To Raise Wages, Make Employers Compete for U.S. Workers

(Bloomberg View) -- One of the more confounding aspects of the U.S. labor market is why, even with unemployment hovering at around 4 percent a year, wages and salaries remain flat. Economists offer a range of explanations for wage stagnation, from the decline of organized labor to the automation of jobs once held by unskilled workers. But another potential factor often goes overlooked: employers' use of temporary foreign workers to fill low-wage jobs. Even among politicians who support tougher immigration laws, this practice is largely tolerated. It's time they reconsider.

U.S. employers bring in guest workers for unskilled work 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 for crop workers. H-2B visas are concentrated in landscaping, forestry, amusement and recreation, housekeeping, and construction. J-1 visa holders are typically young people from other countries who come to the U.S. as au pairs, camp counselors, and interns. Daniel Costa of the left-leaning Economic Policy Institute estimates that 450,000 temporary laborers enter the U.S. annually through these three visa programs.    

In theory, temporary-worker visas are not issued unless employers demonstrate that U.S. workers are unavailable to work in a particular occupation at the prevailing wage. In practice, it's more complicated. In requesting visas, employers are permitted to use private wage surveys, which understate what U.S. workers are paid in those occupations. Moreover, H-2A and H-2B holders, and to a somewhat lesser extent J-1 visa holders, are indentured to their sponsoring employers. They effectively cannot complain over how they are treated because they lose the right to work in this country if they quit their jobs. And for the vast majority of foreign unskilled workers, below-average U.S. wages are still far better than what they would earn at home.

Immigration doesn't always mean lower wages for American workers. When immigrants have skills in areas where U.S. workers are relatively few in number, bringing them into this country adds value without hurting U.S. labor standards. This justification does not apply for unskilled workers. In those occupations, 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 is considerable political support for these programs. Since guest workers stay for a short amount of time and are required to return to their home countries, they are less likely to be perceived as a burden on social services. Businesses benefit from paying less for labor than they would otherwise have to, and from the flexibility of hiring a hand-picked, and presumably more pliable, workforce. U.S. consumers can also gain in the form of lower prices. It's telling that legislation introduced by Republican Senators Tom Cotton and David Perdue, which aims to reduce legal immigration by 50 percent over the next decade, does not address the guest-worker policy at all. Indeed, the Trump administration is likely to raise the H2-B visa cap by an additional 15,000 workers for employers applying in fiscal 2017.

So what should be done? 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 requires measures that make employers compete for qualified U.S. workers. The current guest worker programs fail this test. Sensible immigration reform is one way to provide a boost to working Americans who need it the most.   

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Samuel Estreicher is a law professor at New York University and director of its Center for Labor and Employment Law. 

To contact the author of this story: Samuel Estreicher at samuel.estreicher@nyu.edu.

To contact the editor responsible for this story: Romesh Ratnesar at rratnesar@bloomberg.net.

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