Home Budget, Economy Do H-1B Visas and Outsourcing = Class Warfare?

Do H-1B Visas and Outsourcing = Class Warfare?

145
4
SHARE

It is the 20th anniversary of the H-1B visa program, which has brought thousands upon thousands of foreign IT (Information Technology) workers into the United States.  The program has been hailed as helping to keep American technology firms competitive in a rapidly evolving global industry—- and excoriated as a modern form of indentured servitude which enables companies sneakily to exploit labor and outsource good American jobs overseas. There is also a new budget wrinkle, because last August Congress approved a $2,000 fee increase on H-1B visas, and a $2,250 increase for L-1 visas (“student visas”), intending the new money to help pay for both the 9/11 health and increased border security bills. Moreover, Gene Sperling, the newly appointed head of President Obama’s National Economic Council, replacing Larry Summers, has a long history with the H-1B programs, going back to the Clinton administration, and there is a lot of nervous speculation about what advice he may give the President on changes (if any) to the programs.  Now may be the time to ask just what the programs are really doing to the American IT business and technology workers, and the American economy.

According to ComputerWorld the U.S. “had an H-1 visa for foreign nationals with ‘distinguished merit and ability’ prior to 1990, but that year… (was when)… “Congress broadened the scope of the visa,” fearing there was a so-called skills gap among U.S. technology professionals which could only be filled by bringing in foreign technicians. This narrative of a “skills mismatch” continues to this day; in 2009 former Federal Reserve Chairman Alan Greenspan told Congress the “annual visa cap of 85,000 is ‘too small to meet the need’ and that protecting U.S. IT workers from global competition creates a ‘privileged elite.’ Others disagree. Ron Hira of the Rochester Institute of Technology reports that the H-1B and the L-1 visas are

…used by multinational firms to transfer employees for temporary work, allow(ing) employers to bypass U.S. workers ‘when recruiting for open positions and even [to] replace outright existing American workers” with visa-holding foreigners… and because visas are held by employers, not workers, the H-1B promotes a relationship ‘akin to indentured servitude’

Another critic, Norman Metcalf, said in 2008 that even back in 1998 there were well-qualified, experienced American IT professionals who could not get work because they were over 40, and companies simply “wanted cheap labor,” so

one way to get cheap labor is to “hire young foreign people.  And almost all the H-1Bs are young…. This was all planned for by the National Science Foundation.  Their concern was that Ph.D. salaries were too high, and they said they were going to remedy it by bringing in a lot of foreign students. Swelling the labor pool will reduce the salaries… at the same time the NSF was pushing Congress to enact the 1B program… and by limiting salaries, Americans would be dissauded from pursuing graduate degrees… So now you see only 50% of the Ph.D.s in the computer science go to Americans.

There have always been limits on the number of such visas, beginning at 65,000, but it was not until the dot.com boom that demand for the visas actually exceeded the supply.  The high-tech industry had enough clout in1998 to force a reluctant President Clinton to raise the cap temporarily to 195,000 (in 2001-2003) in exchange for some modest reforms, such as requiring only “H-1B dependent employers” (defined as those having 51 or more employees at least 15% of whom are H-1B) to attest to “having attempted to recruit U.S. workers before applying for an H-1B worker and to having not laid off a U.S. worker in order to hire an H-1B worker,” i.e., a watered down and loop-hole-filled reform effort intended to prevent exactly what Metcalf complained about, the ruthless replacement of American IT professionals with cheap foreign labor.  

As it happened, Gene Sperling was Clinton’s economic advisor, and was intimately involved in the negotiations with the industry and Congress, as we know from e-mails and memos which passed through the office of Elena Kagan, now a Supreme Court Justice, but at that time a White House policy advisor. This was the same time period when Harris Miller of Information Technology Association of America, now TechAmerica said Sperling’s job was to craft a pragmatic deal that would not undermine what Miller saw as the U.S. Labor Department’s “ideological opposition to the H-1B program.” Miller, to my recollection, steadfastly maintained there was indeed a “skills gap” which could only be resolved by extensive education for Americans, and which menawhile forced tech companies to bring in foreign workers.  He later ran unsuccessfully against Jim Webb for the Democratic nomination as candidate for the U.S. Senate from Virginia.  

