oversight

H-1B Foreign Workers: Better Tracking Needed to Help Determine H-1B Program's Effects on U.S. Workforce

Published by the Government Accountability Office on 2003-09-10.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO 	            Report to the Ranking Minority
                 Member, Subcommittee on
                 Environment, Technology, and
                 Standards, Committee on Science,
                 House of Representatives
September 2003
                 H-1B FOREIGN
                 WORKERS
                 Better Tracking
                 Needed to Help
                 Determine H-1B
                 Program’s Effects on
                 U.S. Workforce




GAO-03-883 

                                                 September 2003


                                                 H-1B FOREIGN WORKERS
                                                 Better Tracking Needed to Help
Highlights of GAO-03-883, a report to the        Determine H-1B Program's Effects on
Ranking Minority Member, Subcommittee
on Environment, Technology, and                  U.S. Workforce
Standards, Committee on Science, House
of Representatives




The continuing use of H-1B visas,                H-1B beneficiaries were approved to fill a variety of positions in 2002, and
which allow employers to fill                    the number of approved petitions (i.e., employer requests to hire H-1B
specialty occupations with highly                beneficiaries) in certain occupations has generally declined along with the
skilled foreign workers, has been a              economic downturn, as have U.S. citizen employment levels in these
contentious issue between U.S.                   occupations. In contrast with 2000, most H-1B beneficiaries in 2002 were
workers and employers during the
recent economic downturn. The H-
                                                 approved to fill positions in fields not directly related to information
1B program is of particular concern              technology, such as economics, accounting, and biology. Both the number of
to these groups because                          H-1B petition approvals and U.S. citizens employed in certain occupations,
employment has substantially                     such as systems analysts and electrical engineers, decreased from 2001 to
decreased within information                     2002.
technology occupations, for which
employers often requested H-1B                   GAO contacted 145 H-1B employers, and the majority of the 36 employers
workers. In light of these concerns,             that agreed to speak with GAO said that they recruited, hired, and retained
GAO sought to determine (1) what                 workers based on the skills needed, rather than the applicant’s citizenship or
major occupational categories H-                 visa status. Despite increases in unemployment, most employers said that
1B beneficiaries were approved to                finding workers with the skills needed in certain science-related occupations
fill and what is known about H-1B
petition approvals and U.S. citizen
                                                 remains difficult. Although some employers acknowledged that H-1B
employment from 2000-2002; (2)                   workers might work for lower wages than their U.S. counterparts, the extent
what factors affect employers’                   to which wage is a factor in employment decisions is unknown.
decisions about the employment of
H-1B workers and U.S. workers;                   The Department of Homeland Security (DHS) has incomplete information on
and (3) what is known about H-1B                 H-1B worker entries, departures, and changes in visa status. As a result, DHS
workers’ entries, departures, and                is not able to provide key information needed to oversee the H-1B program
changes in visa status.                          and its effects on the U.S. workforce, including data on the number of H-1B
                                                 workers in the United States at any time. GAO also found that DHS’s ability
                                                 to provide information on H-1B workers is limited because it has not issued
GAO recommends that the                          consistent guidance or any regulations on the legal status of unemployed H-
Secretary of Homeland Security                   1B workers seeking new jobs. Allowing unemployed H-1B workers to remain
(1) take actions to ensure that                  in the United States may have implications for the labor force competition
change of visa status data are                   faced by U.S. workers. While DHS has long-term plans for providing better
entered into DHS’s computer                      information on H-1B workers, policymakers in the interim need data to
system and are integrated with                   inform discussions on program changes.
entry and departure data and
(2) issue regulations that address
                                                 H-1B Petitions Approved and Counted Toward the Annual Limit, Fiscal Years 1997-2002
the extent to which unemployed
H-1B workers are allowed to
                                                 Number of petitions
remain in the United States. DHS
                                                 200,000
agreed with GAO’s
recommendations.                                 150,000

                                                 100,000

                                                  50,000

                                                        0
www.gao.gov/cgi-bin/getrpt?GAO-03-883.                        1997        1998         1999        2000        2001       2002
                                                            Fiscal year
To view the full product, including the scope
and methodology, click on the link above.                              H-1B petitions                      Annual limit
For more information, contact Sigurd Nilsen at
                                                 Source: Bureau of Citizenship and Immigration Services.
(202) 512-7215 or nilsens@gao.gov.
Contents 



Letter                                                                                            1

                         Results in Brief                                                         3

                         Background                                                               6

                         H-1B Beneficiaries Were Approved to Fill a Broad Range of 

                            Occupations, and as U.S. Citizen Employment Generally 

                            Declined with the Recent Economic Downturn, So Did the 

                            Number of H-1B Petition Approvals                                   11

                         The Majority of Employers Interviewed Reported That Skills, 

                            Rather Than Immigration Status, Determine Employment 

                            Decisions, but the Extent to Which Wage Plays a Role Is 

                            Unknown                                                             20

                         Little Is Known about the Status of H-1B Workers, but New
                            Systems Are Being Developed to Improve Tracking Information         27

                         Conclusions                                                            32

                         Recommendations for Executive Action                                   33

                         Agency Comments                                                        33


Appendix I               Scope and Methodology                                                   35 

                         CLAIMS 3 Data on H-1B Petition Approvals                               35

                         Current Population Survey Estimates                                    36

                         Salary Comparisons                                                     38

                         Employers Selected for Interviews                                      39

                         DHS Current and Planned Tracking Systems                               40


Appendix II 	            Age Distribution and Salaries of H-1B Beneficiaries
                         and U.S. Citizen Workers                                                42



Appendix III 	           Comments from the Department of Homeland
                         Security                                                                43



Appendix IV              GAO Contacts and Staff Acknowledgments                                  45 

                         GAO Contacts                                                           45

                         Staff Acknowledgments                                                  45


Related GAO Products 
                                                                           46




                         Page i                                     GAO-03-883 H-1B Foreign Workers
Tables
          Table 1: Top 10 Occupations H-1B Beneficiaries Were Approved to
                   Fill, 2000, 2002                                               12
          Table 2: Change in H-1B Petition Approvals and U.S. Citizen
                   Employment for Selected Occupations, 2000-2001, 2001-
                   2002                                                           20
          Table 3: Department of Labor H-1B Investigations, Violations
                   Identified, and Back Wages Due                                 26
          Table 4: Summary of Reportable Analyses                                 37
          Table 5: Crosswalk from BCIS to CPS Codes                               38
          Table 6: Percentage Distribution of the Age of H-1B Beneficiaries
                   Approved in 2002 and U.S. Citizen Workers in 2002              42
          Table 7: Median Annual Salaries of H-1B Beneficiaries Approved in
                   2001 and U.S. Citizen Workers in 2001 in Selected
                   Occupations, by Age and Education                              42


Figures
          Figure 1: H-1B Petitions Approved and Counted Toward the Annual
                   Limit, Fiscal Years 1997 through 2002                            8
          Figure 2: Median Age of H-1B Beneficiaries Approved in 2002 and
                   U.S. Citizen Workers in 2002 in Selected Occupations            14
          Figure 3: Percentages of H-1B Beneficiaries Approved in 2002 and
                   U.S. Citizen Workers in 2002 with Graduate Degrees by
                   Selected Occupations                                           15
          Figure 4: Median Annual Salaries of H-1B Beneficiaries Approved
                   in 2001 and U.S. Citizen Workers in 2001 in Selected
                   Occupations, by Age and Education                              17
          Figure 5: Countries of Birth for H-1B Petition Approvals, 2002          18
          Figure 6: Total Initial and Continuing H-1B Petitions Approved
                   Annually, Calendar Years 2000 through 2002                     19
          Figure 7: L-1 Visa Issuances, Fiscal Years 1998 through 2002            25




          Page ii                                     GAO-03-883 H-1B Foreign Workers
Abbreviations

AC21                      American Competitiveness in the Twenty-First
                          Century Act of 2000
BCIS                      Bureau of Citizenship and Immigration Services
BLS                       Bureau of Labor Statistics
CLAIMS 3                  Computer Linked Application Information
                           Management System 3
CLAIMS 3 LAN              Computer Linked Application Information
                           Management System 3 Local Area Network
CPS                       Current Population Survey
DHS                       Department of Homeland Security
DMIA                      Immigration and Naturalization Service Data
                          Management Improvement Act
IIRIRA                    Illegal Immigration Reform and Immigrant
                          Responsibility Act
INS                       Immigration and Naturalization Service
IT                        information technology
LCA                       Labor Condition Application
OES                       Occupational Employment Statistics
NIIS                      Non-Immigrant Information System
USA PATRIOT ACT           The Uniting and Strengthening America by
                           Providing Appropriate Tools Required to Intercept
                           and Obstruct Terrorism
US-VISIT                  U.S. Visitor and Immigrant Status Indicator
                           Technology System
WHD                       Wage and Hour Division



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Page iii                                              GAO-03-883 H-1B Foreign Workers
United States General Accounting Office
Washington, DC 20548




                                   September 10, 2003

                                   The Honorable Mark Udall
                                   Ranking Minority Member
                                   Subcommittee on Environment, Technology,
                                    and Standards
                                   Committee on Science
                                   House of Representatives

                                   Dear Mr. Udall:

                                   The continuing use of H-1B visas, which allow employers to fill specialty
                                   occupations1 with foreign workers, has been a contentious issue between
                                   U.S. workers and employers during the recent economic downturn. From
                                   March 2001 to March 2003, unemployment among highly educated
                                   individuals increased by about 400,000, resulting in 1.2 million of these
                                   individuals being unemployed. In particular, employment substantially
                                   decreased within information technology (IT) occupations, for which
                                   employers often requested H-1B workers. Critics of the H-1B program
                                   argue that enough U.S. workers are available to fill these highly skilled
                                   positions and that the use of foreign labor results in U.S. worker
                                   displacement. Proponents of the program argue that it has contributed to
                                   our nation’s productivity in the booming economy of the 1990s and that
                                   the need for highly skilled foreign workers continues to exist for certain
                                   highly specialized occupations.

                                   The H-1B program was established in 1990 to assist U.S. employers in
                                   temporarily (for up to 6 years) filling specialty occupations with highly
                                   skilled workers. In order to ensure that American workers are not
                                   adversely affected, employers are required to meet certain labor
                                   conditions, including paying H-1B workers wages comparable to those of
                                   U.S. workers in similar positions and locations. The Department of Labor’s
                                   Wage and Hour Division (WHD) is responsible for ensuring that H-1B
                                   workers are actually working in the occupation listed in the employer’s
                                   application and receiving the required wages.



                                   1
                                    A “specialty occupation” is defined as one requiring theoretical and practical application of
                                   a body of highly specialized knowledge and the attainment of a bachelor’s degree or higher
                                   (or its equivalent) in the field of specialty.



                                   Page 1                                                  GAO-03-883 H-1B Foreign Workers
Legislation creating the H-1B program limited the number of H-1B workers
allowed to enter the country annually to 65,000. In response to employers’
needs during times of greater economic growth, the limit was increased to
115,000 for fiscal years 1999 and 2000 and to 195,000 for fiscal years 2001
through 2003. This cap will revert to 65,000 in October 2003, unless
legislation is enacted to raise the cap.

