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The H1B refers to non-immigrant visa in the U.S, which was created in section 101(a) (17) (H) of Immigration and Nationality Act. The visa allows employers in the United States to temporary recruit foreign employees in specialty occupations (Borjas 37). In the U.s, the specialty occupations relate to specialized knowledge in specific fields like biotechnology, architecture, theology, arts, chemistry, engineering, physical sciences, mathematics, social sciences, education, medicine and health, law, business specialties and accounting. According to U.S Immigration and Nationality Act, when the employees working under H-1B status is sacked or quit from the place of work, the employees are required to for the permit to get another non-immigrant status so as to seek another job. Failure to apply for non-immigrant status means that the individual must leave the U.S.
Over the year, employers have been recruiting foreign workers under H-1B status to undertake specific tasks in the company. Most employees prefer employing foreign workers under H-1B status as a way of reducing labor cost, which in turn helps in reducing the operational costs. The H-1B workers are paid relatively lower salaries compared to U.S employees with equivalent qualifications. Another motivation of employing H-1B workers relate to a shortage of labor in some fields (Boyd 41). Thus, employers are forced to look for foreign employees to fill the shortage of labor created in the country due to lack of qualified and experienced individuals in the U.S, in some fields of work. The other important motivation of recruiting H-1B workers relates to the need of acquiring the best and brightest employees in specific industries. Some industries like Information Technology, engineering and medicine require the best creative knowledge and technical knowledge so as to create new product and services that will meet the emerging needs of the consumers. This influences the employers in the U.S companies to employ H-1B workers so as they can get the best and brightest employees who can drive the companies to the next level (Grund & Niels 487).
Although H-1B workers have been contributing massively to grow and development of American companies, the program of hiring foreign employees has raised serious issues among the local employees. Some local employees have argued that H-1B workers have led to increased rate of unemployment because they usually take all available jobs. This argument could be true because most employers prefer H-1B workers over local employees due to reduce labor cost and motivation to get the best and brightest employees from the foreign countries. The government of The United States has listened to the citizens and understood their concerns. As a result, the house of representative in the U.S has introduced legislation with the aim of increasing the salary of H-1B visa holders from $60,000 to $130,000. The main aim of this legislation relates to making it difficult for the employers in the U.S companies to replace American workers with foreign workers (Boyd 47).
Most politicians including Zoe Lofgren who is California Congressman maintains that it is true that the program of H-1B workers was to seek the best and brightest employees from the foreign labor market with the aim of supplementing the local workforce. However, they argue that the program should not be used to replace American workers with foreign employees. The congressmen in the U.S are aimed at ensuring that employees in the country are treated more fairly (Mithras & Henry 748). It is important to note that although the increase of salaries to H-1B workers is important in discouraging employers from hiring foreign employees and increasing employment opportunities for American employees, it will have negative impacts on American firms and country’s economy. This part of the paper focuses on highlighting the impact of salary increase of H1B workers to the American companies and the U.S economy.
Effects to the Companies
Although salary increment is aimed at regulating the number of foreign employees getting hired by American firms, the already employed foreign workers will continue enjoying the high salaries. Despite the need to cut cost, employers cannot dismiss foreign employees because the significant contributions they make to the operation of the businesses. Some foreign employees are very bright and possess exceptional talents (Peri 69). As a result, the American firms have no choice but retain them despite the high cost of labor caused by salary increase of H1B workers. This part of the paper focuses on discussing the impact of salary increase of H1B workers on the American Companies.
One of the main impacts of the salary increase of H1B worker to the American firm relate to reduced number of creative and highly talented employees. The main aim of H1B visa program is enabling American firm to recruit new highly experienced and exceptionally talented individuals from other countries and supplement the knowledge and skills available in the United States. However, with the increase in salaries for H1B workers, employers are discouraged from seeking new talents from foreign nation through H1B visa program. This creates a situation whereby employers will be forced to concentrate on seeking new talents within the country (Peri 62). However, with the increased number of companies in the United States, American firms will be faced with the problem of shortage of exceptionally talented employees. The employers are forced to compete for the available talented and bright employees. Shortage of required employees to perform specialized tasks forces the employers to settle on the available workers in the country despite the fact that most of them lack required experience and expertise.
