Obscure Immigration Program Hurts U.S. Residents–Both Young and Old

The full negative impact on residents (both citizens and green card holders) of an obscure, almost secret, immigration program was revealed recently as the Department of Homeland Security–slowly–responded to a FOIA request from the Center for Immigration Studies.

The program that converts foreign college graduates back to foreign students by a wave of a bureaucratic wand had these negative impacts on residents of the United States:

• It denied American workers more than430,000 jobs during the years 2009-2013; and
• It removed $4 billion (with a B) from the Social Security and Medicare trust funds.

The number of foreign college graduates from U.S. universities–in their DHS-created disguise of college students, so they can work legally–increased sharply in the years 2009 to 2013. The total soared to nearly 100,000 in 2013, and presumably is still growing. It had been at just under 74,000 in 2009.

Immigration and Customs Enforcement (ICE) runs the foreign student program. Many years ago it created the Optional Practical Training (OPT) program, which allows recent alien college graduates to work for a period of 12 months after graduation. The Bush (43) administration created a still larger loophole by extending the 12 months by17 more months for those F-1 visa holders working in the fields of science, technology, engineering, and math (STEM), and the Obama administration further expanded the program, with no congressional input in either case. Since these foreign college grads are defined by ICE as “students”, neither the employer nor the alien has to pay payroll taxes, which are mandated on resident workers and their employers. Thus the United States pays a bonus of as much as $11,600 to employers when they hire an alien graduate rather than a U.S. graduate with the same qualifications and paid the same salary. That is both unfair and absurd!

CIS calculations based on the raw DHS data follow:

Year	12-Month OPTs	17-Month STEMs	Total Years of Alien Payroll-Tax-Free Status
2009	73,849	5,938	82,263
2010	79,885	9,417	93,233
2011	87,123	13,602	106,397
2012	93,137	16,065	115,900
2013	99,143	19,115	126,228
Five-Year Totals	433,137	64,137	524,021

What do all these numbers mean? There are several answers.

Trends. Let’s start with columns two and three in the table, the number of extensions granted in each of the five years. These data support what I, modestly, call the North Theory of Nonimmigrant Admission Trends. Generally, without numerical restrictions, old loopholes in the law such as the 12-month OPT program grow steadily, but new ones, like the 17-month extension for STEMs, grow much more rapidly at first as more aliens and more employers learn about them.

In this case, the increase from 2009 to 2013 was a little over 34 percent in the older (12-month) category, while the increase in the same years for the newer STEM category was a thumping 232 percent. A STEM foreign grad, incidentally, will go through the 12-months status first and then the 17-months extension, making the 64,137 number, seen in the table, a subset of the 433,137 figure.

Given the noisy statements from the IT industry that there is a shortage of STEM-trained workers, I find it odd that the ratio of STEM to all OPT-employed workers is so small.

Negative Impacts of These Programs on Citizens and Green Card Holders, Young and Old. There are two different negative impacts–serious ones–on two different sections of the American public: on citizens and green card holders with new college degrees and on older (and disabled) residents of America who are either Social Security or Medicare beneficiaries or both.

Jobs Lost. How much damage is done to each of these two classes of victims? The problem for recent resident college grads is the loss of jobs. I assume that virtually every job that is now filled by a 12- or a 17-month OPT worker could be filled from the vast number of unemployed residents of this country. (There will be exceptions, of course, if an employer really, really needs a recent forestry sciences graduate with fluent Mongolian the boss may understandably need to hire an OPT worker or an H-1B, but these are rare exceptions to the rule.)

Given these assumptions, a total of something on the order of 430,000 jobs were denied to resident workers because of this program; some 64,000 of these jobs were in the STEM fields. For more on the shrill calls of Silicon Valley that there are skills “shortages” (rather than the plain fact that foreign workers cost less and can be exploited more than American workers), see here.

The progression from being a genuine foreign student in F-1 status to the 12-month extension to the 17-month extension for the STEM workers to H-1B and perhaps green card status (for the lucky ones) was the subject of an earlier blog. Employers often use these two OPT periods–12 months and 17 months–as test runs for workers they may later recruit into the H-1B program.