Because of your interest in the employment status of H-1B workers and
their U.S. counterparts since the economic downturn, we sought to
determine (1) what major occupational categories H-1B beneficiaries2
were approved to fill and what is known about H-1B petition approvals
and U.S. citizen employment from 2000-2002; (2) what factors affect
employers’ decisions about the employment of H-1B workers and U.S.
workers; and (3) what is known about H-1B workers’ entries, departures,
and changes in visa status.

To answer the first question, we examined the Department of Homeland
Security’s (DHS) Bureau of Citizenship and Immigration Services’
(BCIS)—formerly the Immigration and Naturalization Service (INS)3—
2000-2002 H-1B petition approval data (i.e., data on approved employer
requests to hire H-1B beneficiaries) for five key occupations: systems
analysis and programming; electrical/electronic engineering; economics;
accountants, auditors, and related occupations; and biological sciences. In
addition, we analyzed 2000-2002 Current Population Survey (CPS) data on
U.S. citizen employment in similar occupations. To obtain information
about factors affecting employers’ decisions, we conducted site visits and
telephone interviews with 36 H-1B employers in 6 of the 12 states with the
largest number of H-1B petitions filed by employers—California,
Maryland, New Jersey, New York, Texas, and Virginia—selected for their
geographic dispersion. Employers were selected to obtain a range in both
the number of employer H-1B petition approvals and the occupations (IT-




2
 H-1B beneficiaries are foreign nationals with approved petitions for H-1B visas. We use
“beneficiary” as opposed to “worker” to refer to these nonimmigrants, because individuals
approved for H-1B visas may not actually become employed in the United States.
3
 On March 1, 2003, immigration and citizenship services formerly provided by INS
transferred over to the Department of Homeland Security under the Bureau of Citizenship
and Immigration Services. For this report, we refer to BCIS or DHS, as appropriate, though
the actions described might have taken place before the transition occurred.




Page 2                                                GAO-03-883 H-1B Foreign Workers
                   related4 and non-IT-related) for which they requested H-1B workers.
                   Seventy-five percent of the 145 employers we contacted chose not to
                   discuss H-1B issues with us; consequently, our results may be affected by
                   this self-selection. Most employers that agreed to speak with us used the
                   H-1B program to fill engineering positions. We also interviewed
                   associations representing U.S. and H-1B workers and associations
                   representing employers. To report information available on H-1B workers’
                   entries, departures, and changes in visa status, we examined DHS data and
                   reports on planned tracking systems, and we interviewed DHS officials
                   about their data systems and tracking procedures. We conducted our work
                   between August 2002 and July 2003, in accordance with generally accepted
                   government auditing standards. For more details on our scope and
                   methodology, see appendix I.


                   H-1B beneficiaries were approved to fill a wide variety of positions, and
Results in Brief   the number of H-1B petition approvals in certain occupations has
                   generally declined along with the economic downturn, as have
                   employment levels of U.S. citizen workers in these occupations. In
                   contrast with 2000, most H-1B beneficiaries in 2002 were approved to fill
                   positions in fields not directly related to IT, such as economics,
                   accounting, and biology. In 2002, 40 percent of all H-1B beneficiaries were
                   approved to fill IT-related occupations, such as systems analysis and
                   electrical engineering, compared with 65 percent in 2000. We found that in
                   most of the five occupations we examined (electrical/electronic engineers,
                   systems analysts/programmers, biological/life scientists, economists, and
                   accountants/auditors), H-1B beneficiaries with petitions approved in 2002
                   were younger and a higher percentage had an advanced degree than the
                   population of U.S. citizen workers in 2002. In the three occupational
                   groups (electrical/electronic engineers, systems analysts/programmers,
                   and accountants/auditors) for which there were sufficient data to compare
                   earnings, salaries listed on petitions for younger H-1B beneficiaries (18-30
                   years old) approved in 2001 who did not have advanced degrees were
                   higher than salaries reported by U.S. citizen workers of the same age
                   group and education level. However, salaries listed on petitions for older
                   H-1B beneficiaries (31-50 years old) were either similar or lower than the
                   salaries reported by their U.S. counterparts. Both the number of H-1B


                   4
                    We include the following occupations in our reference to those that are IT-related:
                   electrical/electronics engineering, systems analysis and programming, data
                   communications and networks, computer system user support, computer system technical
                   support, and other computer-related occupations.




                   Page 3                                             GAO-03-883 H-1B Foreign Workers
petition approvals and U.S. citizens employed in four of the five
occupations we examined decreased from 2001 to 2002. However, it is
unclear whether this decrease in U.S. workers employed was paralleled by
a decrease in H-1B beneficiaries employed in these occupations, because
BCIS is unable to determine the actual number of H-1B beneficiaries who
are employed in the United States.

The majority of the 36 employers that agreed to be interviewed said they
recruited, hired, and retained workers based on the skills needed, rather
than the applicant’s citizenship or visa status. Among employers who said
visa status was a factor in their decisions, several noted that they hired
H-1B workers only when qualified U.S. workers were not available. Half of
the 36 employers we interviewed reported that they did not go abroad to
recruit workers for U.S. positions, but instead found U.S. citizen and H-1B
workers through employee referrals, the Internet, and U.S. graduate
schools. About two-thirds of employers said that most H-1B workers hired
were already in the United States on foreign student visas or working for
another employer on an H-1B visa when they were recruited. In discussing
their recruiting efforts, many employers said that intense competition for
IT-related workers in 1999 made it difficult to find qualified workers in the
United States, but that the supply of workers has since increased while the
demand for workers has decreased. However, most employers said that
finding qualified workers in some engineering and other science-related
professions remains difficult. Employers that laid off workers after the
economic downturn told us that they made these decisions based on
changes in business needs, regardless of employee citizenship or visa
status. The majority of employers interviewed cited cost and lengthy
petition processing times as major disadvantages to hiring H-1B workers;
however, they said they would continue to use the H-1B program to find
candidates with the skills needed. Some employers said that they hired
H-1B workers in part because these workers would often accept lower
salaries than similarly qualified U.S. workers; however, these employers
said they never paid H-1B workers less than the required wage. Labor is
responsible for, among other things, ensuring that employers do not
violate H-1B wage agreements, and continues to find instances of
employers not paying H-1B workers the wages required by law; however,
the extent to which such violations occur is unknown and may be due in
part to Labor’s limited investigative authority.

Little information is available regarding H-1B workers’ entries, departures,
and changes in visa status due to the limitations of current DHS tracking
systems, but new systems are being developed to provide better
information. One reason DHS is unable to determine the number of H-1B


Page 4                                        GAO-03-883 H-1B Foreign Workers
workers who are in the United States at a given time is because it
maintains two separate tracking systems that do not share data. The Non-
Immigrant Information System (NIIS) has data on entries and departures
and the Computer Linked Application Information Management System 3
(CLAIMS 3) has data on changes in visa status. Data from both of these
systems are needed to calculate the number of H-1B workers in the United
States. In addition, while DHS collects information on change of visa
status and jobs held, this information is not consistently entered into
CLAIMS 3. Because these data are not consistently entered, it is not
possible to determine the extent to which H-1B workers become
permanent residents or remain in the United States on other employment-
related visas to work in the same occupations. DHS has recognized the
need for more comprehensive and reliable immigration data and is
working to develop improved tracking systems. One system, the U.S.
Visitor and Immigrant Status Indicator Technology System (US-VISIT), is
intended to incorporate data managed by DHS as well as other agencies,
such as the Department of State, in order to provide a foreign national’s
complete immigration history. DHS plans call for these histories to include
details about entries, change of status, and departures that can be
aggregated for reporting purposes. US-VISIT will be managed by DHS and
is mandated to be fully implemented by December 2005. In addition to
information systems issues, we also determined that DHS’s ability to
provide information on H-1B workers is limited because it has not issued
consistent guidance or any regulations on the legal status of unemployed
H-1B workers who remain in the United States while seeking new jobs.
While BCIS has the authority to issue regulations and has been working to
establish them, more than 2 years have passed since the agency began this
work. With inconsistent guidance and without regulations, unemployed H-
1B workers and their potential employers may be unsure about whether
these workers can be hired for new positions without first having to leave
the country. In addition, allowing unemployed H-1B workers to remain in
the United States to seek new positions may have implications for public
services, such as Unemployment Insurance, and the labor force
competition faced by U.S. workers.

To provide better information on H-1B workers and their status changes,
we recommend that DHS consistently enter change of status data in its
computer systems and integrate these data with that for entry and
departure. Furthermore, we recommend that BCIS issue regulations that
address the extent to which unemployed H-1B workers are allowed to
remain in the country while seeking other employment. In its written
comments on a draft of this report, DHS agreed with our
recommendations.


Page 5                                       GAO-03-883 H-1B Foreign Workers
                  The H-1 nonimmigrant category was created under the Immigration and
Background        Nationality Act of 1952 to assist U.S. employers needing workers
                  temporarily. The Immigration Act of 1990 amended the law, by, among
                  other things, creating the H-1B category for nonimmigrants5 who
                  employers sought to work in specialty occupations and fashion modeling.6
                  Unlike most temporary worker visa categories, H-1B workers can intend
                  to both work temporarily and to immigrate permanently at some future
                  time. Employed H-1B workers may stay in the United States on an H-1B
                  visa for up to 6 years.

                  Until 1990, there was no limit on the number of specialty occupation visas
                  that could be granted to foreign nationals. Through the Immigration Act of
                  1990, Congress set a yearly cap of 65,000 on H-1B visas. In an effort to help
                  employers access skilled foreign workers and compete internationally, the
                  Congress passed the American Competitiveness and Workforce
                  Improvement Act of 1998, which increased the limit to 115,000 for fiscal
                  years 1999 and 2000. In 2000, Congress passed the American
                  Competitiveness in the Twenty-First Century Act, which raised the limit to
                  195,000 for fiscal year 2001 and maintained that level through fiscal years
                  2002 and 2003. The limit is scheduled to revert back to 65,000 in fiscal year
                  2004.

                  In order to hire H-1B employees, employers must first file a Labor
                  Condition Application (LCA) with Labor, attesting to the fact that the
                  employer intends to comply with a number of required labor conditions
                  designed to protect workers. On this application, an employer must state
                  the number of workers requested, the occupation and location(s) in which
                  they will work, and the wages they will receive. The employers must
                  attest, among other things, that:

             •	   the employment of H-1B workers will not adversely affect the working
                  conditions of other workers similarly employed in the area;

             •	   the H-1B workers will be paid wages that are no less than the higher of the
                  actual wage level paid by the employer to all others with similar
                  experience and qualifications for the specific employment or the




                  5
                   Nonimmigrants are foreign nationals who come to the United States on a temporary basis
                  and for a specific purpose, such as to attain education or to work.
                  6
                  This report will focus solely on the specialty workers.




                  Page 6                                                    GAO-03-883 H-1B Foreign Workers
     prevailing wage level for the occupational classification in the area of
     intended employment; and

•	   no strike, lockout, or work stoppage in the applicable occupational
     classification was underway at the time the application was prepared.

