How middlemen are gaming the H-1B program
bloomberg.com
bloomberg.com
Prior to 2021, everyone had to submit a full application packet along with the application fees to enter the lottery. Which meant an IT staffing company had to spend ~2000 USD on immigration lawyers to prepare the application for one employee and another cheque of ~2500 USD to USCIS as application fees. The application fees would get refunded back from USCIS if the application was not picked in the lottery for 85,000 slots and the IT Staffing company would have to at minimum bear the costs they spend on lawyers preparing an application they had to submit to enter the lottery.
From 2022, USCIS I believe made a change with a good intention to reduce burden on the large number of applicants whose applications were bound to not get picked in the lottery. USCIS always received about 225,000 applications typically every year and the 85,000 slots allocated for the full year would get filled in the first week itself. USCIS made a change to the application process and allowed IT staffing companies to pre-register for the lottery by paying a nominal fee of 10 USD. They now do not have to bear any lawyer costs to enter the lottery since they do not have to submit a full application upfront.
This small change makes the whole process more democratic to a vast number of people who work at IT firms in India and allows them to apply now since they fully meet the specialized work conditions set by the H1-B visa system and the cost to enter is almost non-existent.
With the fall of Chevron, I don't think there is a way out of this without legislative changes.
The other side of the coin is the extremely arbitrary and capricious nature of the US employment based visa and immigration system. This naturally leads to middlemen who can navigate the system exploit it.
This would immediately deprive these kinds of staffing companies of the economic incentive as they would have to pay for the legal costs of an H1-B every 12 months. This would remove the depressive impact that H1-Bs have on salaries as they would be free to compete in the market at large after 12 months.
And the H1-B pipeline would be free to bring in people that we actually want.
This could be done tomorrow. But it won't be.
And go with the naked truth of what it is, patronage. Let each Senator/Representative be responsible for giving out a certain number of visas each year and let them auction it off to the highest bidder.
However, I was under the impression that almost all of this is directly under the purview of the Executive Branch (with the possible exception of the criminality).
Apparently one of the bottlenecks is the total number of visas per country. Demonstrating that you're unblocking the H1-B to Green Card pipeline by fast-tracking those from countries that don't have a big backlog should send the body shops running for the hills and unblock the ones with a big backlog as well. Or shutting down any new H1-Bs from countries until their backlog is gone would also accomplish the same thing.
The problem is that US companies like the multi-year indentured servitude of the H1-B program as it depresses salaries.
One of the reasons HN gets mocked is how dismissive many commenters are about the real-world complexities of various domains. Someone thinking that some wacky proposal he just made up 5 minutes ago is the ultimate solution to longstanding labor constraints and that everyone would automatically agree to it within 24 hours, makes it a joke rather than a basic idea that might have some merit if explored further.
What's wrong with these ideas? 1. Criminal liability - this sounds a bit harsh, but some people are concerned about making sure "bad people" don't get in, so making the completion of proper background checks a hard requirement seems reasonable to allay their concerns. But then they might be concerned the background checks are bogus, so adding criminal liability helps with these concerns too. But granted, this is probably the most extreme part of that post.
2. Increasing labor costs - why is this bad for anyone except employers trying to use H1B as a way of keeping costs down? It's claimed to be a system for letting employers get skilled help where there's a labor shortage, so it's supposed to cost them more.
3. Easier to obtain PR: what the heck is wrong with this? If these immigrants are highly skilled, aren't causing any problems, and want to stay, why would you want to make it difficult for them to stay in your country and help your economy?
1. and 2. are anti-business. Just like raising the minimum wage, passing anti-business legislation is very, very difficult. 3. well, if there aren't any negatives, why is there currently a limit on the number of visas?
Sure, I'll agree to that.
>3. well, if there aren't any negatives, why is there currently a limit on the number of visas?
That's a good question, and I have no idea what the answer is. If anti-business legislation (like #1 and #2 here) is so hard to pass, then it seemingly shouldn't be that hard to pass pro-business legislation. Increasing the number of visas (or eliminating the limit) should, logically, be a pro-business position (lots more workers), while also being of interest to the left-leaning people who generally claim to be pro-immigration. So WTF is the problem? I don't know. The only people who should be opposed to such a move are 1) the outright anti-any-kind-of-immigration racists on the right (who aren't even a sizeable number, a large portion (most?) of the anti-immigration people are usually against illegal and/or low-skilled immigration), and 2) any firms that are profiting off the shortage of visas.