Failure to employ the best and brightest employees affects the work efficiency in the company, which in turn affect the productivity of the business. Every company requires employees who offer a pool of talent to ensure various operations in the organization are running effectively. A pool of talent ensures that employees can exchange ideas so as to come up with the most appropriate approach to performing specific operations (Gadsby et al. 389). Additionally, a pool of talent helps to effectively deal with the problems facing the company. They situation created by the introduction of salary increase of H1B worker, which relate to discouraging companies from searching talented employees from abroad reduced the number of experienced workers. Lack of these workers creates a situation whereby there Americans lack individuals who offer extraordinary skills, which is important in improving productivity in the companies. This means that failure to employ foreign workers under H1B visa program results into low productivity, which affect client’s satisfaction (Peri 71). Failure to satisfy the needs of the client reduces their loyalty to the company, which negatively affects the sales made by the business. Reduced sales effects the amount of revenue generated by the company, which in turns affect the performance of the company negatively.
The other key impact of salary increase of H1B worker to the American firm relates to the increased cost of training. Failure to secure gifted employees from the foreign countries forces local employers to employ employees from the local workforce, based on their academic qualification with the aim of taking them through the training program. A Huge amount of money and time is spent on training the newly recruited employees to ensure that they attain the required knowledge and skills (Mithras & Henry 751). For the company to effectively train the workers, professionals in various areas must undertake the training process. Hiring professionals and career experts require a huge amount of money to pay for their wages and allowances (Cadsby et al. 389). The company needs to buy tools, equipment and materials require to take undertake training procedure. The training process requires a lot of time to ensure that employees understand what they are taught. Thus, the management team in the company is required to come up with the arrangement, which ensures that every employee is relieved from the duty to allow them to have enough time to attend training sessions. Additionally, the management team must set aside fund to sponsor some employees to seek higher education. This is aimed to support employees to enroll in institutions of higher education so as they can pursue courses that help the acquire knowledge in a specific area. Thus, the training process is costly to the company because of the huge amount of time and money spent. Thus, increasing salary increase of H1B worker would cause reduction of the profit earned by the company due to increased operational costs.
The other impact of the increase of salaries of H1B worker relates to declining quality of product and services produced by the American firms. The main objective of every business is to produce product and services with the aim of selling them to the potential clients so as to earn a profit. As a result, the business owner or the manager is focused on controlling the amount of money spent on the production process. This because for the business to make the profit, the management team must minimize the operational costs and maximize the revenue earned (Grund & Niels 491). In the case where the government, through the house of Congress is intending to increase the minimum wage of the H1B worker, the operational cost of the business is likely to go up as a result of an increase in the cost of labor. Considering labor has to be involved in the production process, the management team must come up with strategies of cutting the cost of operation by focusing on other areas in the production process.
The main area that most companies are likely to focus on to reduce operational cost relates to materials used in production process. To reduce the cost of operation in the company, the management of most American companies are likely to use the cheaper materials (Cadsby et al. 501). However, cheaper production materials are likely to be of lower quality. Use of low materials would negatively affect the quality of products produced by companies. Thus, if a proposal to increase salaries of the H1B worker from $60,000 to $130,000 is implemented, most American companies will be forced to use cheaper production materials, which will lead to the production of poor quality products.
American companies are likely to suffer from ripple effects of H1B workers salary increase. Ripple effects relate to the fact that the increase in salaries for the H1B worker is likely to affect salaries of other employees in the company. In a company that has employed both the local employees and H1B workers, increase in salaries for the latter would force the management team to increase the salaries of American employees so as to create equality. Thus, American companies would be faced to pay huge salaries to both the junior and senior employees in the company. This would lead to increased wage bill, which in turn affect the financial performance of the business (Grund & Niels 497).
American companies operate under a very competitive environment where they compete for opportunities, market share, employees, and customers. The salaries of H1B worker will limit the number of foreign employees coming to the United States. As a result, American companies will be forced to compete for available employees in the local labor market. Every company will be looking for the most experienced and most talent employees in the market. To ensure that every company gets the required team of employees, the different company will be forced to come up with new strategies for attracting new employees (Boyd 45). One of those strategies would relate to offering high salary packages. Thus, with increased competition for workers, the demand for highly qualified workers will increase, which in turns will lead to increase in salaries. This will create a situation whereby American employers will be forced to pay exceedingly high wages for their employees, which will have a negative effect on business performance, due to the high cost of operation (Cadsby et al. 389).