     H-1B dependent employers (generally those with a workforce consisting of
     at least 15 percent H-1B workers) and willful violators (employers who
     have been found in violation of the conditions of an earlier LCA) are
     subject to additional requirements. These employers must also attest that:

•	   before filing an LCA, the employer will make a good faith effort to recruit
     U.S. workers for the position, offering wages at least as great as that
     required to be offered to the foreign national;

•	   the employer will not displace and did not displace any similarly employed
     U.S. workers within 90 days prior to or after the date of filing any H-1B
     visa petition; and

•	   before placing the H-1B employee with another employer, the current
     employer will inquire whether or not the other employer has displaced or
     intends to displace a similarly employed U.S. worker within 90 days before
     or after the new placement of the H-1B worker.

     After Labor approves the LCA,7 an employer who wishes to hire an H-1B
     worker can file two types of petitions with BCIS to obtain approval.8
     “Initial” petitions are those that are filed for a foreign national’s first-time
     employment in the United States and allow for the H-1B worker to stay in
     the United States for 3 years. With some exceptions, these petitions are
     counted against the annual cap on the number of H-1B petitions that may
     be approved.9 “Continuing” employment petitions are filed for: extensions
     of the initial petitions for another 3 years, the maximum period


     7
      In September 2000, we reported that due to legal limitations, Labor’s review of the LCA is
     perfunctory and adds little assurance that labor conditions employers attest to actually
     exist. For more details, see U.S. General Accounting Office, Better Controls Needed to Help
     Employers and Protect Workers, GAO/HEHS-00-157 (Wash., D.C., Sept. 7, 2000).
     8
      Employers must pay a fee of $1,000 for each H-1B petition, unless exempt under law. As of
     July 30, 2001, employers that wish to expedite the petition processing may pay an
     additional $1,000 for “premium processing,” which will guarantee processing within 15
     calendar days.
     9
      H-1B petitions approved for initial employment with U.S. universities and nonprofit
     research organizations are not counted against the annual cap.



     Page 7                                                 GAO-03-883 H-1B Foreign Workers
permissible under the law; sequential employment, which occurs, for
example, when an H-1B worker changes employers within their 6-year
time period; and concurrent employment, in which the H-1B worker
intends to work simultaneously for a second or subsequent employer.
Continuing petitions do not count against the cap.

In both fiscal years 2001 and 2002, the number of initial H-1B petitions
approved that applied to the cap did not reach the annual limit of 195,000
(see fig. 1). In fiscal year 2001, 163,600 petitions were approved against the
cap. The number of approved petitions decreased by more than 50 percent
in one year, with 79,100 petitions approved against the cap in fiscal year
2002. This recent change contrasts with the trends from fiscal years 1997
through 2000, during which time the cap was lower and the number of
petitions reached or exceeded the annual limit.10

Figure 1: H-1B Petitions Approved and Counted Toward the Annual Limit,
Fiscal Years 1997 through 2002




10
 Due to problems with computerized tracking systems, in fiscal year 1999, BCIS approved
a larger number of petitions than authorized by the annual limit.




Page 8                                               GAO-03-883 H-1B Foreign Workers
DHS is responsible for managing the entry and departure of
nonimmigrants, including H-1B workers. To enhance DHS’s ability in this
regard, legislation was enacted that required the agency to develop an
automated entry/exit control system. Section 110 of the Illegal Immigration
Reform and Immigrant Responsibility Act (IIRIRA) of 1996 required that
this system collect departure records from every foreign national leaving
the United States and match it with arrival records. The act also required
that the system have the capability to assist DHS officials in identifying
nonimmigrants who have been in the United States beyond their
authorized period of stay. The Immigration and Naturalization Service
Data Management Improvement Act of 2000 (DMIA) replaced section 110
of IIRIRA in its entirety. The DMIA, among other things, required that the
entry/exit system integrate arrival and departure information on foreign
nationals required under IIRIRA and contained in the Department of
Justice (now DHS) and Department of State databases. DMIA also
required that this system be fully implemented by December 31, 2005.
Subsequent legislation required that the entry/exit control system must be
capable of interfacing with other law enforcement agencies’ systems.11

In 2001, Congress passed legislation that allowed H-1B workers “visa
portability” – the ability to change employers during their stay once the
new employer files an H-1B petition on their behalf. According to the law,
the petition for new employment must have been filed before the end of
the worker’s period of authorized stay. DHS has the authority to issue
regulations that further specify how visa portability will be administered.

In March 2001, when the economy began to decline, U.S. employment
declined as well, with 1.4 million jobs lost during the year. The
unemployment rate rose to 5.8 percent at the end of 2001 and hovered
between 5.5 and 6 percent throughout 2002. Although downturns tend to
affect sectors throughout the economy, existing research indicates that job
loss from 2001-2002 was particularly severe in IT manufacturing, a sub-
sector in which many H-1B workers were employed.

Concerns that the H-1B program might have unfairly impacted U.S.
workers during the recent economic downturn have prompted labor


11
  See, e.g., the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism Act of 2001. Pub. L. No. 107-56, 115 Stat. 272. For more
information about legislation related to the entry/exit system capabilities, see U.S. General
Accounting Office, Information Technology: Homeland Security Needs to Improve Entry
Exit System Expenditure Planning, GAO-03-563 (Washington, D.C.: June 9, 2003).




Page 9                                                  GAO-03-883 H-1B Foreign Workers
groups to raise questions about the use of the H-1B program. Associations
representing U.S. workers that we spoke with believe that employers
abuse the program by laying off U.S. workers while retaining and hiring
H-1B workers at lower wages. Such practices, according to employee
associations, had the effect of displacing U.S. workers during the
economic downturn. Labor representatives argue that some employers
force H-1B workers to work for lower wages than U.S. citizen workers,
knowing that continued employment is the only legal way for H-1B
workers to remain in the United States. One advocate for H-1B workers
said that some employers dangle the possibility of sponsorship for
permanent residency in front of H-1B workers as a reward for extra work.
These representatives believe that visa portability options do not actually
give H-1B workers more freedom to move around in the labor market,
arguing that H-1B workers are still dependent on their employers to legally
remain in the United States. On the other hand, associations representing
employers argue that H-1B workers were not treated differently than U.S.
workers during the economic downturn, and that use of the H-1B program
by employers has decreased substantially. They also argue that the real
challenge to U.S. workers occurs when companies rely on workers
overseas where the work can be done at a lower cost.




Page 10                                      GAO-03-883 H-1B Foreign Workers
                          H-1B beneficiaries were approved to fill a wide variety of occupations, and
H-1B Beneficiaries        the number of H-1B petition approvals in certain occupations has
Were Approved to Fill     generally declined with the economic downturn, along with the
                          employment levels of U.S. citizen workers in these occupations. In
a Broad Range of          contrast with patterns in 2000, most H-1B beneficiaries in 2002 were
Occupations, and as       approved for positions that were not related to IT. Moreover, a
                          comparison of H-1B beneficiaries and U.S. citizen workers in five
U.S. Citizen              occupations (electrical/electronic engineers, systems
Employment                analysts/programmers, biological/life scientists, economists, and
Generally Declined        accountants/auditors) revealed that, in most of these occupations, H-1B
                          beneficiaries in 2002 were younger and a higher percentage had a graduate
with the Recent           or professional degree.12 In the three occupational groups for which there
Economic Downturn,        were sufficient data to compare salaries (electrical/electronic engineers,
                          systems analysts/programmers, and accountants/auditors), salaries listed
So Did the Number of      on petitions for younger H-1B beneficiaries (18-30 years old) approved in
H-1B Petition             2001 who did not have advanced degrees were higher than salaries
                          reported by U.S. citizen workers of the same age group and education
Approvals                 level; however, salaries listed on petitions for older H-1B beneficiaries (31-
                          50 years old) were either similar or lower than the salaries reported by
                          their U.S. counterparts. Both the number of H-1B petition approvals and
                          U.S. citizens employed in certain occupations decreased from 2001 to
                          2002.13


H-1B Beneficiaries Were   In 2002, H-1B beneficiaries were approved to fill over 100 occupations, but
Approved to Fill a Wide   IT occupations were no longer the majority of approved occupations, as
Array of Highly Skilled   they were in 2000 (see table 1). A large proportion of approved petitions
                          were for fields unrelated to IT, such as university education, economics,
Positions in 2002         and medicine. However, IT-related occupations still constituted 40 percent
                          of all petitions approved in 2002 for H-1B beneficiaries, most prominently,
                          in systems analysis and programming (31 percent). Nine percent were in
                          electrical/electronic engineering and other IT-related fields. In 2000, the
                          pattern was different: 65 percent of all approved petitions were for IT-
                          related positions.



                          12
                           Data limitations precluded a direct comparison of the characteristics and salaries of H-1B
                          workers and U.S. citizen workers. See appendix I for more details.
                          13
                           Because BCIS is unable to determine the actual number of H-1B workers who come to the
                          United States once their petition is approved and because of uncertainty about what year
                          beneficiaries begin working after approval, we cannot assess trends in H-1B employment,
                          only in petition approvals.




                          Page 11                                                GAO-03-883 H-1B Foreign Workers
                              Table 1: Top 10 Occupations H-1B Beneficiaries Were Approved to Fill, 2000, 2002

                                                          2000                                           2002
                                                                     Percent of                                      Percent of
                                  Occupation                              total   Occupation                              total
                                  Systems analysis and                            Systems analysis and
                                             a                                               a
                                  programming                               54    programming                                    31
                                  Electrical/electronic                           College and university
                                               a
                                  engineering                                5    education                                       8
                                  Computer-related, othera                        Accountants, auditors,
                                                                             4    and related occupations                         5
                                  College and university                          Electrical/electronic
                                                                                               a
                                  education                                  3    engineering                                     4
                                                                                                                a
                                  Accountants, auditors,                          Computer-related, other
                                  and related occupations                    3                                                    3
                                  Architecture, other                        3    Biological sciences                             3
                                  Economics                                  2    Physicians and surgeons                         3
                                  Mechanical engineering                          Miscellaneous managers
                                                                             2    and officials, other                            3
                                  Physicians and surgeons                    2    Economics                                       3
                                  Miscellaneous                                   Miscellaneous
                                  professional, technical,                        professional, technical,
                                  and managerial                             2    and managerial                                  2
                                  All other IT-related                            All other IT-related
                                               a                                               a
                                  occupations                                2    occupations                                     2
                                  All other occupations                     19    All other occupations                          34
                                  Total approvals                          100    Total approvals                               100
                              Source: GAO analysis of BCIS data. 


                              Note: The percent totals for the occupations above do not sum to 100 percent due to rounding. 

                              a
                              IT-related occupations. 





In 2002, H-1B Beneficiaries   In most of the five occupations we examined (electrical/electronic
Approved to Fill Selected     engineers, systems analysts/programmers, biological/life scientists,
Occupations Were Younger      economists, and accountants/auditors), H-1B beneficiaries with petitions
                              approved in 2002 were younger and a higher percentage had an advanced
and a Higher Percentage       degree than the population of U.S. citizen workers in 2002. H-1B
Had Advanced Degrees          beneficiaries with petitions approved in 2002 were younger than U.S.
than U.S. Citizen Workers     citizen workers in four of the five occupations: electrical/electronic
                              engineers, systems analysts/programmers, economists, and




                              Page 12                                                      GAO-03-883 H-1B Foreign Workers
accountants/auditors (see fig. 2).14 For example, the median age of H-1B
beneficiaries approved for accountant/auditor positions was 32, which was
substantially younger than the median age of 38 for U.S. citizen
accountants/auditors. The largest difference between the median ages,
about 9 years, was for U.S. citizens and H-1B beneficiaries approved for
electrical/electronic engineer positions. We found no significant difference
in the median ages of H-1B beneficiaries and U.S. citizens in biological/life
scientist positions.




