Concerns About “Phantom Employees” in Federal Programs

The identification of 10,000 so-called “phantom employees” misusing federal work programs has led Republicans to examine the incentives associated with hiring foreign workers, which they argue costs American jobs.

Currently, many foreign students and their employers enrolled in the Optional Practical Training (OPT) program are not required to pay the same federal Social Security and Medicare payroll taxes that are levied on domestic workers. This, according to critics, provides a substantial economic advantage to employers who choose to hire foreign OPT workers instead of American workers.

In response, Rep. Glenn Grossman from Wisconsin has introduced the OPT Fair Tax Act. This legislation aims to remove the tax exemption for foreign workers, thereby making employers accountable for the same taxes that U.S. workers pay. Grossman thinks that closing these loopholes will create a more equitable job market for American graduates seeking employment.

He expressed, “Americans should not be at a disadvantage because the government offers preferential treatment to foreign workers over competent Americans.” He noted that many recent graduates are finding themselves competing against a system that doesn’t seem to favor them.

Investigation into Hiring Practices

Grossman’s bill aligns with a Senate initiative introduced by Sen. Tom Cotton from Arkansas last September. Although Cotton’s bill hasn’t passed, the scrutiny of the OPT program has intensified since Acting ICE Commissioner Todd Lyons disclosed that federal agents had identified over 10,000 international students linked to “suspected employers” in what is described as a large-scale fraud scheme.

Lyons characterized the OPT program, which allows international students on F-1 visas to work temporarily in fields related to their studies, as having evolved into an unchecked guest worker system, with hundreds of thousands of international students participating in the U.S. workforce.

“The growth of the program has been paralleled by an increase in fraudulent activities,” he remarked. “We’ve identified over 10,000 international students supposedly employed by questionable companies, but this is only scratching the surface,” he added.

Lyons also mentioned that investigators had come across what he termed “phantom employees,” referring to international students who attained work authorization through OPT but failed to show up for work at the claimed locations.

Legislative Responses

Grossman remarked that these recent findings indicate serious weaknesses within the OPT program. “The reports indicating many foreign students are linked to non-existent jobs should raise alarm for all Americans,” he pointed out, stressing that the federal government seems to be incentivizing the hiring of foreign over American workers.

He highlighted the financial impact, citing data from the Institute for Progress, a think tank that found an average of about 330,000 students engaged in OPT yearly from 2017 to 2022. Eliminating the tax exemption, Grossman claims, could bolster federal revenue by an estimated $27 billion to $36 billion over the next decade.

Focus on American Workers

Grossman believes Congress should prioritize creating opportunities for young Americans, assisting graduates in finding secure jobs, and encouraging businesses to focus on hiring U.S. talent. He asserted, “The American public has a right to understand how such dubious employers have managed to operate unchecked for so long.” He called for a reconstruction of the OPT program to protect American workers from ongoing abuse and exploitation.