Greenspan: H-1B cap would make U.S. workers 'privileged elite'

Tells Senate subcommittee quota too small, would protect workers from global competition

WASHINGTON -- Former Federal Reserve Chairman Alan Greenspan today offered a spirited defense of the controversial H-1B visa program, telling a U.S. Senate subcommittee that the visa quota is "far too small to meet the need" and saying that it protects U.S. workers from global competition, creating a "privileged elite."

Greenspan, testifying on immigration reform before the Subcommittee on Immigration, Border Security and Citizenship, said more skilled immigration was needed "as the economy copes with the forthcoming retirement wave of skilled baby boomers."

This hearing was called by the subcommittee's chairman, Sen. Charles Schumer (D-N.Y.), to encourage the U.S. senate to address the issue of immigration, despite the economy. Greenspan was the marquee witness.

Greenspan provided a list of reasons for increasing competition in the skilled labor force. In particular, he said it would help fix a problem -- the housing bubble -- that grew during his tenure as Fed chair, a position he held from 1987 to 2006.

Skilled workers from overseas "will, out of necessity, move into vacant housing units; the current glut of which is depressing prices of American homes," said Greenspan. In 2005, Greenspan characterized rising housing prices as "froth."

But what will likely prove to be the most controversial aspect of Greenspan's argument was his call for more wage competition.. He said that increasing the numbers of skilled workers from overseas "would address the increasing concentration of income in this country."

"Greatly expanding our quotas for the highly skilled would lower wage premiums over lesser skilled," said Greenspan. "Skilled shortages in America exist because we are shielding our skilled labor force from world competition," he said.

Greenspan said visa quotas "have been substituted for the wage pricing mechanism. In the process we have created a privileged elite whose incomes are being supported at noncompetitively high levels by immigration quotas on skilled professionals," he said. "Eliminating such restrictions would reduce at least some of the income inequality."

The views cited by Greenspan are in sharp dispute. H-1B opponents say that there is no skills shortage and that the H-1B visa has been used to reduce wages, especially by replacing older workers with younger workers from overseas. One recent study found that H-1B workers are depressing wages for some occupations, including programmers.

Greenspan cited failures in the U.S. educational system, in part, for the need to bring in more foreign workers. He cited the high percentages of foreign graduates of advance degree programs.

Schumer cited the role of immigration in the U.S. economic development. "Because of immigration, Google, Yahoo, Intel and eBay are American success stories," he said. "In New York, one quarter of all businesses are immigrant-owned."

Similarly, Sen. John Cornyn (R-Texas) said the U.S. should "offer more visas to highly skilled students who have studied at our colleges and universities and, when they can't work here, go back to their native land and compete with us and create jobs there rather than here, in the United States."

Sens. Charles Grassley (R-Iowa) and Dick Durbin (D-Ill.), recently introduced legislation that would restrict the use of the H-1B visas. The measure is particularly aimed at offshore outsourcing companies and would require them to increase the size of their U.S. workforces under a rule that would prohibit employers from hiring additional H-1B and L-1 guest workers if more than 50% of their employees are H-1B and L-1 visa holders.

Copyright © 2009 IDG Communications, Inc.

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