14
 For a more detailed breakout of the age distribution of H-1B beneficiaries approved in
2002 and U.S. citizens in 2002, see appendix 2, table 6.




Page 13                                                GAO-03-883 H-1B Foreign Workers
Figure 2: Median Age of H-1B Beneficiaries Approved in 2002 and U.S. Citizen
Workers in 2002 in Selected Occupations

Age (years)
45
                     41
40                                                          39
                                                                                                38
                                             37
                                                   35                           35
35
           32                                                                            32
                                  31                                     31
30

25

20

15

10

    5

    0
           Electrical/        Systems analysts/   Biological/life       Economistsa     Accountants/
           electronic          programmersa         scientists                           auditorsa
           engineersa
        Occupation


                 H-1B beneficiaries

                 U.S. citizen workers

Source: GAO analysis of BCIS and CPS data.
a
 Age differences between H-1B beneficiaries and U.S. citizen workers are significant at the
95-percent confidence level.


In the three occupational groups (electrical/electronic engineers, systems
analysts/programmers, and accountants/auditors) for which there were
sufficient data to compare education levels, a higher percentage of H-1B
beneficiaries with petitions approved in 2002 had earned a graduate or
professional degree than U.S. citizen workers (see fig. 3). For example, 50
percent of H-1B beneficiaries approved to fill electrical/electronic engineer
positions had graduate degrees, compared with 20 percent of U.S. citizen
electrical/electronic engineers.15 Insufficient data precluded us from
analyzing the education levels of U.S. citizen biological/life scientists and
economists.



15
  H-1B workers are required to have a bachelor’s degree or its equivalent in order to meet
the qualifications of their visa status. No advanced degree is required.




Page 14                                                             GAO-03-883 H-1B Foreign Workers
Figure 3: Percentages of H-1B Beneficiaries Approved in 2002 and U.S. Citizen
Workers in 2002 with Graduate Degrees by Selected Occupations
Percent
100

    90

    80

    70

    60
            50
    50

    40                            38
                                                   34
    30
                      20
    20
                                             14            13
    10

     0
            Electrical/       Systems analysts/   Accountants/
            electronic         programmersa        auditorsa
            engineersa
         Occupation


                  H-1B beneficiaries

                  U.S. citizen workers

Source: GAO analysis of BCIS and CPS data.

Note: Figure 3 does not include information on education for biological/life scientists and economists
because the CPS sample sizes were too small to analyze.
a
 Educational attainment differences between H-1B beneficiaries and U.S. citizen workers are
significant at the 95-percent confidence level.


The salaries of H-1B beneficiaries and U.S. citizen workers differed from
each other when examined in relation to their education levels and age.16
In the three occupational groups (electrical/electronic engineers, systems
analysts/programmers, and accountants/auditors) where there were
sufficient data to compare salaries by age and education level, in 2001,
salaries listed on petitions for H-1B beneficiaries were higher (by about
$7,000 - $10,000) than salaries reported by U.S. citizen workers, for those
who were 18-30 years of age and did not have graduate degrees (see fig. 4).
In contrast, salaries listed on petitions for H-1B beneficiaries approved for


16
 We used age as a proxy for experience, which is a factor that can affect earnings. Age was
presented in two categories to maximize data available for estimation.




Page 15                                                          GAO-03-883 H-1B Foreign Workers
either electrical/electronic engineer or systems analyst/programmer
positions who were 31-50 years of age and had graduate degrees were
lower (by about $11,000 - $22,000) than salaries reported by U.S. citizens
with the same characteristics. In addition, salaries listed on petitions for
H-1B beneficiaries approved for electrical/electronic engineer positions
who were 31-50 years old and did not have graduate degrees were lower
(by about $5,000) than salaries reported by their U.S. counterparts. There
were no significant differences between the annual salaries of 31-50 year­
olds in all other cases shown in figure 4. Insufficient data precluded us
from making determinations about the relationship of age and education
to the salaries of H-1B beneficiaries and U.S. citizens who were 18-30 year­
olds with graduate degrees, or those who were in economist or
biological/life scientist positions. (See table 7 in app. II for more details.)
In addition to the factors we examined, a number of other factors can
affect earnings, such as years of experience and geographic location.
However, BCIS does not collect data on years of experience or geographic
location for H-1B beneficiaries.




Page 16                                         GAO-03-883 H-1B Foreign Workers
Figure 4: Median Annual Salaries of H-1B Beneficiaries Approved in 2001 and U.S.
Citizen Workers in 2001 in Selected Occupations, by Age and Education




Note: Figure 4 does not include information on salaries for persons age 18 to 30 with graduate
degrees or for economists and biological/life scientists because the CPS sample sizes were too small
to analyze.
a
 The differences in salaries between H-1B beneficiaries and U.S. citizen workers are statistically
significant at the 95-percent confidence level.
b
    Indicates those with bachelor’s degrees, or less education.
c
    Indicates those with graduate degrees.




Page 17                                                           GAO-03-883 H-1B Foreign Workers
                          Almost one-third of H-1B beneficiaries with petitions approved in 2002
                          were born in India, with the second highest percentage of H-1B
                          beneficiaries born in China, followed by Canada, the Philippines, and the
                          United Kingdom (see fig. 5). The remaining 45 percent of H-1B
                          beneficiaries represented an array of roughly 200 other countries.

                          Figure 5: Countries of Birth for H-1B Petition Approvals, 2002




H-1B Petition Approvals   After reaching a high level in 2001, the number of H-1B petition approvals
and U.S. Citizen          has recently declined substantially. The numbers of both initial and
Employment in Selected    continuing petitions approved increased from 2000 to 2001 and declined
                          well below 2000 levels in 2002, as shown in figure 6. The decline in petition
Occupations Declined      approvals for systems analysis/programming positions constituted 70
from 2001 to 2002         percent of the decline in the total number of petition approvals from 2001
                          to 2002. For each of the 3 years, a larger number of initial petitions were
                          approved than continuing petitions.




                          Page 18                                            GAO-03-883 H-1B Foreign Workers
Figure 6: Total Initial and Continuing H-1B Petitions Approved Annually, Calendar
Years 2000 through 2002




From 2000 to 2001, the estimated numbers of H-1B petition approvals and
U.S. citizens employed in most of the five occupations we examined
increased significantly (see table 2). For example, the number of petitions
approved in biological sciences positions increased by 1,685 to 5,454, and
employment for U.S. citizen biological/life scientists increased by 14,448 to
59,511. However, as U.S. citizen employment declined from 2001 to 2002,
so did the number of H-1B petition approvals (see table 2). In particular, H-
1B petition approvals and U.S. citizen employment decreased in IT
occupations. For example, the number of H-1B petition approvals for
systems analysis/programming positions dropped by 106,671 to 56,184, and
the estimated number of U.S. citizen systems analysts/programmers
employed decreased by 147,005 to 1,577,427.17




17
 From 2000-2002, about 4 to 6 percent of all H-1B petitions adjudicated were denied,
according to BCIS.




Page 19                                                GAO-03-883 H-1B Foreign Workers
                       Table 2: Change in H-1B Petition Approvals and U.S. Citizen Employment for
                       Selected Occupations, 2000-2001, 2001-2002

                                                             Change from 2000-2001           Change from 2001-2002
                                                                              U.S citizen                    U.S citizen
                                                          H-1B petition      employment     H-1B petition   employment
                        Occupation                           approvals         estimates       approvals      estimates
                        Electrical/electronic
                        engineers                                    2,840        16,868           -8,426        -54,031
                        Systems
                        analysts/programmers                        17,513        -62,852       -106,671       -147,005
                        Biological/life
                        scientists                                   1,685        14,448            -233         -10,840
                        Economists                                   1,534         -8,700          -1,467         -7,868
                        Accountants/auditors                         3,677        15,099           -3,082         5,701
                       Source: GAO analysis of BCIS and CPS data.



                       All 36 employers that we interviewed said they made hiring and layoff
The Majority of        decisions about workers by selecting and retaining candidates with the
Employers              skill sets needed for the job, and the majority (19) of employers said that
                       they did not treat H-1B workers differently when making these decisions.
Interviewed Reported   Most of the employers who said immigration status was a factor in their
That Skills, Rather    decisions noted that they hired H-1B workers only when qualified U.S.
                       workers were not available. Despite increases in unemployment among
Than Immigration       highly skilled U.S. workers, about two-thirds of employers said that finding
Status, Determine      workers with the skills needed in certain engineering and other science-
Employment             related occupations remains difficult. Employers who laid off workers said
                       that these decisions were based on whether the employee had the skills
Decisions, but the     that the business needed for the future. While employers cited
Extent to Which Wage   disadvantages to the H-1B program, such as cost and lengthy petition
                       processing times, they said they would continue to use the program to
Plays a Role Is        meet skill needs. Some employers said that they hired H-1B workers in
Unknown                part because these workers would often accept lower salaries than
                       similarly qualified U.S. workers; however, these employers said they never
                       paid H-1B workers less than the required wage. Labor is responsible for
                       enforcing H-1B wage agreements and has continued to find instances of
                       employers paying H-1B workers less than the wages required by law, but
                       the full extent to which such violations occur is unknown.

                       Most of the information in this section is based on our interviews with
                       employers of H-1B workers. We contacted 145 employers to discuss issues
                       related to the H-1B program, and 36, or 25 percent, of the employers
                       agreed to speak with us. Therefore, our results may be affected by this



                       Page 20                                                        GAO-03-883 H-1B Foreign Workers
                             self-selection and cannot be viewed as representative of all H-1B
                             employers.


The Majority of Employers    All employers interviewed said that finding qualified workers with the
Said They Recruited and      needed skill sets was the main factor in recruiting and hiring candidates,
Hired Workers Based on       and the majority (19) of the 36 employers said that H-1B candidates were
                             not treated differently in the recruiting and hiring process. Several
Skill Needs, Regardless of   employers mentioned that they were looking for experienced workers and
Visa Status                  that qualified candidates often had a minimum of 2 to 3 years of relevant
                             work experience. These employers said their need to remain competitive
                             prevented them from spending time to train workers who did not have the
                             necessary skills. In addition to the need for technical skills and
                             experience, employers that hired for consulting positions—in which
                             workers are sent to different job locations or relocated frequently—said
                             that flexibility was an important consideration in hiring decisions. These
                             employers said that H-1B workers, having moved to the United States from
                             another country, were very flexible in moving within the United States.

                             Many employers told us that immigration status was a factor in their
                             decision-making when they looked for candidates with experience in
                             particular skill sets. Most of these employers said that they looked at
                             available U.S. workers before considering applicants that required H-1B
                             visa sponsorship and that they hired H-1B workers only when there were
                             no qualified U.S. workers available. One company that hired H-1B workers
                             primarily for product development engineering said that company policy
                             states that H-1B workers can only be hired after managers conduct
                             rigorous and unsuccessful searches for qualified U.S. candidates. Other
                             companies told us that because of the costs of processing and legal fees,
                             they hired candidates requiring H-1B sponsorship as a last resort.

