8. STEM Students in State Schools must qualify for Financial Aids ahead of all Other Majors – In addition to interest-free student loans, STEM students must receive financial aids ahead of their counterparts. Given the urgent need for STEM graduates in our economy, it does not make much sense anymore to treat all economic needs equally. At this point, college education must be compared with and treated like government services, meaning essential education (like essential government services) must always receive higher weights and protections than the not-so-essential education (like non-essential government services). Simply put, STEM education must be declared, protected and promoted as essential education. Ceteris paribus, the qualified STEM student population must get the first shot at the pool of financial aids and the residual will then be distributed to the other disciplines. To make things clear, it has been assumed that health and mental care education – another market area with critical shortages – is part and parcel of STEM, specifically part of ‘S.’   

9. Ideally, We need a Moratorium on Student Loans for Business and Humanities Majors – Due to the easy access to student loans, far too many students – relative to the aggregate market demand – continue to major in business and humanities, resulting in significant disguised unemployment all across the country, arguably reaching a point of moral hazard. In order to reduce the incidence of disguised unemployment, we need a moratorium on such student loans for a period of time, at least 5 to 7 years, thus allowing enough time to get the excess market supply meaningfully absorbed while the wage level rising back to the equilibrium. This pause will allow Sallie Mae to re-evaluate its existing debt load, meaning if they could use a meaningful stress test to evaluate if they might be approaching the "too big to fail" threshold. Meanwhile, a good chunk of the potential fallout population (business and humanities majors) would be redirected to the STEM universe. Sadly, if this decline is not arrested, the possibility of a bailout would be on the horizon in not too distant future (considering the student loan portfolio in the US has recently eclipsed $1.5T). Absent student loans for business and humanities, only a small percentage of the future student population – mostly from the well-to-do families and foreign students – will opt for these majors. Obviously, neither group would pose any renewed threat to the labor force or contribute to the accentuation of the bailout scenario.  

Again, in order to reduce our continued dependence on H1B foreign workers, it’s high time that we promote STEM education here by making it significantly cheaper and more labor-force friendly. Our kids deserve better!

- Sid Som, MBA, MIM
President, Homequant, Inc.

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