“Optional Practical Training” is a misleading name for the program as there is no training involved; this is simply another foreign worker program hiding behind student visas. The OPT notion is that the foreign students will work in the field they studied; this is rarely, if ever, enforced as the designated cops on this beat are the colleges from which the alien students graduated.

Can you imagine that the international student officers, at say Notre Dame or Harvard, are making sure, six months after graduation, that the alien alumni in question are actually working in their academic field, rather than pumping gas or being a cashier in a grocery store thousands of miles from the campus–which may well be the case? Can you imagine, after finding a violation, that a college official would call ICE saying “deport these alumni”? Can you imagine ICE doing anything with that information if it received it in the first place?

I cannot see any of those things happening.

Which Educational Institutions Use the OPT Program the Most? Four and a half years ago ComputerWorld, having filed a similar FOIA request, reported that the top-two OPT-issuing institutions in 2009 were Stratford University, a for-profit entity in suburban Washington, and Connecticut’s Bridgeport University, with the little known Stratford having that year more OPT extensions than the entire Ivy League put together. Bridgeport, meanwhile, apparently once in financial difficulties, had been taken over by the Unification Church. On the list, the 18th largest institution was the University of Northern Virginia, a for-profit visa mill subsequently put out of business by state authorities and later, de-listed by ICE.

Were these institutions still prominent in the OPT field? Apparently not. With that question in mind, we asked ICE for the top 100 institutions in the years for both the 12- and 17-month programs for 2009-2013. The list of entities issuing 12-month OPTs in 2013 did not show Stratford at all, Bridgeport came in 78th; and another list, that of the top 100 users of the 12-month program in 2012, showed that the University of Northern Virginia–alone among the institutions on all of these lists–had “withdrawn” from “school status”. One can be fairly sure that none of the 555 “students” noted in that filing were booted out of the country, but, in most cases, they must have been simply pushed into illegal status or forced to move on to a legitimate college or university.

The five largest of the 12-month OPT institutions in 2013 were the University of Southern California, Columbia University, New York University, the City University of New York, and the University of Michigan–none of these are for-profit entities. USC had 1,930 foreign graduates in the 12-month program in 2013.

The five largest in the 17-month category in 2013 were USC, the Illinois Institute of Technology, Columbia, the University of Florida, and the New Jersey Institute of Technology; again, none of these are for-profits. USC issued 354 extensions to STEM workers that year.

Trust Funds Lost. We noted earlier that more than $4 billion had been lost by the Social Security (FICA) and the Medicare trust funds because non-taxable work had been substituted for the usual taxable work. In addition, much smaller losses were sustained, for the same reason, by the Federal Unemployment Trust Fund and some state unemployment insurance funds. (The $4 billion estimate, which is described more thoroughly below, does not include these smaller losses.)

One might think that a loss of such magnitude would be: A) noticed by the media; and/or B) be subject to congressional criticism; or at the very least C) be attacked by entities representing the tens of millions of users of Social Security and Medicare.

Alas, none of this is true. We had a meeting with several people at AARP on the subject and were treated respectfully, but the bottom line, as we reported at the time, of a loss of $1 billion a year was too small to be included in that organization’s lobbying program. None of the otherwise knowledgeable people on the AARP staff had even heard of the program until I brought it to their attention.

OPT Is a Near-Secret Operation. The AARP lobbyists and researchers are not the only ones who do not know about the OPT programs. In recent years I have, as a volunteer, provided income tax counseling at tax time to graduate students at a major Washington, D.C.-area university; many of the people I saw were both foreign students and in the STEM fields. With one or two exceptions, none of these students were aware of OPT when I talked to them, even though the vast majority were looking forward to working in the United States.

I asked them: “Suppose you and I had exactly the same credentials, were the same age, and citizenship was not a factor, why would a U.S. employer hire you instead of me?”

I think no more than one of the scores of potential beneficiaries I discussed this with knew the answer; apparently OPT was never mentioned in the university’s briefings on how to get a job in the United States and is not discussed on the active grad-student grapevine.

Further, and even harder to believe, many of the grad students who had summer jobs with (admittedly smaller) American corporations showed me tax forms that indicated that their employers had not taken advantage of this program. The big employers never make that mistake! (OPT covers summer jobs, too.)