Effect on the Economy
The increase in salaries for H1B visa workers is likely to hurt the economy of United States. The negative effects of this increase relate to increased rate of unemployment, inflation, closing down of local companies. Increased salaries for H1B visa workers would cause the management teams in different companies to come up with strategies of increasing wage bill. For the company to successfully reduce the wage bill, it must cut the number of employees. Most American companies would lay off some of the semi-skilled workers, who are the majority in most companies, so as to reduce the wage bill. The companies retain highly skilled workers to ensure that they are involved in the main operation of the company (Boyd 47). To ensure that the production process is not affected by reduced number of employees, the management team of the companies makes an arrangement with the employees to work overtime. Additionally, most companies are forced to employ the latest technology in the production process so as to reduce the number of employees. The reason for considering the use of improved level of technology relate to the fact that machines can perform tasks that can be performed by large number or employees.
The process of reducing the number of unskilled and semi-skilled employees in the company creates unemployment to an unskilled worker, particularly the youths. Increased rate of unemployment has a negative effect on country’s economy (Neumark & William 7). When people are not employed, they cannot earn income, which is required in buying commodities and services required for one to survive in the day to day life. Lack of income reduces the purchasing power of people, which reduces sales of products offered to the market by different companies.  This reduces the amount of revenue earned by those companies, which in turns reduce the amount of money the companies invest into the economy.
Another effect of the increase of salaries for H1B visa workers to the economy relates to increased rate of inflation. When the salary for H1B visa workers is increased, the management teams of various companies are forced to increase the salaries and wages of other employees in the companies, including the unskilled workers. Increasing the salaries of workers in the companies means that they earn more income (Dickens et al. 297). The increase of income leaves employees with enough money to save and spend on various commodities. Increased amount of disposable income among the employees creates a situation where they can afford most of the products and services offered to them.
This means that most employees can buy most of the products offered on the market. The capacity to buy different product and services increases demand for those items and services. The increase in demand for products and services forces their prices to go up. The capacity of the employees to buy various product and services even after the increase in their prices causes inflation where different items are offered into the market at very high prices (Neumark & William 11). Inflation is bad for the economy because it negatively affects various sectors of the economy, including processing and manufacturing due to increased cost of equipment and raw materials. Additionally, in the long-run inflation in the economy can cause increased rate of unemployment.
The other effect of the increase of salaries for H1B visa workers to the economy relates to closing down of local companies. Every American company is involved in its business with the aim of earing profit. However, the proposal to increase the wages and salaries of H1B visa workers is threatening the process of realizing the goal of most American companies to maximize profit. Most American companies benefit from the services of H1B visa workers (Dickens et al. 297). Thus, increase in their salaries would raise the cost of running a business to these companies. With the aim of cutting down the costs, the management teams will be forced to produce the product that will help their businesses to break-even. In the long-run, the continuous increase in the cost of operation, which will reduce the amount of revenue generated by the business, will affect their performance causing them to close down (Cadsby et al. 391). Closing down of companies in the local industry will have the negative impact on the economy because many jobs will be lost. When people lose a job, their purchasing power decline, which creates a situation whereby local products do not get enough market.
To conclude, from the literature reviewed in this paper, it is evident that increasing salaries of H1B workers from 60K to 100K would have hurt the American companies and the U.S economy. This increase of salaries can reduce number of creative and highly talented employees, lead to increased cost of training to the companies and cause the declining quality of product and services produced by the American firms. It can also cause increased rate of unemployment, inflation, and force local companies to close down.
 
Work Cited
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Boyd, Monica. “Recruiting high skill labour in North America: Policies, outcomes and futures.” International Migration 52.3 (2014): 40-54.
Cadsby, C. Bram, Fei Song, and Francis Tapon. “Sorting and incentive effects of pay for performance: An experimental investigation.” Academy of management journal 50.2 (2007): 387-405.
Dickens, William T., et al. “How wages change: micro evidence from the International Wage Flexibility Project.” The Journal of Economic Perspectives 21.2 (2007): 195-214.
Grund, Christian, and Niels Westergaard-Nielsen. “The dispersion of employees’ wage increases and firm performance.” ILR Review 61.4 (2008): 485-501.
Mithas, Sunil, and Henry C. Lucas Jr. “Are foreign IT workers cheaper? US visa policies and compensation of information technology professionals.” Management Science 56.5 (2010): 745-765.
Neumark, David, and William L. Wascher. “Minimum wages and employment.” Foundations and Trends in Microeconomics 3.1–2 (2007): 1-182.
Peri, Giovanni. How immigrants affect California employment and wages. Public Policy Institute of California, 2007.