                             Six employers cited the cost of U.S. labor as another factor in employment
                             decisions. While these employers said that they never paid H-1B workers
                             salaries below the prevailing wage, they did acknowledge that H-1B
                             workers were often prepared to work for less money than U.S. workers.
                             These employers said that they could not compete with the large salaries
                             offered to U.S. workers by the major IT and pharmaceutical companies.
                             These employers also told us that they had to recruit overseas because
                             U.S. workers either demanded salaries that were too high or were already
                             employed with other companies. A number of employers interviewed
                             acknowledged that some H-1B workers coming directly from other
                             countries might initially have accepted an offer with lower pay, but that it
                             would have been unwise for employers to pay these workers less than


                             Page 21                                       GAO-03-883 H-1B Foreign Workers
their U.S. counterparts because they would soon leave for a higher wage
offered by a different employer.

Half of the employers we interviewed said they did not recruit overseas for
U.S. positions, but instead recruited workers through a variety of methods,
including employee referrals, the Internet, and outreach at U.S. graduate
schools. These employers said that they used the same methods to recruit
H-1B candidates and U.S. workers. Employee referrals and job boards on
the Internet were the most commonly cited recruiting methods. Several
employers noted that many H-1B workers were hired through referrals by
other workers already employed by their companies. In addition, about
two-thirds of employers said that most H-1B workers hired were already in
the United States attending graduate schools on student visas or working
for another employer on an H-1B visa.

Many of the employers interviewed said that they recruited overseas for
U.S. positions before the recent economic downturn because they could
not find enough qualified U.S. workers. However, most of these employers
said they have not recruited overseas for these positions since the
downturn. One employer cited the anticipation of Year 2000 computer
problems as a major factor in recruiting overseas, claiming the company
needed workers who were skilled in programming older mainframe
systems, whereas available U.S. workers were experienced in more
advanced technologies. Many of the employers interviewed reported that
there is a greater supply of workers for certain IT positions (e.g., systems
analysts and programmers) since the economic downturn, but also said
they have substantially reduced their hiring since the economic downturn
and have cut back on their use of the H-1B program.

Of the 36 employers we interviewed, about two-thirds said that despite the
increase in the number of unemployed workers since the economic
downturn, finding qualified workers in some engineering and other
science-related occupations remains difficult. These employers told us
that they look for superior candidates or those who are in fields with a
smaller pool of qualified candidates, such as chemists. One Internet
company said that it is difficult to hire the most productive workers
because such top performers are unlikely to be looking for work. Four
employers said they were looking for candidates with unique skills. For
example, one employer told us that foreign workers who helped develop
products overseas were the most qualified to help introduce those
products to the U.S. market.




Page 22                                       GAO-03-883 H-1B Foreign Workers
Employers Interviewed        Thirty of the 36 employers interviewed experienced layoffs, and all 30 said
Said They Released           that the layoffs were based on whether the employees had the skill sets
Workers Based on             that the business would need in the future, regardless of their immigration
                             status. Seven of these 30 employers also added that employee
Business Needs,              performance was a major consideration in layoff decisions. Several
Regardless of Visa Status    companies said that layoffs were due to positions being eliminated or
                             decisions to close offices in certain locations. However, some companies
                             said that if they were eliminating a product line or regional office,
                             employees—whether H-1B workers or U.S. citizens—would be transferred
                             to another division or product line if their skills were needed. All
                             30 employers said that H-1B status was not a factor in these decisions, and
                             19 of these employers reported that they had laid off H-1B workers.
                             According to a few employers, H-1B workers were often the last to be
                             released because they frequently work in research and development
                             positions that create new products or other areas of the business that
                             generate revenue. Details about the number of workers laid off by
                             employers were not publicly available, and most employers declined to
                             share this information with us.

                             Labor associations argue that U.S. workers are being displaced by H-1B
                             workers whom employers view as a more affordable source of labor.
                             These groups cited anecdotal accounts of employers laying off U.S
                             workers and then retaining or hiring H-1B workers for the same positions
                             or outsourcing the work to companies using foreign labor. In the case of
                             H-1B dependent employers, the law prohibits companies from hiring H-1B
                             workers when it has the effect of displacing similarly employed U.S.
                             workers in the workforce. Although Labor has found no instances of such
                             illegal displacement by H-1B dependent employers, a few cases are
                             currently under investigation.


Most Employers Cited         Nearly all employers interviewed said that the length of time required to
Cost and Lengthy Petition    process petitions is a major disadvantage of the H-1B program. About half
Processing Time as Major     of these employers said that hiring an H-1B worker could take from
                             2 to 6 months, but that they often pay an additional $1,000 fee for premium
Disadvantages of the H-1B    processing, which substantially reduces processing time. In addition, most
Program, but Said They       employers interviewed said that the combination of processing fees and
Will Continue to Use the     legal fees made the program very costly, with costs cited ranging from
Program to Find the Skills   $2,500 to $8,000 to hire an H-1B worker.
Needed
                             Citing their need to fill permanent positions, some employers noted that
                             the main disadvantage of the H-1B program is its temporary provision of
                             labor. These employers said they experience a substantial loss of


                             Page 23                                      GAO-03-883 H-1B Foreign Workers
intellectual capital when an H-1B visa has expired and a foreign national is
forced to leave the United States. Nearly all employers interviewed said
that in order to retain these foreign workers, they often sponsored H-1B
workers for permanent residency either as part of their initial employment
offer or after a certain period of employment. Some of these employers
said that the fees associated with applications for permanent residency
can raise the cost of hiring an H-1B worker substantially, with a few citing
costs as high as $10,000 to $15,000. A few companies said that if their H-1B
workers were unable to obtain permanent residency, they would send
them to one of their foreign offices for a year and then bring them back to
the United States on new H-1B visas.

Despite the disadvantages of the H-1B program cited, 31 of the 36
employers interviewed said they would continue to use the program in the
future to meet skill needs. These employers believe that once the economy
recovers it will be difficult to find enough qualified U.S. workers, and that
the H-1B program gives them the opportunity to access a larger pool of
workers. Of the 24 employers that commented on the H-1B cap, 16 said
they were concerned that a limit of 65,000 would create processing
backlogs at BCIS when the economy improves, and feared that they would
have to wait several months longer to hire H-1B workers, as was the case
when the cap was reached in 2000.

While employers said that they would continue to use the H-1B program, a
few employers mentioned that they are seeking additional visa options for
bringing highly skilled workers to the United States. For example, in
recent years, employers have increasingly turned to the L-1 visa, an
intracompany transfer visa that can be used by companies to bring their
foreign professional workers to the United States on a temporary basis
(see fig. 7).18 L-1 visas do not have an annual cap and are not subject to
prevailing wage laws. Department of State statistics show that the use of
L-1 visas has increased substantially since fiscal year 1998. The number of
L-1 visas issued in fiscal year 1998 was 38,307 and rose to 41,739 in fiscal
year 1999, peaked in fiscal year 2001 at 59,384, and decreased slightly in
fiscal year 2002 to 57,721. Eight companies noted that the process to
obtain an L-1 visa was less cumbersome than the H-1B visa process, and a
few said that they planned to increase use of the L-1 visa in the future.


18
 L-1 visas can be issued to intracompany transferees who work for an international firm or
corporation in executive and managerial positions or have specialized product knowledge.
L-1 visa holders can stay in the United States for up to 5 or 7 years, depending on the type
of services provided.




Page 24                                                 GAO-03-883 H-1B Foreign Workers
                            Figure 7: L-1 Visa Issuances, Fiscal Years 1998 through 2002




                            In addition to using other visas, some employers said that they are now
                            considering outsourcing work or moving their own operations offshore to
                            remain competitive. A few employers said that if they cannot find enough
                            highly skilled workers within the United States, they would start operating
                            overseas. One offshore IT services company said its competitive advantage
                            comes from offering U.S. clients IT services in India, which can
                            significantly reduce costs. According to a temporary staffing agency, some
                            companies are increasingly using contract or temporary staff as a way of
                            cutting labor costs and avoiding the bad publicity associated with layoffs.


The Extent to Which Wage    While a number of employers acknowledged that some H-1B workers
Is a Factor in Employment   might accept lower salaries than U.S. workers, the extent to which wage is
Decisions Is Unknown        a factor in employment decisions is unknown. Labor’s Wage and Hour
                            Division (WHD), which is responsible for ensuring that H-1B workers are
                            receiving legally required wages, has continued to find instances of
                            program abuse. As shown in table 3, the number of investigations in which
                            violations were found doubled from fiscal year 2000 to 2002, and the
                            amount of back wages owed to H-1B workers by employers increased
                            from $1.6 million in fiscal year 2000 to $4.2 million in fiscal year 2002.
                            These violations were largely due to employers bringing H-1B workers into




                            Page 25                                           GAO-03-883 H-1B Foreign Workers
                                                        the United States to work, but not paying them any wages until jobs are
                                                        available,19 according to WHD officials. This dramatic increase in
                                                        violations and back wages owed to H-1B workers may be due to the
                                                        increase in the number of H-1B workers who have entered the country
                                                        over the years and does not necessarily indicate an increase in the
                                                        percentage of H-1B workers affected by wage violations.

Table 3: Department of Labor H-1B Investigations, Violations Identified, and Back Wages Due

                                                Number of    Investigations showing a
                                            investigations   violation as a percentage     Investigations                   Number of
 Fiscal           Investigations                 showing         of total investigations      where back Amount of back employees due
 year                  finalized                 violation                     finalized wages found due wages found due  back wages
 2000                               58                 51                         88%                  49         $1,629,173               339
 2001                               60                 54                         90%                  48         $1,335,147               198
 2002                              134                 112                        84%                  94         $4,211,209               580
 2003 (thru
 3-03)                              71                 62                         87%                  56         $2,126,881               478
Source: Department of Labor, Wage and Hour Division.

                                                        The extent to which violations of the H-1B program take place is unknown
                                                        and may be due in part to WHD’s limited investigative authority. WHD can
                                                        initiate H-1B-related investigations only under limited circumstances.
                                                        WHD may investigate (1) when a complaint is filed by an aggrieved person
                                                        or organization, such as an H-1B worker, a U.S. worker, or the employee
                                                        bargaining representative; (2) on a random basis, employers, who, within
                                                        the previous 5 years, have been found to have committed a willful failure
                                                        to meet LCA work conditions; and (3) if it receives specific credible
                                                        information from a reliable source (other than the complainant) that the
                                                        employer has failed to meet certain specified work conditions. According
                                                        to WHD officials, H-1B workers may be reluctant to complain, given their
                                                        dependency upon their employers for continued residency in the United
                                                        States. In 2000, we suggested that the Congress consider broadening
                                                        Labor’s enforcement authority to improve its ability to conduct
                                                        investigations under the H-1B program. In response, Labor concurred with
                                                        our suggestion, indicating that it has long urged that the Congress
                                                        reconsider and expand the narrow limits on its enforcement authority.20




                                                        19
                                                         Even if not yet working, employers must pay H-1B workers the required wage beginning
                                                        30 days after their arrival in the United States.
                                                        20
                                                         GAO/HEHS-00-157.