>directly contradicting the OP's implication that they are simple and easy.
I don't think the OP was under any illusion that passing such legislation would be simple and easy, due to the hyper-partisan nature of the current government. If the government weren't this way, passing reforms would be easy.
That seems weird. Why would they be extremely profitable? Are there big barriers to entry?
Without barriers to entry, you would expect the profits of staffing companies to be competed away. (Just to be clear: you wouldn't expect workers to be less exploited. That's a feature of the visa system and their relative lack of other opportunities, not a function of the staffing companies.)
If there are so profitable, why isn't everyone and their mom starting staffing companies?
Physics can tell you how frictionless, spherical cows behave in a vacuum. When you see real cows behave differently, you can investigate which of your violations are violated (and by how much, and which assumptions are still ok to make; eg air resistance is seldom a factor in the movement of real cows). The spherical cows are still a good starting point.
Economics can be similar. First, I doubt that staffing companies are actually all that profitable across the board. Yes, the difference between what they charge and what they pay out might be big, but they have plenty of overheads. Do we have any sources for their supposed extreme profitability?
Second, I suspect that any remaining excess profitability can probably be explained by barriers to entry.
Though some quick googling really makes me lean very much towards the first: staffing companies are by and large not more profitable than companies in other sectors.
An auction would cut out all the surplus any middle men could earn, and put it in the pockets of the taxpayer. It would also cut out political meddling, and replace it with an incentive to increase revenue.
It would also give an incentive to hand out more visas, to 'make those foreigners pay for our public services' or something like that.
We are doing such a cap-and-auction system for car licenses in Singapore. It works really well. (Our country is small enough that there's a cap of roughly one million cars.)
Do you realize that after a person gets H1B visa and start working they are still paying taxes. It is usually higher. My last experience was F1 visa and I was paying more taxes than my US colleagues earning same money.
Also this suggestion wouls only benefit the big tech companies.
I was talking about how to sell the visa auction to the voters. Yes, to bolster the argument further, you can mention that visa holders obviously also pay all the other regular taxes, too. Income taxes, sales taxes, etc.
Despite a higher effective tax on those foreigners (normal taxation plus visa bidding), it's still a good deal for those that come: otherwise they wouldn't bid.
> Also this suggestion would only benefit the big tech companies.
No worries, banks and hedge funds and oil refineries and private hospitals etc can also bid a lot.
Yes, the whole point is to hand the visas primarily to those people and industries that create a lot of economic value. The auction simultaneously makes participants reveal the economic value they expect the visa to confer and allows the fisc to efficiently tax that value for general revenue. Specifically, the auction removes any surplus from the middle man (see linked article), and puts it into government covers.
You seem to think that this is a downside?
(Just to be clear, I'm all for helping poor people. You can use some of the revenue raised from the auction and the extra income tax from getting highly paid migrants to finance any do-goodery the voters feel like.)
It might get fixed by the time we all retire.
If the main problem is less skilled workers that take American jobs, then I would start with agricultural visas -- there a ton of low-skilled foreign workers coming to US totally legally and taking jobs from Americans.
(Of course in my opinion, this is not a problem at all. If low-skilled immigrant without connections and safety nets can take someone's job at a lower pay, then that someone was too entitled on the first place).
There are lots of countries run worse than the US, and quite a few run better.
There s nothing wrong about them, they work hard and are not rent seekers (a commission on successful deal is the exact opposite of a rent).
Every countries has them (Im French, live in Hong Kong) and what you bemoaned is mundane in my experience.
When the real estate lobby makes the whole industry a de facto closed shop, the real estate agencies themselves are full of middlemen picking each other's pockets, and the commission rate and total amount are far in excess of what you'd expect in a free market, and completely unrelated to any effort or expense on behalf of the agent? Sure, it's the exact opposite of rent seeking /sarc
You personally may prefer to handle each of the above on your own, but millions of people prefer one-stop shopping where everything is taken care of, along with services like title registration, having a person show you how to use the electronics, offering coverage for regular maintenance, etc.
Why would direct delivery take 3-6 months? Also, most dealerships wont give you your car the day you buy it anyway.
As far as financing goes, thats totally orthogonal to the process of buying the car. As it stands now, car dealers get kick back from financers and try to steer customers into the highest interest loans they can, so decoupling the two processes would probably benefit customers.
Recalls aren't handled by salesmen.
Used care sure. Dealers make sense. Secondhand markets need price discovery too afterall.
