The law originally capped the number of H-1B visas at 65,000 per year, but  the cap has changed several times pursuant to legislation. Demand for H-1B Workers Exceeded the Cap in Most Years and Was Largely Driven by a Small Number of Companies

Available data show that, while demand for H-1B workers by employers  has fluctuated with the economy over the past decade, the demand for   H-1B workers tended to exceed the cap, as measured by the numbers of  initial petitions submitted by employers. If initial petitions submitted by  employers exempt from the cap are also included in this measure, the  demand for new H-1B workers is higher, since over 14 percent of all initial  petitions across the decade were submitted by employers who are not  subject to the cap. Second, according to Homeland  Security officials, Homeland Security stops accepting petitions that are  subject to the cap once the cap is reached. Consequently, we cannot  precisely determine the level of any unmet demand among those  employers who are subject to the cap. Most Interviewed Companies Said the H-1B Cap and Program Created Costs, but Were Not Factors in Their Decisions on R&D and Offshoring

To better understand the impact of the H-1B cap and program on H-1B  employers, GAO interviewed 34 companies—including individual  structured interviews with 31 companies and group discussions with 3  companies—about how the H-1B program affects their costs of doing  business, their R&D activities, and their decisions about whether to locate  work overseas. These companies reported that the H-1B cap created  various costs, but those costs varied depending on the size and maturity  of the company. Two firms also said that delays in processing their petitions,  such as requests for additional evidence, sometimes resulted in their  candidates accepting other positions in the United States or abroad  instead of waiting for a resolution. Limitations in Agency Data Systems Hinder Tracking the Cap and H-1B Workers Over Time, Though Homeland Security Is Working to Improve Its Systems

Although Homeland Security generally tracks the flow of likely H-1B  workers into the United States on an annual basis, it cannot determine the  size of the cumulative H-1B workforce because several agencies or  departments manage data on this population over time, and the systems  that capture the data are not easily linked. The Impact of Raising the H-1B Cap on the U.S. Labor’s Employment and Training Administration. Lack of Accountability Provisions for Staffing Companies Also Hinders Enforcement

The laws governing the H-1B program do not include explicit provisions to  hold employers that obtained the H-1B worker through a staffing company  accountable to the program requirements that are applicable to the  employer who applied for H-1B visas on behalf of foreign workers. Changes to Program Legislation Have Diluted Worker Protections

Changes to the H-1B program over time have weakened U.S. worker  protections related to the (1) temporary nature of the program, (2) pool of  H-1B workers eligible for H-1B status, and (3) cap. As currently  structured, however, the program may not be used to its full potential and  may be detrimental in some cases. Matters for Congressional Consideration

To ensure that the H-1B program continues to meet the needs of  businesses in a global economy while maintaining a balance of protections  for U.S. workers, Congress may wish to consider reviewing the merits and  shortcomings of key program provisions and making appropriate changes  as needed. The Departments  of Homeland Security and Justice provided written responses to one or  more of our recommendations, which appear in appendixes VI and VII of  this report. With respect to H-1B and U.S. workers, we  examined what is known about (3) H-1B worker characteristics, (4) how  raising the H-1B cap might affect employment and wages of U.S. workers,  and (5) how well H-1B program requirements ensure that U.S. workers are  not displaced or disadvantaged by the program. Using the CLAIMS 3 Mainframe database from fiscal years 2000 through  2009, for each fiscal year we determined  the number of H-1B initial petitions and extensions submitted by all  employers, employers subject to the cap, and cap-exempt employers;  the number of H-1B petitions approved or denied by Homeland Security,  by initial petitions and extensions;  the total number of companies and the total number of cap-exempt  companies that submitted and had approved H-1B petitions, by initial  petitions and extensions;  the characteristics of companies that were approved by Homeland  Security to hire H-1B workers, including their industry codes and the  number of workers they requested; and  the characteristics of workers that Homeland Security approved as H-1Bs,  including whether or not the workers were residing in the United States at  the time of application; their countries of birth, education level, age, rate  of pay, occupation, industry, and the location of their prospective place of  employment.
Why GAO Did This Study

Congress created the H-1B program in 1990 to enable U.S. employers to hire temporary, foreign workers in specialty occupations. The law capped the number of H-1B visas issued per fiscal year at 65,000. Since then, the cap has fluctuated with legislative changes. Congress asked GAO to assess the impact of the cap on the ability of domestic companies to innovate, while ensuring that U.S. workers are not disadvantaged. In response, GAO examined what is known about (1) employer demand for H-1B workers; (2) how the cap affects employer costs and decisions to move operations overseas; (3) H-1B worker characteristics and the potential impact of raising the cap; and (4) how well requirements of the H-1B program protect U.S. workers. GAO analyzed data from 4 federal agencies; interviewed agency officials, experts, and H-1B employers; and reviewed agency documents and literature.

What GAO Found

In most years, demand for new H-1B workers exceeded the cap: From 2000 to 2009, demand for new H-1B workers tended to exceed the cap, as measured by the numbers of initial petitions submitted by employers who are subject to the cap. There is no way to precisely determine the level of any unmet demand among employers, since they tend to stop submitting (and the Department of Homeland Security stops tracking) petitions once the cap is reached each year. When we consider all initial petitions, including those from universities and research institutions that are not subject to the cap, we find that demand for new H-1B workers is largely driven by a small number of employers. Over the decade, over 14 percent of all initial petitions were submitted by cap-exempt employers, and only a few employers (fewer than 1 percent) garnered over one-quarter of all H-1B approvals. Most interviewed companies said the H-1B cap and program created costs, but were not factors in their decisions to move R&D overseas: The 34 H-1B employers GAO interviewed reported that the cap has created some additional costs, though the cap's impact depended on the size and maturity of the company. For example, in years when visas were denied by the cap, most large firms reported finding other (sometimes more costly) ways to hire their preferred job candidates. On the other hand, small firms were more likely to fill their positions with different candidates, which they said resulted in delays and sometimes economic losses, particularly for firms in rapidly changing technology fields. Limitations in agency data and systems hinder tracking the cap and H-1B workers over time: The total number of H-1B workers in the U.S. at any one time--and information about the length of their stay--is unknown, because (1) data systems among the various agencies that process such individuals are not linked so individuals cannot be readily tracked, and (2) H-1B workers are not assigned a unique identifier that would allow for tracking them over time--particularly if and when their visa status changes. Restricted agency oversight and statutory changes weaken protections for U.S. workers: Elements of the H-1B program that could serve as worker protections--such as the requirement to pay prevailing wages, the visa's temporary status, and the cap itself--are weakened by several factors. First, program oversight is fragmented and restricted. Second, the H-1B program lacks a legal provision for holding employers accountable to program requirements when they obtain H-1B workers through a staffing company. Third, statutory changes made to the H-1B program have, in combination and in effect, increased the pool of H-1B workers beyond the cap and lowered the bar for eligibility. Taken together, the multifaceted challenges identified in this report show that the H-1B program, as currently structured, may not be used to its full potential and may be detrimental in some cases. This report offers several matters for congressional consideration, including that Congress re-examine key H-1B program provisions and make appropriate changes as needed. GAO also recommends that the Departments of Homeland Security and Labor take steps to improve efficiency, flexibility, and monitoring of the H-1B program. Homeland Security disagreed with two recommendations and one matter, citing logistical and other challenges; however, we believe such challenges can be overcome. Labor did not respond to our recommendations.