                                                        Page 26                                             GAO-03-883 H-1B Foreign Workers
                          Little is known about the status of H-1B workers due to the limitations of
Little Is Known about     current DHS tracking systems, but new systems to provide more
the Status of H-1B        comprehensive information are being developed. One reason DHS is
                          unable to determine the number of H-1B workers who are in the United
Workers, but New          States at a given time is because it has two separate tracking systems that
Systems Are Being         do not share data. The Non-Immigrant Information System (NIIS) has data
                          on entries and departures of H-1B workers and the Computer Linked
Developed to Improve      Application Information Management System 3 (CLAIMS 3) has data on
Tracking Information      changes in visa status, but data from both of these systems are needed to
                          calculate the number of H-1B workers in the United States. In addition,
                          while DHS collects information on departures, change of visa status, and
                          occupations performed under a new status, this information is not
                          consistently collected and entered into current systems. DHS has
                          recognized the need for more comprehensive immigration data and is
                          working to develop improved tracking systems. One system, known as the
                          U.S. Visitor and Immigrant Status Indicator Technology System (US-
                          VISIT), is intended to incorporate data managed by DHS as well as other
                          agencies to provide a foreign national’s complete immigration history.
                          System plans also provide for capabilities to generate aggregated reports
                          on foreign nationals. In addition to information systems issues, we also
                          determined that DHS’s ability to provide information on H-1B workers is
                          limited because it has not issued consistent guidance or any regulations on
                          the legal status of unemployed H-1B workers who remain in the United
                          States while seeking new jobs. The lack of clear guidance or any
                          regulations on this issue has resulted in uncertainty among H-1B workers
                          and employers about the appropriate actions needed for being in
                          compliance with the law.


DHS Has Incomplete        DHS cannot account for all the H-1B worker entries, departures, and
Information on H-1B       changes of visa status using its current tracking systems, because NIIS and
Worker Entries,           CLAIMS 3 data are not integrated, and data for certain fields in each of
                          these systems are not consistently collected and entered. As a result, DHS
Departures, and Changes   is not able to provide some key information needed to oversee the H-1B
of Visa Status            program and assess its effects on the U.S. workforce. This includes
                          information on the number of H-1B workers in the United States at any
                          time, the extent to which these workers become unemployed, the extent
                          to which H-1B workers become long-term members of the labor force
                          through other immigration statuses, and the occupations they fill as
                          permanent members of the labor force.

                          We found that obtaining better arrival and departure information on H-1B
                          workers requires integration of change of status data from CLAIMS 3 with


                          Page 27                                      GAO-03-883 H-1B Foreign Workers
data from NIIS, and that such integration has proven to be challenging.
Currently, if a foreign national enters the United States under a student
visa and later becomes an H-1B worker, NIIS will not have a record that
indicates this person is an H-1B worker, unless the person exits and re-
enters the United States under the H-1B visa.21 In 2001, DHS officials
attempted to obtain better information on the number of nonimmigrants in
the United States and their current statuses by matching CLAIMS 3 and
NIIS data using automated formulas, but found that about 60 percent of
the records between these two systems still needed to be matched
manually. This was mainly because the two systems do not have unique
identifiers for matching records. While DHS is examining ways to improve
its ability to match these records through formulas or by creating unique
identifiers, arrival and departure data continue to be separated from
change of status data.

Although data integration could improve information on H-1B workers,
DHS may continue to face challenges accounting for all departures
because these data are not consistently collected. While NIIS is supposed
to maintain departure records for H-1B workers, along with other
nonimmigrants,22 data from fiscal years 1998 through 2000 indicate that
departure information for foreign nationals is missing in about 20 percent
of the cases.23 DHS cannot account for all H-1B worker departures because
some nonimmigrants, especially those departing through land borders, do
not submit departure forms when leaving the United States. The United
States has an agreement with Canada that allows Canadian immigration
officials to collect departure forms and submit them to DHS. However,
Canadian officials are not required to collect these forms and, therefore,
some nonimmigrant departures from the United States through Canada are
not recorded. DHS also does not have immigration officials at some
departure areas along the Mexican border, thereby relying on
nonimmigrants to voluntarily deposit departure forms in collection boxes.


21
  We found that about 42 percent of workers approved for H-1B visas in 1999 were already
in the United States when their visas were approved. See GAO/HEHS-00-157 for more
information.
22
 DHS obtains the information in NIIS from Form I-94, the Arrival/Departure Record, which
nonimmigrants must submit to DHS when entering and leaving the United States.
Nonimmigrants with visas that allow them to leave and re-enter freely, such as H-1B
workers, will have completed multiple I-94 forms and have multiple arrival/departure
records.
23
 DHS became aware of missing departure records when attempting to estimate the
number of nonimmigrants who overstayed their allowed period of stay.




Page 28                                               GAO-03-883 H-1B Foreign Workers
DHS officials also told us that airlines do not consistently collect and/or
return departure forms to DHS. In addition, some H-1B workers become
permanent residents and, therefore, are no longer required to submit
departure forms when exiting the country, leaving NIIS with no record of
their departures from the United States.

Moreover, DHS does not consistently enter change of status and
occupation data into CLAIMS 3. As a result, it is not possible to determine
either the number of H-1B workers who remained a part of the U.S.
workforce by becoming permanent residents or other employment-related
visa holders and the types of jobs they performed. About 50 percent of
electronic records on permanent residents do not include data on
residents’ prior visa status, according to a DHS official. Also, in fiscal years
2000 and 2001, about 20 to 25 percent of electronic records on permanent
residents who were known to have been H-1B workers did not contain
information on their occupations. In the data sets used to determine the
number of nonimmigrants, such as H-1B workers, who changed to other
employment-related visa statuses, the prior status data was missing in 30
percent of the cases. In addition, BCIS officials told us that occupation
data for H-1B workers who changed to other employment-related visa
statuses was often missing, but they were unable to tell us the extent to
which this occurred. Although no formal studies have been conducted to
determine why these data are missing, DHS officials believe that this is
primarily due to contractors not entering prior visa status and occupation
information into CLAIMS 3. One official said that some data contractors
may not enter this information because CLAIMS 3 will accept records if
the prior visa status and occupations fields are left blank. These data could
also be missing because individuals without a prior status or occupation
may leave these fields blank on their applications. These individuals, such
as spouses of permanent residents, may be coming directly from a foreign
country without having previously entered the United States under a
nonimmigrant visa.

DHS also maintains information in CLAIMS 3 that could indicate whether
an H-1B worker is no longer employed and possibly no longer in H-1B
status, but the agency has faced challenges with collecting this
information. When H-1B workers become unemployed before their visas
expire, employers are required to submit a letter to DHS stating that these




Page 29                                         GAO-03-883 H-1B Foreign Workers
                         workers are no longer employed with them.24 DHS uses this information to
                         revoke the H-1B petitions, and this is indicated in CLAIMS 3. However,
                         agency officials do not believe that all employers are submitting these
                         letters, because DHS officials believe they have not received an equal
                         number of subsequent employment petitions as notices that the H-1B
                         worker is no longer with a former employer. Agency officials said that they
                         are not able to better ensure the collection of these letters because they do
                         not have the resources to proactively monitor employers. In addition,
                         since the agency is not currently concerned about reaching the H-1B
                         worker cap on petitions, a 6-month to a year lag time exists for entering
                         data about revoked petitions.


DHS Is Developing New    DHS recognizes the need for a more integrated system to track
Data Systems to Obtain   information on foreign nationals and is currently developing systems to
More Comprehensive       meet this need. DHS is mandated to develop an information system that
                         will integrate arrival and departure information on foreign nationals from
Tracking Information     databases within DHS and across other government agencies, such as the
                         Department of State and law enforcement agencies. DHS is currently
                         working with State to develop this system, known as US-VISIT, which is
                         mandated by Congress to be fully implemented by December 2005. DHS
                         plans call for US-VISIT to have the capability to generate a single
                         comprehensive record of an individual’s entire immigration history, from
                         the initial request to enter the United States (e.g., H-1B worker petitions)
                         through departure and any re-entry. DHS’s plans also call for individual
                         records in US-VISIT to be updated almost immediately as users of the
                         different component databases update their records. For example, if a
                         DHS official updates a nonimmigrant’s record to reflect that a person has
                         changed visa status, that person’s US-VISIT record should reflect this
                         change almost immediately. Moreover, DHS plans for US-VISIT to be able
                         to generate statistical reports on nonimmigrants. As required by law, these
                         reports will include the number of nonimmigrants, including H-1B
                         workers, who have entered, exited, and remained in the United States.




                         24
                          Employers are not required to report the reasons why H-1B workers are no longer
                         working for them, and when DHS receives information on causes of unemployment, DHS
                         officials do not have to input this information into CLAIMS 3.




                         Page 30                                            GAO-03-883 H-1B Foreign Workers
DHS Has Not Clarified the   In addition to information systems issues, DHS’s ability to provide
Status of Unemployed H-     information on the status of the H-1B population is constrained because it
1B Workers through          has not issued consistent guidance or any regulations for implementing
                            the visa portability provision of the American Competitiveness in the
Guidance or Regulations     Twenty-First Century Act of 2000 (AC21). This has resulted in uncertainty
                            about the extent to which unemployed H-1B workers can legally remain in
                            the United States while seeking new jobs. Regulations have been in
                            development for over 2 years, and interim guidance has not clarified this
                            issue. For example, 1999 guidance stated that unemployed H-1B workers
                            are out of status and should leave the United States or seek a change in
                            status. However, in 2001, DHS issued guidance stating that AC21’s visa
                            portability provisions appear to include unemployed individuals and that it
                            expected to issue regulations addressing their status.25

                            Currently, BCIS officials are addressing this issue on a case-by-case basis,26
                            and decisions have been inconsistent, according to a few employers.
                            These employers told us that in some cases, H-1B workers who were
                            unemployed for more than 3 months were required to exit and re-enter the
                            United States before beginning work with a new employer because they
                            were considered out of legal status. Yet, overall, BCIS officials have not
                            offered these employers clear directions about allowable timeframes for
                            H-1B workers to be unemployed and remain in the country. This lack of
                            clear guidance or any regulations can contribute to uncertainties in the
                            circumstances facing these workers. Moreover, employers told us that this
                            situation makes planning a worker’s starting date for a new job difficult. In
                            addition, if employers pay for the cost of re-entry, this process can impose
                            an unexpected cost of hiring an unemployed H-1B worker.

                            The agency has been working to develop regulations related to visa
                            portability since October 2000, but internal debates have prevented
                            regulations from being issued sooner, according to a BCIS official. For
                            example, the agency official told us that BCIS is concerned about
                            immigration enforcement issues that may arise by allowing unemployed H-


                            25
                              A 2001 BCIS memorandum stated that the agency plans to address the legal status of
                            unemployed H-1B workers in their regulations related to visa portability. Specifically, the
                            memorandum stated that the agency expects to allow “some reasonable period of time
                            such as 60 days” for an H-1B worker to be unemployed before being considered out of legal
                            status.
                            26
                             Under certain circumstances, BCIS officials are permitted by regulation to grant visa
                            extensions or authorize classification changes to nonimmigrants, such as H-1B workers,
                            who are no longer in status at the time a petition is filed.




