H-1B Employees Could Help Manufacturers Hire Again
Written by Prachi Bhardwaj on May 24, 2017
President Trump has staked his presidency on reviving manufacturing and restricting immigration, and he seems to think the two go hand in hand.
He's wrong. Manufacturing companies say they need skilled immigrants to build and maintain advanced factories, and the blue-collar workers the president has promised jobs to aren't being displaced by immigrants.
"The majority of our staff are either going to be machine operators, assemblers, or engineers, primarily software or electrical," said Peggy Cantor, the senior recruiter for manufacturing company, Raven Industries, Inc. "The markets for both of those groups are tough, and we've had some difficulty filling positions not only in Sioux Falls, but also for our operations in South Dakota and Texas."
There's a shortage of workers with higher skills in the U.S., and the administration's plan to tighten regulations on H-1B visas – temporary employment visas awarded to immigrants with skills specific to "specialty occupations" – will further that shortage.
In the manufacturing sector, U.S. employers request H-1B visas for roles that require innovation and engineering to design the product (or the machines that manufacture the product), which blue-collar workers are then hired to operate or assemble.
Engineers, analysts, and developers top the list of H-1B requests from manufacturers. Foreigners who win the right to work in the U.S. often receive multiple job offers, a sign of the shortage of skilled workers.
"I picked and chose which companies I would be applying to," said Digant Dave, an H-1B visa-holder from India. His previous employer, Cummins Power Generation, awarded him the visa after he received his Master's in electrical engineering. He now works for Siemens in the Bay Area. "Once I sent my applications in, I interviewed and got multiple offers. Then I chose what I felt was the best offer out of all of them."
A huge gap in the education system is a driving force for this need for H-1B workers in the U.S. American education is criticized for its lack of emphasis on STEM (science, technology, engineering, and math), such as weak technical programs in public high schools. Students are showing increasing interest in STEM subjects for 10 years, but that interest declines by the time students apply for college, according to a 2015 report by Deloitte. The result is a scarcity of STEM skills among employees.
"The U.S. is woefully undersupplied in that two-year community college technical education space," said Edward Allen, a Senior Fellow at the Council on Foreign Relations. "A lot of other countries pay a lot more focus on mid-level technical education."
Fewer Americans in the STEM industry means that nearly all of them get a job. When the American unemployment rate was 5.6 percent in 2014, the unemployment rates for STEM manufacturing occupations in the U.S. were less than 2 percent, according to calculations of BLS data, conducted by NAM.
Meanwhile, countries like India emphasize the importance of technology in education because of the substantial role it plays in the economy. Countries with technology-focused programs churn out a surplus of STEM employees – the type of employees who, given the resources, can create the type of technology American companies need to increase productivity.
"If somebody's done a master's in industrial engineering, then they definitely have the right skill set, and that's the reason they would get picked," said Mr. Dave. "American or not, at that point it doesn't really matter."
Tightening visa regulations that bring these employees to the U.S. could send companies – and the jobs that go with them – elsewhere, as company CEOs have to make decisions to keep high-skill positions filled.
"I think the danger is if the [H-1B] program gets too restrictive," said Edward Alden, a Senior Fellow at Council on Foreign Relations. "When you're talking about the big multi-nationals, they have other options: If we can't get the people we need to do high-level research jobs in the U.S., we'll set up research facilities somewhere else. We'll do it in Singapore and India, or we'll do it in Vancouver where it's easier to get immigrants."
Trump and his pro-business agenda are currently lifting the spirits of manufacturers, and companies are doing their best to increase domestic job opportunities. But efforts to expand will soon run manufacturing companies into a shortage of both blue-collar workers and highly skilled engineers available to the manufacturing industry.
Almost half of the manufacturers surveyed in the Manufacturers' Outlook Survey released by the National Association of Manufacturers (NAM) – the first since President Donald Trump took office – said they'll increase hiring more this year than last year. This is the highest the results have been in the two decades since the survey's existence.
But manufacturing wages were stagnant in the last two quarters – compared to the same quarters in previous years – at a time when these jobs require more monetary incentive due to location and skill requirements.
Factories have been moving further away from metropolitan cities, which either means a longer commute or relocation, both of which are costly. And the jobs – even if they're on the floor or administrative – require more technical skills than ever.
"It's not your grandfather's manufacturing anymore," said Christine Scullion, the director of human resources policy at NAM. "I had one of my member companies say to me a number of years ago, 'I need people on my manufacturing lines who know how to calibrate the line to five points past the decimal, thus I need somebody that understands the importance of what five points past the decimal is.'"
Getting a technical education is a lift for a lot of the employees who feel like they can get jobs elsewhere – in construction or utilities, for example – and get similar, if not better, compensation. Blue-collar workers are responding accordingly: BLS reports show that jobs are being created in the manufacturing industry, but those positions aren't getting filled.
Indeed.com and Glassdoor, job search engines, both have data that say the same. People are searching for jobs using keywords like "maintenance" and "welders," but these jobs titles are still pulling up tens of thousands of results.
"While Glassdoor data show an increase in manufacturing job postings on Glassdoor during Trump's first 100 days, today's BLS numbers show that has yet to translate into actual hiring by employers," said Dr. Andrew Chamberlain, Glassdoor's chief economist, in a blog post about the April jobs report.
Prospective blue-collar employees need to be incentivized to take the plunge and face the inconveniences of moving, commuting, or broadening their skillset, and ultimately, the best way to attract employees is to increase wages.
Manufacturing companies like Raven Industries pay blue-collar employees a competitive wage compared to others in the industry, but the wages are also competing with those of companies in other industries.
Higher wages are best accomplished by increasing productivity, which – in today's globalized and technologically advanced economy – is done with state of the art technology, built by trained researchers, engineers, and designers.
Written by Prachi Bhardwaj
Based in New York, the Invisible Hand is an economics blog targeted towards millennials. We offer lightning fast reports on key U.S. market indicators.
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