In 2008 Congress refused to raise the 85,000 cap in place at that time, so President George W. Bush bypassed Congress by extending from 12 to 29 months the time a foreign student with a tech degree could be employed by private industry without a work visa. This policy is called the Optional Practical Training (OPT) extension; these students are employed by high tech firms, often while they are in school.   It is interesting to note which educational institutions’ students have applied for OPT: for example, in 2009, Stratford University, a small Falls Church, Va., institution, had 730 OPT extensions approved, “and many of the companies employing them are IT consulting services firms, often with offices in India,” The University of Bridgeport had 533, the University of Southern California 309, Polytechnic Institute of New York University 196, and Carnegie Mellon University had 14 (6 of whom worked for Intel, 8 for Oracle).  

The visa program has changed the IT industry and what ComputerWorld calls the IT “consulting landscape,” creating a multitude of small firms which are technically U.S. companies staffed mostly by H-1B visas but with offices overseas, where most of the client work is actually completed.  Thus a visa program supposedly designed to bring foreigners to America for education and to fill jobs here in fact ends up sending the jobs overseas—- at, of course, much lower salaries. Many American IT professionals contend, first, that there never was any “skills mismatch,” it is a myth purveyed by bean-counting industry CEO’s, and second, that the government is a complicit partner with the industry in offshoring because the whole H-1B program is “inexctricably linked” with transferring the jobs abroad. The companies deliberately place “H-1B workers in client sites in the U.S. with the intention of ultimately transferring the work overseas.”

On the other hand, supporters of the visa program contend that “offshoring does not lessen U.S. companies’ need to hire foreign students with strong academic achievements, high-tech skills and potential,” and America wants to expand its trade with India for economic and geopolitical reasons which go way beyond the interests and needs of the IT industry, and Indians want access to our IT market.  On his recent visit to India President Obama took care to reassure the Indian government that he did not see outsourcing as a “bad thing.” Meanwhile, the Indian Commerce Minister, Anand Sharma, has complained that the recently passed legislation raising the visa fees “unfairly targets Indian companies,” saying that “it is inexplicable to our companies to bear the cost of such a highly discriminatory law,” which has been estimated to cost Indian firms an extra $200 million a year. Senator Charles Schumer (D, NY) called Infosys, a major IT company, a chop shop “which outsources high-paying American tech jobs to immigrants willing to take less pay.” Lawmakers have listed Infosys, Wipro, Tata, and Satyam as firms which exploit U.S. visa programs.

Actual tech workers who have been willing to express an opinion on living with H-1B to ComputerWorld give a ground-level view: (emphasis is mine)

“Once my OPT was done, it took me some time to find a job…. At the top technology companies… 60% to 70% are H-1B, Indian or Chinese… If we stopped H-1B, IT would crash… The U.S. has a lot of talent, but wherever people are outstanding, the U.S. should try to help them into this country, to choose from a pool of talent worldwide. H-1B holders cannot negotiate easily… Consulting companies can hire and fire you with no obligation… they treat you as second class citizen… Innovation will happen in other places, not in the United States, if we do not continue to get talent from the whole world.  People come here for the great research facilities and the universities… If we lose them, we will lose a lot of talent.”

“I was working late one Friday night when I overheard some young engineers… say an H-1B was coming in on Monday.  I knew I was a dead man walking. The workforce there was very young, mostly under 30, and high-tech companies tend to hire young and fire old… The type of job I was doing was fairly unique, but there’s no question they could have found another American… When companies are cutting their budgets, the first to go will be the expensive Americans… there’s such a vast pool of H-1Bs that you’re competing against.”

“I came to the United States in November of 2007. My H-1B was sponsored by an Indian consulting firm.  They have an address in Washington, D.C. They tell the clients they have a guest house there, but really it’s just a post office box…At the consultancy, if you get $100, you have to pay $40 to them… The consultancies are 90% of the problem.  Definitely there should be a proper audit.”

“I’m an independent consultant… (a) company hired an American consulting firm, who turned around and brought in a large Indian IT service provider to actually do the coding… (they) lowballed to get the bid… the bottom line was, it’s cheap labor. Ironically, the project is over budget. The programming quality has been shockingly bad… the H-1Bs get paid a pittance, and everyone loses… The workers in the trenches are afraid. Nobody’s willing to scream… that this thing is a fraud.”

“I came to the United States on an F-1 visa in 2001… (and) worked as a design engineer on an H-1B visa from October 2006 until May 2010… The work-related part of my H-1B experience was always positive. Dealing with the U.S. Citizen and Immigration Services was always a nightmare… We came back to India at the end of May…(because we wanted to) contribute… to the good of the society… Plus, the world has changed dramatically in the last two decades. Now from my office in India I can easily collaborate with a professor or a company in the U.S…. Overall, my H-1B experience was positive.”

