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Revisting Silicon Valley’s obsession with immigration reform

Last week, prominent venture capitalist Paul Graham published a passionate essay in favor of H-1B – a skilled worker visa – immigration reform on his oft-cited blog. He argued that the United States needs to allow more foreign programmers into the country in order to preserve Silicon Valley’s status as a global hub for the best tech talent into the future. The central point he makes is that higher immigration quotas for programmers is not at all about lowering wages here because companies are simply looking to hire the best people regardless of where they come from. The primary concern for companies in his view is not that immigration quotas are keeping wages high, but that the restrictive policies are preventing companies from hiring people that they really need even regardless of costs.

In his essay, Graham brings up the now-familiar adage that the best programmers are a hundred, if not a thousand times, more impactful than their peers and hiring globally is the only way for American companies to get to all the “100x” programmers they need to maintain their global dominance. In other words, if companies are willing to spend the money to hire the best people in the world, then they should be allowed to do so freely. If companies are only looking to hire the best programmers to fill these critical positions that no one else in the country is both looking to and capable of filling, then it is a net economic gain for everyone in the country that they be allowed to do so. Unfortunately, this sanguine view is not an accurate reflection of reality.

The same argument has been made before by various prominent Silicon Valley figures, including Mark Zuckerberg and his FWD.us lobbying efforts; Graham’s essay has predictably provoked another round of counter arguments. The replies reflect widespread suspicion that the tech elites are pushing a cynical agenda that seeks not to create more growth but to monopolize a larger portion of growth that would have happened anyway by lowering the cost of labor. In light of revelations such as salary fixing by high-profile tech companies like Google and Apple, this is a reasonable fear.

Unlike many of his detractors, I completely agree with Graham’s assessment of the extremely unequal impact that individual software engineers bring to a company. There are individuals working in the Silicon Valleys that are widely acknowledged to be crucial in enabling the growth of companies like Facebook and Google. I am not talking about founders who are often more business-savvy than engineering-savvy, but the important hires who designed the infrastructure to manage software complexity and growth. The hiring demand for people like those is almost entirely inelastic and the exact opposite of an ideal labor economic model consisting of undifferentiated mutually replaceable workers and it is clear that these are people that Graham has in mind in his writing.

The problem, however, with the general pro-reform argument is that this fact is being used to justify a wider loosening of immigration quotas.

If we take a look at the H-1B visa approval numbers from 2012, we see that of the 135,000 or so approvals, a good 35,000 – more than a quarter – can be accounted for by a small handful of large companies. We are not talking about ground-breakingly innovative companies, but about large IT service providers like Infosys, IBM and Accenture. Infosys alone accounts for 5,600 of those approved applications.

No one sincerely believes that these companies are only looking hire the best global talents that they cannot find elsewhere. Yes, the immigration quota system for tech employees is broken right now, not because the annual H-1B quota of 85,000 plus additional exceptions is too low for Silicon Valley to hire all the software engineering superstars it needs – the world is just not producing anywhere close to 85,000 of these “100x” programmers every year – but because the H-1B is being used by large companies for undifferentiated IT and basic programming positions as an outsourcing visa, exactly the fear that reform skeptics have repeatedly brought up. In loosening quotas to meet Silicon Valley’s needs, the unavoidable side effect will be lower wages and greater competition for American tech workers elsewhere.

Paul Graham is probably entirely sincere in making his appeal. Regardless of the rightfully questionable motivations of large tech firms in pushing to hire more H-1B workers, the immigration system needs to ensure that startups here can hire the best talents they need in the world. The challenge is to address the very real and specific needs of the startup world that Graham hails from without threatening the general labor market with another wave of outsourcing. A general increase in the H-1B quota is not going to do the job when companies like Infosys continue to dominate the application process.

We need a smarter process.

Contact Raven Jiang at jcx ‘at’ stanford.edu.

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