In immigration debate, some query skilled-worker shortage By Sarah McBride and Noel Randewich SAN FRANCISCO (Reuters) - As the wrangling over immigration reform intensifies in the Congress, the tech industry is lobbying hard to raise the limit on H-1B visas, which allow non-U.S. citizens with advanced skills and degrees in "specialty occupations" to work in the country for up to six years. Demand is so great that the annual cap of 65,000 was hit last week, just days after the application period opened. Technology companies support raising the H-1B quota almost five-fold, to 300,000, arguing universities are just not turning out enough American math and science graduates and they need to cast their net abroad to stay competitive. Yet some U.S. tech workers and academics say that the shortage of talent is exaggerated, that many of the jobs could go to out-of-work computer professionals in the United States, and that the program serves mainly as a source of cheap labor. The 200,000-member U.S. chapter of the Institute of Electrical and Electronics Engineers rejects the claim of a broad shortage of tech workers and opposes more H-1Bs. "What these companies are doing is to replace Americans with lower-cost foreign workers," says Russ Harrison, senior legislative representative at the IEEE. Rather than more H-1B visas, the group favors giving foreign workers permanent residency, which Harrison said would help boost wages and increase job mobility for newcomers. In Silicon Valley, stories of ferocious competition for engineering workers and a lack of qualified job-seekers abound. Tech companies point to an unemployment rate of around 3.5 percent for those with advanced computer and math experience, less than half the national rate, though in line with other professional occupations. But wages in the tech industry are rising more slowly than those in the economy as a whole. For example, pay for applications software developers, a specialty in high demand, have risen just 8.9 percent in the five years through mid-2012, compared with a 12.5 percent increase for all occupations in the U.S. economy. "It is extraordinarily unlikely for a severe shortage to happen in a way that doesn't result in very large wage increases," said Kirk Doran, an economist at the University of Notre Dame who studies immigration and labor. We know what a labor shortage looks like: there should be both much lower unemployment than other professions and much higher wage growth. If either of these are not present, then I don't buy the shortage hypothesis. Others say that when industries grow fast, wage growth can be stifled because of an influx of relatively inexperienced and lower-paid workers. "Even if you look at data from one year to the next, it may not tell you what you think," said Stuart Anderson, executive director of the National Foundation for American Policy, a think tank backed by the pro-entrepreneurship Kauffman Foundation and others. He says sub-industries sometimes move from one category to another one, and that industries are growing more specialized, complicating the data. The United States issued 129,000 H-1B visas last year - almost double the official cap, since workers at universities and some other workplaces don't count toward the limit. Those with graduate degrees from U.S. universities have their own quota of 20,000, a limit the tech industry hopes to see removed. The three-year visas can be extended to six years, so there are likely hundreds of thousands of H-1B workers, half of them in computer-related fields, according to government data. There is no exact count of H-1Bs in use at any given time. Companies hiring H-1B workers are required by the Department of Labor to pay either the prevailing local wage for the job or the wage that would be paid someone with equivalent qualifications, whichever is higher. But critics of the program say these rules give employers too much latitude to discriminate, for example, by age. Tech companies recruit heavily at U.S. universities, where many science and engineering students are foreign nationals. Younger and less experienced workers generally receive less pay. According to the U.S. Citizenship and Immigration Services, a division of Homeland Security, 90 percent of all H-1B holders are 39 or younger. Bea Dewing, 61, a database designer, blames growing competition from immigrant workers for hampering her career over the past decade. "It's very unfair from the standpoint of American workers," said Dewing, who has been out of steady work since August, when she said she was laid off from Tata Consultancy Services, an Indian software services firm which had placed her at a New York-based financial services company. Tata declined to comment on specific employees but said, "As a matter of corporate policy, TCS does not lay off its employees in order to replace them with H-1B visa holders." The IEEE and others who see flaws in the H-1B program say they are outgunned politically on the issue. Computer and Internet companies spent an estimated $132.5 million on lobbying last year, according to the Center for Responsive Politics. Tech executives including Cisco Systems Inc Chief Executive John Chambers and venture capitalist John Doerr of Kleiner Perkins Caufield & Byers flew to Washington last month to discuss immigration reform with the White House and Congressional leaders. "Most of our members aren't really rabble rousers," said the IEEE's Harrison, who urges members to call their representatives, armed with facts about how many H-1B workers are in their state, to stop any increase in H-1B visa quotas. We are constrained by the personality of our members. For some Silicon Valley executives, the issue is larger than filling vacant jobs. To compete in a global economy, they argue, the United States needs all the talent it can find, and the fact that its preeminent universities draw the best and brightest students from all over the world is a competitive advantage that should not be squandered. Especially in a small start-up, they say, more than expertise is required: The right fit is critical. "When you're creating something from scratch you need somebody outstanding," said Nathan Blecharczyk, co-founder of the red-hot short-term rental company Airbnb. The firm currently has only two engineers working on its search capability, he explained - a critical function that could be improved if he could find just the right caliber of engineer. "There isn't enough of the talent that we need to basically create this business in the U.S.," he said. We do need to look globally for that talent. Michael Moritz, a partner at Sequoia Capital, concurs. "The rare individual is so often capable of doing the work of several other people, in engineering like other creative art forms," he says. Barriers to hiring slow down everything. Joe Golden, a former software developer at Microsoft Corp who is studying the effects of immigration in the tech industry as a graduate student in economics at the University of Michigan, is also a proponent of opening the doors further to skilled workers. But he says that as long as companies are free to headhunt employees from rivals and woo qualified professionals from other industries, it's difficult to say shortages exist. "If companies want more workers they can all raise wages and attract more people," Golden said. Reporting by Sarah McBride and Noel Randewich; Editing by Jonathan Weber and Tim Dobbyn