Taking the Blinders off Social Security's H-1B Audit

By David North on September 20, 2011

To use a rural metaphor regarding the recent Social Security Administration audit of the H-1B program, while blinders are sometimes useful on a riding horse, they are not in a government report.

The document by the SSA's Office of Inspector General, recently cited by my colleague John Miano, estimated that 18 percent of a population of 38,546 H-1B-linked Social Security numbers (SSNs), or an estimated 7,131 SSNs, had been misused by these foreign workers, suggesting serious problems in the program. These difficulties ranged from unauthorized switching of employers to the illegal payment of wages to the workers in their home countries, thus avoiding all U.S. taxes.

The problem with OIG and GAO reports, all too often, is their exceedingly narrow focus; the sampling plans and related math are handled with exquisite precision, which is splendid, but the policy analysis is often grossly inadequate and sometimes very, very narrow. All of these comments apply to this SSA report.

To return to the riding horse, blinders are essentially censoring devices; they are useful in wooded or urban areas where the rider does not want the horse to spook because of a sudden movement seen out of a corner of an eye; as a youth I was sometimes tossed from the horse if she saw a deer, for example, before I did. But when dealing with policy analysis, as these reports do, a blinders-free range of vision is preferable.

While I am delighted that the OIG document was published, and there are useful data within it, there are two problems with the cited report: 1) its failure to see the big picture, and, 2) its failure to understand some of the mechanics of the program and their broader implications.

The Big Picture. I have no trouble with the mathematical accuracy of the numbers 7,131 and 38,546 noted above, but I have a lot of trouble with their policy relevance.

You see, there are not about 38,546 H-1Bs in the nation; rather, there are probably about 650,000 of them, as I estimated earlier this year. So, if you can project the OIG percentage to the entire population, and not just to those who secured SSNs in FY 2007 (the study's focus), you have you have something like 117,000 H-1Bs with troubled Social Security numbers. OIG probably should have published both the 7,131 and the somewhat less firm estimate of 117,000; using the latter to illustrate the real size of the problem.

The 117,000 might have spooked the decision-makers, and that would be a good thing.

The Implications of the Findings. The 18 percent figure related to two subpopulations: in one, there were H-1B SSNs that showed that the workers were not working for the previously authorized employer (11 percent). And, in the other, there were H-1Bs whose SSNs showed no wages at all (7 percent). (The whole sample consisted of 200 SSNs, which I suppose suffices in a scientific cross section of a population of 38,546, but I would have wanted it to be bigger.)

The report on the 11 percent simply noted that the workers were not employed by the correct firms, and left it at that. The implications are more significant: in all cases, the immigration law regarding the movement of H-1Bs from one employer to another had not been followed. In some of those cases, the alien may have been working for an employer who had no right to such a worker, and in a few, the employer may have been blacklisted by the government. Also, fees are charged when H-1B workers switch jobs, and presumably were not paid in these cases.

A further implication is that these jobs were illicitly filled by aliens when they should have been filed either licitly by aliens, or, better, by unemployed U.S. residents. None of these implications are even hinted at in this narrowly-focused document.

The seven percent – the ones with no reported wages – reflected the reactions in 14 of the 200 cases; six employers said that yes, they had sponsored the workers, but no, they had not employed them; three said that they never had sponsored the workers (though DHS documents indicated the contrary) and five simply could not be reached.

What the OIG missed in its analysis of this second subpopulation is a small, central fact of the H-1B program; a percentage of the H-1B slots are granted to employers but, for a variety of reasons, are not actually used. Sometimes employers change their minds, sometimes the workers do so, and sometimes a petition granted by one agency (DHS) leads to a visa denial by another (State).

The non-use of an H-1B slot is a non-problem to the nation, in fact it is a blessing, but is regarded by the OIG as a problem to SSA because the agency has issued a number that it need not have issued; in other words, small potatoes, narrowly defined.

Regarding the non-reporting of wages, however, a useful part of this document comes on p. 3, where it states:

One [SSA] field office manager told us that some H-1B workers acknowledged that they would not receive wages in the United States, because their employers would pay them in their home countries.

I have been watching the H-1B program for many years, and never heard about that problem. As the OIG does not say, such wages would have been subject to no federal or state income or payroll taxes, of any kind, a real loss to our economy.

I hope that those reading this report will do so with their eyes open to its hidden implications.