                            Page 31                                                GAO-03-883 H-1B Foreign Workers
              1B workers to remain in the United States. Labor officials said that they
              were concerned about how unemployed H-1B workers in the United States
              might impact government programs for the unemployed if, for example,
              unemployed H-1B workers attempted to collect Unemployment Insurance.
              In addition, a U.S. labor representative said that another implication of
              allowing unemployed H-1B workers to remain in the United States is that
              they will be competing with unemployed U.S. workers for highly skilled
              positions.


              Much of the information policymakers need to effectively oversee the H-
Conclusions   1B program is not available because of limitations of DHS’s current
              tracking systems. Without this information, policymakers cannot
              determine whether this program is meeting the need for highly skilled
              temporary workers in the current economic climate and how to adjust
              policies that may affect workforce conditions over time, such as the H-1B
              visa cap, accordingly. Examples of needed information include the total
              number of H-1B workers in the United States at a given time and the
              numbers of H-1B workers employed in various occupations, the extent to
              which H-1B workers become long-term members of the labor force
              through permanent residency or other immigration statuses, and the
              occupations they fill as long-term members of the labor force. Such
              information could also assist policymakers in better determining program
              effects on workforce conditions such as wages and the proportion of jobs
              filled by H-1B workers. While DHS has long-term plans for providing better
              information on H-1B workers, policymakers in the interim need data to
              inform discussions of program changes.

              Employers also have expressed concern about how BCIS determines the
              legal status of unemployed H-1B workers. BCIS determines on a case-by-
              case basis whether an unemployed H-1B worker is allowed to stay in the
              United States while looking for another job. However, H-1B workers and
              employers are unsure about whether these workers can be hired for new
              positions without first having to exit and re-enter the country, which
              would be required if the workers’ legal immigration status was determined
              to have expired. While this issue is no doubt a concern for H-1B workers
              who have become unemployed, it is also a growing concern to employers
              who may wish to hire these workers.




              Page 32                                     GAO-03-883 H-1B Foreign Workers
                      To provide better information on H-1B workers and their status changes,
Recommendations for   we recommend that the Secretary of DHS take actions to ensure that
Executive Action      information on prior visa status and occupations for permanent residents
                      and other employment-related visa holders is consistently entered into
                      their current tracking systems, and that such information becomes
                      integrated with entry and departure information when planned tracking
                      systems are complete.

                      In order to improve program management, we also recommend that the
                      Secretary of DHS issue regulations that address the extent to which
                      unemployed H-1B workers are allowed to remain in the United States
                      while seeking other employment.


                      We provided a draft of this report to DHS and Labor for their review. DHS
Agency Comments       concurred with our recommendations and acknowledged the need for an
                      improved tracking system to link information related to H-1B
                      nonimmigrants among the State Department, Labor, and DHS. DHS also
                      said that it is in the planning stages to make changes to CLAIMS 3, which
                      will ensure that information on prior visa status and occupations for
                      permanent residents and other employment-related visa holders is
                      consistently entered. In addition, DHS said that issuing regulations is a
                      priority and that the final rule for implementing the law authorizing visa
                      portability for H-1B workers is undergoing revisions based on intra-agency
                      comments. DHS’s comments are reprinted in appendix III. Labor had no
                      formal comments. DHS and Labor also provided technical comments that
                      we incorporated as appropriate.


                      As arranged with your office, unless you publicly announce its contents
                      earlier, we plan no further distribution of this report until 30 days from its
                      issue date. At that time, we will send copies of this report to the Secretary
                      of Homeland Security, the Secretary of Labor, appropriate congressional
                      committees, and other interested parties. In addition, the report will be
                      available at no charge on GAO’s Web site at http://www.gao.gov.




                      Page 33                                        GAO-03-883 H-1B Foreign Workers
If you or your staff have any questions about this report, please contact me
at (202) 512-7215. Other contacts and staff acknowledgments are listed in
appendix IV.

Sincerely yours,




Sigurd R. Nilsen
Director, Education, Workforce,
  and Income Security Issues




Page 34                                       GAO-03-883 H-1B Foreign Workers
Appendix I: Scope and Methodology 



                        To obtain information on the occupations H-1B beneficiaries were
                        approved to fill and demographic information and wage characteristics for
                        H-1B beneficiaries and U.S. citizens, we examined the Bureau of
                        Citizenship and Immigration Services’ (BCIS) 2000-2002 H-1B petition
                        approval data for five key occupations: systems analysis and
                        programming; electrical/electronic engineering; economics; accountants,
                        auditors, and related occupations; and biological sciences. In addition, we
                        examined 2000-2002 Current Population Survey (CPS) data on U.S. citizen
                        employment in similar occupations.1


                        To obtain information on the occupations H-1B beneficiaries were
CLAIMS 3 Data on        approved to fill, we examined 2000-2002 H-1B petition approval data from
H-1B Petition           BCIS’s Computer Linked Application Information Management System
                        Local Area Network (CLAIMS 3 LAN).2 These data provided a variety of
Approvals               information on the H-1B beneficiaries in each year, such as the age,
                        education level, and annual salary expected for each beneficiary at the
                        time the petition was filed.3 However, neither the CLAIMS 3 LAN data nor
                        BCIS itself can provide information on how many H-1B beneficiaries
                        approved for employment in a year are actually working in the United
                        States in any particular year. The CLAIMS 3 LAN data may be informative
                        about H-1B petitions approved in a given year and about some
                        characteristics of those beneficiaries. However, these characteristics may
                        not be indicative of the characteristics of all H-1B workers in a given year.
                        For example:

                   •	   Of the H-1B beneficiaries approved in 2001, we do not know the
                        proportion that began work in 2001. Some may not have started work until
                        2002; others may not have started work at all.

                   •	   An individual H-1B worker could be represented in multiple petitions filed
                        by different employers in the same year.


                        1
                         We selected these occupations because they were among the top 10 occupations filled by
                        H-1B workers and were likely to have been affected by the economic downturn. In making
                        comparisons between the occupations of H-1B beneficiaries and U.S. citizens, we used the
                        CPS occupational codes. See table 5 for a description of the crosswalk used to compare
                        occupations from the BCIS database and the CPS.
                        2
                         We assessed the reliability of the CLAIMS 3 LAN data through interviews with agency
                        officials, electronic data testing, and review of related documentation.
                        3
                         Annual salary is based on full-time employment for 12 months, even if the beneficiary
                        actually worked for fewer than 12 months.




                        Page 35                                                GAO-03-883 H-1B Foreign Workers
                          Appendix I: Scope and Methodology




                     •	   We do not know the proportion of H-1B workers in 2001 who obtained
                          their H-1B petition approvals in 2001, 2000, 1999, or 1998.

                     •    Characteristics of H-1B beneficiaries approved in 2001 and working in
                          2001 may differ from characteristics of the H-1B workforce working in
                          2001 who received their approval in 1998-2000. For example, H-1B workers
                          approved in 1998-2000 could, on average, be older in 2001 than those
                          workers approved in 2001.

                          Because of these uncertainties, we do not know how well the
                          characteristics of the H-1B beneficiaries in any year would approximate
                          the characteristics of the population of H-1B workers actually employed in
                          that year.


                          To obtain demographic information for U.S. citizens working in the five
Current Population        occupations we examined, we used the monthly CPS from 2002. The CPS
Survey Estimates          is a monthly survey of about 50,000 households that is conducted by the
                          Bureau of the Census for the Bureau of Labor Statistics (BLS). The CPS
                          provides a comprehensive body of information on the employment and
                          unemployment experience of the nation’s population. A more complete
                          description of the survey, including sample design, estimation, and other
                          methodology can be found in the CPS documentation prepared by Census
                          and BLS.4

                          We used the 2002 CPS data to produce estimates of longest held job in the
                          previous year, highest degree attained, citizenship, and age. We used the
                          March 2002 Supplement of the Current Population Survey for all estimates
                          of median wages of U.S. citizens working for private employers. This
                          March Supplement (the Annual Demographic Supplement)5 is specifically
                          designed to estimate family characteristics, including income from all
                          sources and occupation and industry classification of the job held longest
                          during the previous year. It is conducted during the month of March each
                          year because it is believed that since March is the month before the
                          deadline for filing federal income tax returns, respondents would be more



                          4
                           See Technical Paper 63RV: Current Population Survey—Design and Methodology, issued
                          March 2002. Electronic version available at
                          http://www.census.gov/prod/2002pubs/tp63rv.pdf.
                          5
                           We used the March 2002 Supplement data on income on U.S. citizens for median salary
                          estimates, for the most recent year measured—2001.




                          Page 36                                              GAO-03-883 H-1B Foreign Workers
                                                    Appendix I: Scope and Methodology




                                                    likely to report income more accurately than at any other point during the
                                                    year. 6


Sampling Error                                      Because the CPS is a probability sample based on random selections, the
                                                    sample is only one of a large number of samples that might have been
                                                    drawn. Since each sample could have provided different estimates,
                                                    confidence in the precision of the particular sample’s results is expressed
                                                    as a 95-percent confidence interval (e.g., plus or minus 4 percentage
                                                    points). This is the interval that would contain the actual population value
                                                    for 95 percent of the samples that could have been drawn. As a result, we
                                                    are 95-percent confident that each of the confidence intervals in this
                                                    report will include the true values in the study population. We use the CPS
                                                    general variance methodology to estimate this sampling error and report it
                                                    as confidence intervals. Percentage estimates we produce from the CPS
                                                    data have 95-percent confidence intervals of +/- 10 percentage points or
                                                    less. Estimates other than percentages have 95-percent confidence
                                                    intervals of no more than +/- 10 percent of the estimate itself. Consistent
                                                    with the CPS documentation guidelines, we do not produce annual
                                                    estimates from the monthly CPS data files for populations of less than
                                                    35,000, or estimates based on the March Supplement data for populations
                                                    of less than 75,000. The blank cells in table 4 identify the estimates that we
                                                    do not produce because they are for small populations.

Table 4: Summary of Reportable Analyses

                                    Electrical/electronic              Systems       Biological/life
                                         engineers              analysts/programmers   scientists    Economists Accountants/auditors
 Age                                         X                               X                           X     X                 X
 Educational
 attainment                                  X                               X                                                   X
 Median annual
 salary                                      X                               X                                                   X
Source: GAO analysis of CPS data.

                                                    Note: ‘X’ indicates that we could report findings.


                                                    We compared CPS estimates of the number of U.S. citizen workers, age
                                                    distribution, and highest degree attained to comparable categories of H-1B
                                                    beneficiary approvals for the five occupation categories we examined.


                                                    6
                                                     See Technical Paper 63RV, page 11-4.




                                                    Page 37                                                  GAO-03-883 H-1B Foreign Workers
                     Appendix I: Scope and Methodology




                     While we attempted to produce CPS estimates of U.S. citizens for a
                     population that would be similar to H-1B workers, we could only make
                     comparisons to H-1B beneficiaries with petitions approved in a particular
                     year.

                     In order to compare the H-1B beneficiary occupations to CPS U.S.
                     workforce occupations, we combined some occupational categories in the
                     CPS to better match those of the BCIS data, as shown in table 5.

