H-1B Is Just Another Gov't. Subsidy

Despite big layoffs among IT workers and post-Sept. 11 concerns over the immigration system, advocates of H-1B visas aren't going away. Indeed, IT employers are lying low, hoping to quietly persuade Congress next year to permanently raise the annual H-1B visa limit above 65,000. And why not? Like most politically connected industries, IT employers have friends in Washington who are arguing to expand what is in truth a government subsidy.

Take the Cato Institute, supposedly a small-government, antiregulation, free-market advocate, which for 10 years has opposed deregulating employment-based immigration. Buying green cards for new hires is a "tax," it argues, so Cato wants a permanent, massive, overregulated subsidy instead.

Meanwhile, IT employers explain that H-1B holders are a "minor league," in ITAA President Harris Miller's words - a try-before-you-buy approach, like Major League Baseball's farm teams. But Nobel economist Milton Friedman scoffs at the idea of the government stocking a farm system for the likes of Microsoft and Intel. "There is no doubt," he says, "that the [H-1B] program is a benefit to their employers, enabling them to get workers at a lower wage, and to that extent, it is a subsidy."

From free-market thinker Friedman, those are devastating words. The H-1B program is a subsidy that distorts the job market for IT talent. (But watch for hilarious letters from libertarians explaining how Friedman, a contributor to Free Minds and Free Markets, doesn't know a free lunch when he sees one.)

Two years ago, I participated in a National Academy of Sciences hearing about IT workforce needs. After the ostensible libertarian in the room, former Cato economist Steve Moore, laid out his case for permanently recruiting foreign talent, the panel's economist called his bluff: "So, there is no argument for a temporary visa, then?" Moore did a double take before stammering, "Well, this is one of those wink-and-a-nod programs. Everybody expects most of these workers to stay."

When the government supplies non-U.S. workers to an industry, that's a subsidy. When those workers accept minor-league wages, that's a big subsidy. When those outsiders want a benefit that can be supplied only by the government, like a green card, even regulations intended to protect U.S. workers can skew the labor market against citizens. American workers won't support a minor league that runs against their interests, and winks and nods don't fool them.

Meanwhile, unions and IT professionals risk getting suckered (again) into supporting irrelevant training programs as a trade-off for H-1Bs. But the more that's loaded onto the H-1B approach, the bigger the subsidy gets.

Let's face it: IT lobbyists ill serve the industry by perpetuating the failed regulations of the H-1B and green-card programs, which could be replaced with a market system that would deliver green cards as fast as they're paid for. But laying off thousands of U.S. citizens and green-card holders while retaining "temporary" foreign workers adds fuel to a growing anger. So call the H-1B visa what it is: a subsidy that runs counter to the real interests of both IT workers and free-market thinkers.

Paul Donnelly writes about immigration and citizenship. Contact him at pauldonnelly@mindspring.com.

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