The H-1B visa system is in place. Clearly, it has contributed greatly to the loss of jobs in America, especially jobs for local Americans. There is even evidence, mostly anecdotal but nevertheless compelling, that the outsourcing does not always result in a better product, just a cheaper product, and we all know the overwhelming importance modern business places on short-term bottom line profits, often to the detriment of longer-term quality.  I also have my doubts about the peculiar short-term system for government IT contracts, which hires multiple companies to work on a project where each operates in their own silo, with little cross-communication, no apparent chain of command so there is little accountability, and the teams are created ad hoc for each contract and disburse at the end, resulting in no institutional memory, and a frequently slapdash, jury-rigged end product (IMO).

Nevertheless,  I do not see that Big Business will ever agree to ending the system (there is an element of anti-labor class warfare here); it has proven to be a phenomenal money-maker for them; besides, there is that international geopolitical rationale for continuing the visa programs.   Everything I hear from investors and business economists tells me that CEO’s are adamant that American workers must reduce their wages to meet third world wages if American business is to compete successfully in the global market. That is why I have concluded that at this time, the best we can hope for from a Republican-dominated Congress and a compromise-minded President is some tweaking and a few minor reforms of the visa programs to protect American workers and reduce the fraud. What we should do for the future is develop a better, comprehensive industrial policy (in which “guest workers” are a part) that establishes strong American innovation, business, and jobs in the competitive 21st century economy.  

  • commentator1

    The best place to learn about the H1-B visa program is to read the blog posts of those Indians who participate in them and those Americans affected by them. Here are a few gems:

    From an American engineer:

    “People in the US don’t want to get engineering degrees anymore because employers would rather hire H1-B engineers.”

    From an Indian programmer:

    “US employers seek people via H1B not because they cannot find quality candidates in America, but because they cannot find CHEAP candidates in America.

    Most Indians are too ashamed and embarassed to admit the above, because deep inside, they know it is true – their body-shopper knows it’s true too, but it is almost a taboo subject. As long as they can make enough money to send back home, they’re OK with it.

    In the end, it hurts young American people. A system that was designed to help America fill a supposed shortage of skills is starving their own people with fewer opportunities. There is no shortage of skills in America. How can the richest country in the world be short of skills? Most programming jobs are “CRUD” jobs, and do not require much specialist skills. There are many native American candidates who could easily fill any job, but they cannot compete with low wages like the Indians can.”

    From an American IT worker:

    “This is how it is run in reality. It is run by so called body-shoppers who get people from India and then try to place them with clients here. Even companies like Microsoft, Cisco, Intel who need technical people, actually hire these people (as contractors) from these body shopping companies. This way they do not have to pay them much of benefit that they pay their employees, with helps their bottomlines.

    Educated people coming (from India) via this program face immense tortures at hand of their body-shopping employers. Since these body-shopping employers do not have a job themselves, these companies (usually mom-pop) try to place them with other companies and try to get a hefty share of billing for their profit. All they have to do is get people from India and place them, and then they pocket 30-40% of hourly billing for 3-6 years. The end result is the actual (not on paper) pay received by these people is sometimes even around poverty line.

    On the other hand, the program also genuinely hurts the USA Workforce. The people coming on this program are so desperate for work, that they are ready to accept very very low wages for these high-paying jobs … which in turn depresses the wage markets in USA for local residents. These people are desperate because without a job/project, they will need to go back to their country. This means that genuine resident who apply for same position either has to accept same desperate wages or be priced out of the wage market in his own country.”  

  • libra

    several months at least, that NYTimes’s Paul Krugman (on his blog, not in one of his twice-weekly columns) addressed the skills gap mentioned here:

    “Congress broadened the scope of the visa,” fearing there was a so-called skills gap among U.S. technology professionals which could only be filled by bringing in foreign technicians.

    He wasn’t writing about IT specifically, he was writing about jobs in general. That meant jobs that are farmed out to other countries, the employment of undocumented immigrants (“because Americans won’t take those jobs”), but it included the IT jobs as well. Even so, his conclusion was pretty much the same as it is here — the “gap”, whether of skills or geographical (“we don’t have enough qualified people in our area”) — is pure BS.