Every consumer bank offers auto loan financing and yet somehow, tons of people prefer to go with the dealer.
You still didn't state how the car would get from the factory to your house - would you have to hire a delivery company? Or you think GM is going to put up with "your car delivery is approaching your house" and you reply with "I'm at work can you come back at 6?"
Recalls are handled by dealerships, which is where salesman work.
Like most of HN, you are choosing to ignore the real-world reasons these companies exist and assume some techno-utopia would solve all problems. Indeed, a small percentage of car buyers would benefit from a pure direct-from-factory purchase option, but the vast majority of car buyers want or need one or more of the services that car dealerships provide.
That's how long it takes now. Relying on dealerships is part of the reason for that. If manufacturers were allowed to direct deliver, they could do away with dealerships as the only warehousing mechanism, and do their own warehousing to cut down that time. I was trying to point out that the constraints of the current system would not apply to a different system, but you missed that. No biggie.
> Every consumer bank offers auto loan financing and yet somehow, tons of people prefer to go with the dealer.
Again, why is that? Go to a dealership and see what price you can talk them down to with financing, and what price you can talk them down to paying cash. You'll be surprised at the results.
> You still didn't state how the car would get from the factory to your house - would you have to hire a delivery company?
You could pick it up from the warehouse, or have it delivered. Both of those technologies have existed for a long time :)
> Like most of HN, you are choosing to ignore the real-world reasons these companies exist and assume some techno-utopia would solve all problems
What does doing away with dealerships have to do with technology? Im confused by that statement.
I think it's always been this way. It takes a lot of work and resources to deal with individual customers at scale.
>Staffing firms, real estate agents, car dealerships, attorneys, healthcare, etc.
Staffing firms, real estate agents, and attorneys are not unique to the US at all. Staffing firms are used by many companies because they don't want to hire full-time HR people to do "talent acquisition". (Personally, I haven't had good experiences when I've tried interviewing at these companies, and have always done better by going with companies that do their own recruiting and hiring.) People selling their house don't have the time or resources to sell it themselves usually, dealing with all the prospective buyers. And attorneys are pretty necessary if you have non-trivial legal issues anywhere.
Health insurance isn't even unique to the US; lots of developed nations have systems that look sorta like ObamaCare. But they all do it MUCH better, with FAR lower costs. Someone's probably written a long book somewhere explaining why the US is so uniquely bad here.
Car dealerships aren't unique to the US (how else are you going to buy a car?), but the requirement that they be independently owned is, and adds to the cost of cars in the US, and I think especially results in a lot of (less-than-savvy) customers being ripped off with unnecessary charges.
The thing I see about the US is that it seems to be uniquely bad at actually fixing problems. Most of these middlemen services you list are natural outcomes of real-world constraints. A company that makes milk, for instance, can't realistically sell it individually to customers all over your city or state, so they sell it to distributors, who distribute it to their retail stores, where customers buy it to take home. Similarly, a small car manufacturer, like Studebaker, can't set up dealerships all across the US, so they partner with local dealerships that are probably selling other mfgrs' cars too. Back in the early days of cars, all the carmakers were small, remember. A century later, they're mostly big, but the US made laws long ago requiring independent dealers, and now they can't change.
For whatever reason, as time goes on and things change, the US is uniquely bad it seems at adapting and fixing the problem. In better-run countries, they'd see this independent-dealership law is no longer necessary, and change it. In the US, it stays, because car dealers are politically connected to local politicians.
Yeah, this is the part I'm trying to understand. There is lobbying/corruption, but that can't be the whole story. Perhaps culturally and historically, the US has been a prosperous high-trust society that did not have to worry too much about people skimming a percentage off the top for providing a service. And over time, that has ballooned into the state we are in now.
The other thing I see is that the executive branch of the government is egregiously bad at implementing any sane designs. There is soviet era levels of dysfunction in the federal government when it comes to employment based immigration.
When was the US ever a high-trust society? I don't think it ever was in my lifetime (and I'm not young). I feel like the US sees itself as a high-trust society (or a former one, not so long ago), but the reality is quite different. I'd say, at best, the US was a medium-trust society, with highly variable levels of corruption by locality, and is getting steadily worse.
https://www.abc.net.au/news/2020-08-07/idp-education-ceo-and...
The interesting part is how power tends to centralize into the hands of an elite few (ie oligarchies), rather than equalize or concentrate completely into the hands of one. And I think this tends to happen as to reflect the collective wills of society's members.