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May 18, 2007

Labor Pains

Michael Feldman

The 1990s represented a time in which globalization was being hailed as the unifying political and economic model. That decade brought us the ratification of the North American Free Trade Agreement (NAFTA), the creation of the World Trade Organization (WTO), and the disintegration of the Soviet Union. It also brought us the H-1B visa worker program. All of these seemed like good ideas at the time, but none has exactly worked out as planned.

I'll leave NAFTA, the WTO, and the former Soviet Union to bigger minds (and bigger articles) than mine and focus on the H-1B visa controversy.

Historically, H-1B visas have mostly been used to import foreign workers for high-tech jobs in computer programming, engineering, and science. The program's original intent seemed reasonable enough: in the face of a limited supply of domestic technology workers, U.S. companies and government organizations would be allowed to hire skilled foreign nationals for up to six years. H-1B visa holders are required to possess at least a bachelor's degree or equivalent work experience, and be paid the prevailing U.S. wage for their profession. The employer is required to ensure that foreign visa holders are provided the same benefits and working conditions as all other employees.

What could go wrong?

Critics have charged the H-1B program is principally being used by employers to shift U.S. tech jobs to lower paid foreign workers. The federal government's response has involved a lot of rhetoric, but little action. Other than ratcheting the H-1B visa quotas up or down a bit, no major changes have been made to the program since its creation in 1990.

Recently though, Senators Chuck Grassley and Richard Durbin introduced legislation that would overhaul the H-1B visa program to give priority to American workers and crack down on employers who are abusing the program. On Monday, the two Senators sent a letter to the top nine foreign-based companies using H-1B visas, requesting that they disclose more details about their workforce and their use of the visa program. The companies being targeted are Infosys, Wipro and Tata Consultancy Services, Patni Computer Systems, I-Flex Solutions Inc., Satyam Computer, Larsen & Toubro Infotech Ltd., Tech Mahindra Americas Inc. and Mphasis.

“More and more it appears that companies are using H-1B visas to displace qualified, American workers,” said Grassley. “Now, as we move closer to debate on an immigration bill, I continue to hear how people want to increase the number of H-1B visas that are available to companies. Considering the high amount of fraud and abuse in the visa program, we need to take a good, hard look at the employers who are using H-1B visas and how they are using them.”

The way the law is written, the employer has little incentive to give preference to a U.S. citizen over a foreign worker. In a perfect world, the motivation to do so wouldn't exist as long as salaries were equivalent. But in reality the wages paid to a foreign worker often end up being much lower than what a domestic worker would have received. This is the result of the rather employer-friendly formula devised by the Department of Labor to calculate prevailing wages for H-1B positions. The Programmers Guild, an advocacy group for professional IT workers, estimates that 80 percent of H-1B holders are paid substantially less than their U.S. counterparts. By using the H-1B program to get cheap high-tech labor, wage expectations are being lowered for both employer and employee.

Laying off workers while hiring H-1B visa holders is another legal way for companies to game the system. But this doesn't prevent such behavior from being challenged. In 2002. Guy Santiglia, a laid-off Sun Microsystems employee, filed complaints with the Department of Justice and Department of Labor claiming that Sun exercised bias against U.S. citizens when it laid off 3,900 workers while simultaneously applying for thousands of visas. Sun prevailed in that case, being found guilty of only minor infractions regarding its failure to post information about H-1B workers at the site where the employees worked.

If a company wants to go after even cheaper foreign workers, the H-1B program can be used as a conduit for offshore labor. Some H-1B visa holders are hired as offshore agents for larger U.S. corporations, coordinating work that will be outsourced to their native country. The target country most often mentioned is India. The nine companies under scrutiny by Grassley and Durbin are suspected of engaging in this type of activity.

On the same day that Durbin and Grassley were talking about reining in H-1B, Senators Joe Lieberman and Chuck Hagel introduced a bill to increase the quota of H-1B visas. The current visa cap is 65,000 per year, with an additional 20,000 available for foreign nationals holding U.S. graduate degrees. The bill would increase this to 115,000 in 2007 and would add a flexible adjustment mechanism that would enable it to rise as high as 180,000, depending on market conditions. Exempted from the quota would be foreign nationals who hold a U.S. graduate degree; a non-U.S. graduate degree in science, technology, engineering or math; or a U.S. medical specialty certification. Critics claim the exemption would open up the floodgates, theoretically providing a way for perhaps hundreds of thousands of additional visas. Included in the proposed legislation are also provisions that targets some of the H-1B program abuses.

“To remain competitive, American companies need access to highly educated individuals,” said Lieberman in a statement to the media. “But today's system makes it difficult for innovative employers to recruit and retain highly educated talent, which puts the U.S. at a competitive disadvantage globally. As part of comprehensive immigration reform, we must address this crisis to ensure that America remains the world leader in innovation. At the same time, we must strengthen the H-1B program to ensure that American workers are protected.”

The Lieberman-Hagel bill received support from Compete America, a coalition of corporations, educators, research institutions and trade associations representing U.S. employers. Also in favor of the bill is Microsoft Corporation, whose well-know chairman, Bill Gates, testified before Congress in March to drum up support for more liberal H-1B quotas. Gates expressed concern that American technology competitiveness will be at risk if we limit access to foreign talent, since domestic workers are in short supply.

This last point is quite controversial in the IT community. Unemployed high-tech professionals who can't find work say that the manpower shortfalls claimed by the industry are largely fabricated and are being used to justify using cheaper foreign labor. Wrapped up in this is an industry culture that offers little support or incentive for retraining to keep worker skills relevant. The Programmers Guild says this type of environment devalues experienced workers and tends to shorten career paths. As someone who worked for commercial software companies for over two decades, I can attest that this characterization is largely correct.

In a recent IT Jungle article, Victor Rozek asks the obvious question: If there's a labor shortage in high-tech, why aren't wages rising? That's what's supposed to happen in a free market. Rozek, like others, has come to the conclusion that companies are doing what they do best, i.e., holding down costs and maximizing profits. Importing labor and outsourcing to other countries has become one of the most efficient ways to do this. From the employers' point of view, the shortage is real because they've self-limited their supply of domestic workers.

Unfortunately, the belief that foreign workers are needed because not enough domestic ones are available is a kind of self-fulfilling prophecy. Without true wage equity, once employers start trading in their domestic IT workers, it will become progressively harder to motivate the natives to enter the field. By embracing foreigners, the employer has stepped onto a treadmill that may be hard to get off.

What's a capitalist to do? In this still young age of globalization, American competitiveness may not be a coherent concept — at least from the point of view of U.S. workers. Companies are seeking to compete on a worldwide basis, while workers are looking for a level playing field. That puts the workers on the defensive since corporations can live globally, people can't. Against the backdrop of an uneven economic landscape, globalization has created some inequities than neither employer nor employee has yet figured out.


As always, comments about HPCwire are welcomed and encouraged. Write to me, Michael Feldman, at

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