Make Employers Compete for U.S. Workers: A Strategy To Raise Wages?

Bloomberg analyst Samuel Estreicher recently argued that guest-worker programs put low-skilled Americans at a disadvantage. As he points out, one of the more confusing facts in the U.S. labor market is why, even with unemployment hovering at 4%, wages and salaries remain flat. Economists have proposed various explanations for this persistent wage stagnation, from the decline of organized labor to automation of work once done by humans. But Estreicher insists that another factor has gone largely overlooked by prominent economists: the use of temporary foreign workers to fill low-wage jobs. Even among politicians who call for tougher immigration laws, this practice is typically tolerated. Estreicher argues that we should all reconsider.

U.S. employers bring guest workers to do unskilled work – for example, harvesting crops – through three visa programs: the H2-A visa for agricultural workers, the H-2B visa for non-agricultural workers, and the J-1 visa for exchange visitors. H-2A visas are used by crop workers. H-2B visas go to those in landscaping, forestry, amusement and recreation, housekeeping, and construction. J-1 visa holders are typically younger workers from other abroad who come to the U.S. as au pairs, camp counselors, and interns. Daniel Costa of the left-leaning Economic Policy Institute estimates that close to half a million temporary laborers come into the U.S. annually through these three visa programs.

In theory, Estreicher writes, giving visas to temporary-worker happens when employers shows that U.S. workers aren’t unavailable to work in a particular occupation at the prevailing wage. Yet the reality is more complicated. By requesting visas, companies can use their own private wage surveys, which (not surprisingly) understate what U.S. workers get paid in those positions. Moreover, H-2A and H-2B holders, and to a somewhat lesser extent J-1 visa holders, are more or less “indentured” to their sponsoring employers. It’s extremely hard for them to complain or seek recourse over mistreatment because this means losing the right to work in the US after they quit their jobs. And for most foreign unskilled workers, below-average U.S. wages are still a lot better than what they can earn back at home.

Estreicher points out that immigration doesn’t always mean lower wages for American workers. When immigrants have skills in areas where there are few U.S. workers, bringing them into the American workforce adds value without affecting U.S. labor standards. But he argues that that justification doesn’t apply for unskilled workers. In those occupations, Estreicher writes, “foreign guest workers are direct competitors of domestic workers, and increasing the overall labor supply places a downward pressure on what incumbent workers can receive. In effect, our immigration laws allow U.S. employers to draw from non-U.S. labor pools to avoid competing for U.S. workers.”

Even so, there’s a lot of political support for these programs. Because guest workers don’t stay over a long period of time and must return to their home countries, they’re less likely to be seen as a “burden” on U.S. social services. Businesses also profit from lower labor costs than they would otherwise face, and from the flexibility of hiring a hand-picked, and presumably more pliable, workforce. U.S. consumers also win from lower prices. It’s revealing that legislation introduced by Republican Senators Tom Cotton and David Perdue, which looks to reduce legal immigration by 50% over the next decade, doesn’t address the guest-worker policy at all. In fact, the Trump administration is expected to raise the H2-B visa cap by an additional 15,000 workers in fiscal 2017.

So, Estreicher asks: what should be done? His proposal doesn’t show any easy way out. As he writes: “Short of abolishing or substantially curtailing these programs, policy makers should resist any increase in the number of visas that are issued. They should also tighten up the rules so wage data reflect actual wages paid in that occupation, and require employers to make a serious effort to first recruit U.S. workers at those wages — and where they cannot, to ensure that guest workers are in fact paid those prevailing wages.”

Solving the problem of wage stagnation will requires actions that compel employers to compete for qualified American workers. The current guest worker programs don’t meet that requirement. Sensible immigration reform is one way to give working Americans who need it the most a boost.

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Emery Reddy