The reader might Google “OPT tax break” and see what is to be found; there are a only a handful of on-target entries and these are soon mixed in with references to the City of Denver’s Occupational Privilege Tax, which, of course, has the same initials. This is another measure of the program’s obscurity.

This is a blockbuster of a story for someone in the media.

My policy suggestion is to abolish the OPT program completely, or at least cut it back to the historic 12-month period, but this would be fought by the employers’ lobby which is trying so hard to expand the H-1B program. Perhaps a compromise could be reached in which the program stays intact but the outrageous tax breaks are removed.

The reader, if allergic to numbers, may be excused from the final part of this report in which we examine the source of the data, and the techniques used to create the $4 billion loss estimate and the estimate of the up to $11,600 bonus for an employer hiring an OPT worker rather than an American.

Data Source and the Estimation Techniques Used

CIS filed a Freedom of Information Act (FOIA) request with ICE on March 14, 2014, for information about the total numbers of OPT 12-month and 17-month extensions, seeking both alphabetical lists of the grantors of these extensions and the top 100 grantors in each category for the years 2009-2013. The response, with all the data on a single disc, was sent to us on February 19 of this year and arrived shortly thereafter.

That disc contained the (lengthy) alphabetical listings, no totals, no explanations, and only some of the top 100 listing we requested; we subsequently totaled the number of extensions ourselves. If mailed to one without a computer, or one with limited computer skills, such as the author, the government would have complied with the request without disclosing a bit of data. The data were also in the “read only” category. A skilled CIS colleague unlocked the data and provided me with useful tabulations extracted from what would have been the full 64-page printout.

The ICE letter included the following passage:

Provisions of the FOIA and Privacy Act allow us to recover part of the cost of complying with your request. In this instance because the cost is below the $14 minimum, there is no charge.

I thoroughly believe that no more than $14 in staff time was spent on this response; on the other hand, we were glad to get the information.

The $4 Billion Estimate of Moneys Lost by the Trust Funds. The formula for this is:

A * B * C = X

in which A is the total years of payroll tax-free status, B is the average annual pay of the foreign college graduates, C is the Social Security/Medicare tax rate, and X is the total loss to these two funds over the five-year period. The assumption is that all these years of tax-free status were used; in reality, probably a small fraction of the tax-free status was not used because the recent graduate either moved on to another visa category, left the nation, or, in a very few cases, died. This slight tilt toward a lower estimate is, however, more than balanced by other factors.

A is taken from the fourth column of the table shown earlier. In the case of B, I used the average new college grad’s wage of $50,000 for all years. This is based on the finding for the middle year, 2011, in which that average was $50,034 (rounded down to $50,000), in a report by the National Association of Colleges and Employers.

For C, the assumption is that the Social Security/Medicare tax rate was 15.3 percent (for both employer and employee) for all years, when in fact during the years 2011 and 2012 (because of the recession) these rates were reduced to 13.3 percent. Since this reduction was unique in the now nearly 80 years of Social Security taxation, I ignored it. The numbers, subsequently rounded to $4 billion, work out as follows:

524,021 (years) * $50,000 (salary) * 15.3 percent (rate) = $4,008,760,600

The $11,600 Bonus for an Employer to Hire an OPT Worker Rather than a Resident. The formula follows:

D * E * F = Y

in which D is the tax-free period, E is the average annual pay, F is that part of the tax break that goes to the employer, and Y is the employer savings (and the loss to the trust funds) in dollars. D is 2.41 years (or 29 months, covering both the 12-month and the 17-month periods). E is $60,000, my best guess as to the annual income of the STEM graduate (probably an under-estimate), and F is the employer’s part of the tax break, or 7.65 percent. This works out as follows:

2.41 * $60,000 * 7.65 percent = $11,619

The higher the salary, and I have heard of OPTs getting more than $100,000 a year, the higher the tax-avoiding bonus to the employer.

Again, the assumption is that the newly hired foreign college grad stayed with the firm, in OPT status, throughout the full 29 months. The $11,600 bonus is an estimate of what an employer would get when hiring an alien STEM worker rather than a resident one with the same qualifications.