H-1B Demand Surges Back

Friday, May 18, 2012 - 13:48

The government’s H-1B filing season for the 2013 fiscal year (FY2013) began on April 2, 2012, with a renewed surge in U.S. employer demand for professional workers. With an annual limitation of 65,000 H-1B petitions (plus another 20,000 for workers holding U.S. advanced degrees), the H-1B classification is a complex but useful tool for American employers in need of foreign talent. For the past two years, modest H-1B demand has afforded employers time and flexibility for planning their organizational strategies. This comfort appears to be short-lived.    

As of May 11, 2012, 36,700 cases had been counted against the 65,000 cap and 14,800 had been filed against the advanced degree cap of 20,000 – more than twice as many for this time during each of the previous two fiscal years.  In the coming weeks, it is projected that H-1B numbers for FY2013 will be exhausted and employers will be faced with a harsh reality – they will not be able to start a new H-1B worker until October 1, 2013.  It is even conceivable that the H-1B cap will be reached by the time this column is published.

Year after year, the current allocation of H-1B petitions has proven to be inadequate, although it is not clear that numerical limitations are even necessary. When reviewed against U.S. economic trends, the H-1B classification suggests a self-regulating market: petitions increase during periods of economic growth and decrease when the American economy sputters. 

This correlation is demonstrated by two strong indicators of economic growth, gross domestic product (GDP) (World Bank Databank) and export of goods and services (exports) (Id.). Employers submit H-1B petitions up to six months prior to the government’s fiscal year – which is nine months prior to a new calendar year – based on anticipated market conditions and business needs. Therefore, one would expect to observe reduced demand for H-1B workers for the fiscal year following a year of poor economic performance.

FY1997 marked the first time H-1B numbers were exhausted before the end of the fiscal year, which coincided with four percent GDP growth and eight percent export growth.  Demand for H-1B workers was fueled by emerging high-tech industries requiring professional workers in the science and technology fields.  Continued GDP growth of five percent and twelve percent export growth led to exhaustion of H-1B numbers for FY1998 in an even shorter time.

As the American economy continued to grow, Congress responded to employer needs for professional workers by raising H-1B numbers to 115,000 for FY1999 and FY2000. (The American Competitiveness and Workforce Improvement Act of 1998, Pub. L. No. 105-277, tit. IV, § 411, 112 Stat. 2681, 2681-642.) Despite these additional numbers, the H-1B cap was reached before the end of each fiscal year.  Congress then raised H-1B numbers to 195,000 for the next three fiscal years. Following September 11th, however, the U.S. economy plummeted and so too did employer H-1B petitions. GDP was stagnant and exports shrank six percent in 2001. With lackluster GDP and export growth, the H-1B cap went unmet for the next three years as FY2002 and FY2003 each saw over 115,000 H-1Bs go unused. 

For FY2004, the H-1B cap reverted to 65,000. Over the next five years, demand for H-1B workers increased dramatically as the U.S. economy flashed promising signs of growth. For FY2007, FY2008 and FY2009, H-1B numbers were completely consumed before the beginning of each fiscal year, despite the addition of 20,000 H-1Bs for workers holding a U.S. advanced degree. This increased demand for H-1B workers parallels steady export growth of nine percent in 2006 and 2007 and six percent in 2008. For FY2008, USCIS received approximately 150,000 H-1B cap-subject petitions in the first two days of filing, forcing the agency to utilize a computer-generated lottery to randomly select petitions. (USCIS Update, U.S. Citizenship and Immigration Services Office of Communications, USCIS Reaches FY 2008 H-1B Cap [Apr. 3, 2007].) USCIS utilized a similar lottery system for FY2009 with both the regular and advanced degree caps exhausted by April 7, 2008. 

In 2009, the U.S. economy fell into a recession with GDP shrinking four percent and exports decreasing nine percent.  Demand for H-1B workers dropped sharply in FY2010 with H-1B numbers remaining available through January 26, 2011.  Employers remained hesitant to petition H-1B workers through FY2011, even though GDP grew three percent and exports swelled eleven percent.  While it is still early in 2012, indicators suggest strong economic growth.  These signs of growth have been reflected in heightened H-1B demand at a rate triple to last year and double to FY2010.

With economic trends demonstrating that employers have consistently exercised self-restraint in hiring H-1B workers, it is not clear how employers or the American people are served by the H-1B cap.  As the economy awakens from recession, there is little sensibility in depriving businesses of the talented foreign workers who are critical to their success. If American businesses are to compete in this ever-changing global marketplace, we must provide them with the framework necessary to cultivate innovation.  While elimination of the H-1B cap is not a panoptic solution to the challenges faced by employers or the problems inherent in our immigration system, it is a logical and long overdue step in the right direction.

Michael D. Patrick is a Partner at Fragomen, Del Rey, Bernsen & Loewy, LLP, resident in its New York office. He may be contacted via email at mpatrick@fragomen.comPaul Devendorf, an Associate at the firm, and Nancy Morowitz, Counsel at the firm, assisted in the preparation of this column. To learn more about Fragomen, please visit http://www.fragomen.com.