                     Table 5: Crosswalk from BCIS to CPS Codes

                      BCIS
                      codes             BCIS occupational title                   CPS codes      CPS occupational title
                      030               Systems analysis and                      064, 229       Computer systems analysts,
                                        programming                                              computer programmers
                      003               Electrical/electronic                     055            Electrical and electronic
                                        engineering                                              engineers
                      160               Accountants, auditors,                    023            Accountants and auditors
                                        and related
                      050               Economics                                 166            Economists
                      041               Biological sciences                       078            Biological and life scientists
                     Source: Monthly Current Population Survey, 2002, and BCIS.


                     In order to verify our estimates of the numbers of U.S. citizens in the key
                     occupations and their average annual salaries, we compared the March
                     Supplement employment statistics for 2001 to those reported in the
                     Occupational Employment Statistics (OES) 2001 survey. We did not use
                     the OES for our analysis because the survey collects data from employers
                     and does not provide information about individual workers, such as age
                     and education.


                     We compared the CPS median salary estimates for 2001 to median salary
Salary Comparisons   figures reported for the 2001 H-1B beneficiaries for several occupations,
                     and for four age by education categories. For two of the occupations
                     (biological/life scientists and economists), we did not produce CPS
                     estimates due to insufficient data (see table 7). Although several of the
                     comparisons we were able to make did show a statistically significant
                     difference between the CLAIMS 3 H-1B beneficiary median salary and the
                     “comparable” CPS estimate, it is difficult to interpret this result in terms of
                     actual H-1B workers in 2001. There are several limitations that lead to
                     uncertainty in the interpretation of these results:




                     Page 38                                                                  GAO-03-883 H-1B Foreign Workers
                            Appendix I: Scope and Methodology




                       •	   Although reporting problems are an issue with any measure of income, we
                            have additional concerns about the validity of the H-1B beneficiary
                            salaries, because the frequency distributions of the salaries of H-1B
                            beneficiaries in the five key occupations showed that employers reported
                            a number of very low and very high salaries for the “annual rate of pay” on
                            the petition application. We had no basis for determining whether the high
                            and low salaries were data entry errors, estimated payments for an
                            employment period of more or less than a year, or were very high or low
                            for some other reason.

                       •	   The measures of median annual salaries for U.S. citizens could include
                            bonuses, but the median annual salaries listed on H-1B beneficiary petition
                            approvals most likely do not. Neither median salary includes noncash
                            benefits such as health insurance or pensions.

                       •	   CPS salary reported in March 2002 was for the longest held position
                            actually worked in 2001, and reported by the worker himself (or a
                            knowledgeable member of the household). In contrast, salaries reported in
                            the CLAIMS 3 database for H-1B beneficiaries are provided by the
                            employer requesting the petition approval in possibly 2000 or 2001 for an
                            H-1B beneficiary likely beginning work in 2001 or 2002.

                       •	   The 2001 H-1B workforce includes not only a portion of those H-1B
                            beneficiaries approved in 2001, but also those approved in prior years and
                            beginning to work in the United States in 1999, 2000, or 2001. In 2001, the
                            more experienced H-1B workers may have salary patterns that differ from
                            new recipients in 2001.

                       •	   The definition of education level used to create our four age categories by
                            education level cells is somewhat different for the H-1B beneficiaries as
                            compared to the CPS U.S. workforce estimates. H-1B beneficiary status
                            requires the attainment of a bachelor’s degree or higher (or its equivalent)
                            in the field of specialty. In contrast, the education level recorded in the
                            CPS is the highest degree attained – not necessarily related to any
                            particular occupation.

                            In light of these limitations, caution should be used in interpreting
                            differences found in comparing CPS 2001 median salary estimates and
                            2001 H-1B beneficiary salaries.


                            To obtain information about the factors affecting employer decisions
Employers Selected 	        about the employment of H-1B workers, we conducted site visits and
for Interviews              telephone interviews with 36 H-1B employers in 6 of the 12 states with the



                            Page 39                                       GAO-03-883 H-1B Foreign Workers
                   Appendix I: Scope and Methodology




                   largest number of H-1B petitioners—California, Maryland, New Jersey,
                   New York, Texas, and Virginia—selected for their geographic dispersion.
                   Employers were selected based on their number of H-1B petition
                   approvals and occupations for which they requested H-1B workers in
                   fiscal year 2000. Specifically, we selected a variety of large (100 or more H-
                   1B workers), medium (30-99 H-1B workers), and small (29 or fewer H-1B
                   workers) employers to participate in the study. To obtain a range of
                   occupations for which employers hired H-1B workers, we also selected
                   employers based on whether they hired H-1B workers for either IT-related
                   or non-IT-related positions, such as those in accounting or life sciences.
                   We used fiscal year 2000 BCIS data to select employers because we
                   wanted to capture any changes in H-1B worker staff since the economic
                   downturn.

                   Through interviews with these employers, we collected qualitative
                   information on the factors affecting employers’ decisions in recruiting,
                   hiring, and laying off both H-1B workers and U.S. citizen employees.
                   Employer participation in this study was voluntary. We contacted 145
                   employers, and 25 percent, or 36, of these employers chose to participate;
                   consequently, our results may be biased by this self-selection. In order to
                   provide a broader perspective, we interviewed associations representing
                   highly skilled workers and associations representing employers to obtain
                   their views on how employers make decisions about their U.S. and H-1B
                   workers. We also interviewed Labor WHD officials about the agency’s
                   enforcement authority and employer violations of the H-1B program
                   requirements.


                   To obtain information available on H-1B workers’ entries, departures, and
DHS Current and    changes in visa status, we examined DHS data from current tracking
Planned Tracking   systems. However, we determined that these data had limitations that
                   precluded them from meeting our reliability standards. As a result, we did
Systems            not include them in our report. For example, we obtained data from DHS
                   on the total arrivals and departures of H-1B workers for fiscal year 2000
                   and the number of permanent residents who reported previously being H-
                   1B workers immediately before changing status in fiscal years 2000 and
                   2001. According to DHS officials, these were the most recent automated
                   data available. We also obtained data on the number of H-1B workers who
                   changed from H-1B to other employment-related visa statuses from
                   January 1, 2000 to December 31, 2002. In addition, we spoke with DHS
                   officials about the limitations of these data, data on the occupations of
                   employment-related visa holders, and current tracking systems.



                   Page 40                                        GAO-03-883 H-1B Foreign Workers
Appendix I: Scope and Methodology




We also obtained and reviewed reports on DHS’s planned tracking
systems. Among the documents we reviewed were the concept of
operations for US-VISIT (formerly known as the entry/exit system), a
report on system requirements for US-VISIT, the Data Management and
Improvement Act Task Force’s first annual report, and a report on the case
management system that is planned to replace CLAIMS 3. We also
interviewed DHS officials who are developing the new systems to learn
more about the planned system capabilities.




Page 41                                     GAO-03-883 H-1B Foreign Workers
Appendix II: Age Distribution and Salaries of 

H-1B Beneficiaries and U.S. Citizen Workers 


                                                                 Tables 6 and 7 provide information on the age distribution and salaries of
                                                                 H-1B beneficiaries and U.S. citizen workers.

Table 6: Percentage Distribution of the Age of H-1B Beneficiaries Approved in 2002 and U.S. Citizen Workers in 2002

                 Electrical/electronic                            Systems
                            engineers                analysts/programmers                                  Biologists             Economists          Accountants/auditors
 Age
 (years)              H-1B               U.S.                H-1B                U.S.            H-1B            U.S.            H-1B    U.S.              H-1B       U.S.
 20-24                      2                 5                      2                6                1            4               6      15                  4        7
 25-29                    27                11                   37                 17               12            20              34      16                30        16
 30-34                    33                12                   39                 19               34            14              31      17                31        17
 35-40                    22                21                   16                 19               37            17              16      15                19        18
 41+                      16                52                       6              39               16            45              13      37                17        42
Source: GAO analysis of Bureau of Citizenship and Immigration Services and Current Population Survey data.


Table 7: Median Annual Salaries of H-1B Beneficiaries Approved in 2001 and U.S. Citizen Workers in 2001 in Selected
Occupations, by Age and Education

                                                                                                             U.S. citizen        H-1B beneficiary     Statistical
 Occupation                                        Educational attainment                     Age            median salary       median salary        significance
 Electrical/electronic engineers                   Less than graduate degree                    18-30              $52,000                $60,000 H-1B higher
                                                   Less than graduate degree                    31-50              $70,000                $65,000 H-1B lower
                                                                                                                             a                        a
                                                   Graduate degree                              18-30                                     $66,500
                                                   Graduate degree                              31-50              $88,000                $77,000 H-1B lower
 Systems analysts/programmers                      Less than graduate degree                    18-30              $45,000                $54,500 H-1B higher
                                                   Less than graduate degree                    31-50              $60,000                $60,000 No difference
                                                                                                                             a                        a
                                                   Graduate degree                              18-30                                     $59,500
                                                   Graduate degree                              31-50              $87,000                $65,000 H-1B lower
 Accountants/auditors                              Less than graduate degree                    18-30              $33,280                $40,000 H-1B higher
                                                   Less than graduate degree                    31-50              $39,014                $39,000 No difference
                                                                                                                             a                        a
                                                   Graduate degree                              18-30                                     $46,500 

                                                   Graduate degree                              31-50              $50,000                $55,000 No difference 

Source: GAO analysis of Bureau of Citizenship and Immigration Services and Current Population Survey data.
                                                                 a
                                                                  Indicates that there were insufficient observations to make a determination.




                                                                 Page 42                                                                GAO-03-883 H-1B Foreign Workers
Appendix III: Comments from the 

Department of Homeland Security 





              Page 43          GAO-03-883 H-1B Foreign Workers
Appendix III: Comments from the Department of Homeland Security




Page 44                                            GAO-03-883 H-1B Foreign Workers
Appendix IV: GAO Contacts and Staff
Acknowledgments

                    Andrew Sherrill (202) 512-7252
GAO Contacts 	      Mary Abdella (202) 512-5878


                    In addition to the above contacts, Danielle Giese and Emily Leventhal
Staff 	             made significant contributions to this report. Also, Shana Wallace assisted
Acknowledgments 	   in the study design and analysis; Mark Ramage assisted in the statistical
                    analysis; Julian Klazkin provided legal support; and Patrick DiBattista
                    assisted in the message and report development.




                    Page 45                                      GAO-03-883 H-1B Foreign Workers
Related GAO Products 



              Information Technology: Homeland Security Needs to Improve Entry
              Exit System Expenditure Planning. GAO-03-563. Washington, D.C.: June
              9, 2003.

              High-Skill Training: Grants from H-1B Visa Fees Meet Specific
              Workforce Needs, but at Varying Skill Levels. GAO-02-881. Washington
              D.C.: September 20, 2002.

              Immigration Benefits: Several Factors Impede Timeliness of
              Applications Processing. GAO-01-488. Washington, D.C.: May 4, 2001.

              H-1B Foreign Workers: Better Controls Needed to Help Employers and
              Protect Workers. GAO/HEHS-00-157. Washington, D.C.: September 7, 2000.

              Immigration and the Labor Market: Nonimmigrant Alien Workers in the
              United States. GAO/PEMD-92-17. Washington, D.C.: April 28, 1992.




(130162)
              Page 46                                    GAO-03-883 H-1B Foreign Workers
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