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November 27, 2000

The Great Foreign IT Worker Debate

Is the H-1B visa process mired in red tape and creating communities of indentured servants?

By Peter Ruber

Illustration by Janusz Kapusta

More on H1B Visas:

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President To Sign H-1B Visa Bill (10/9/00)

EETimes: Perks keep India's EEs happy at home (11/20/00)

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lmost as stormy as the outcome of the presidential election is the controversy over the U.S. government's immigration policy on high-tech workers.

More foreign labor is something the industry has lobbied hard for all year, and those efforts have paid off. Beginning this month, the start of the government's fiscal year, the number of H-1B work visas granted in the country was hiked to 200,000 for the next three years, the highest it has been since the program began. But even as he signed the legislation into law Oct. 17, President Clinton challenged high-tech companies "to redouble their efforts to find long-term solutions to the rapidly growing demand for workers with technical skills."

Just how acute the IT labor shortage is depends on who's crunching the numbers. Rep. David Dreier, R-Calif., says there are 364,000 more high-tech jobs than workers to fill them. A joint workforce study released earlier this year by the Information Technology Association of America and Georgetown University says 840,000 IT jobs are expected to go unfilled in 2000. The Bureau of Labor Statistics, meanwhile, reports 480,000 openings and says that the United States will require an average of 140,000 new skilled IT workers per year between now and 2006.

Whatever the number, the pressing issue is how to fill those vacant slots. Rep. Eva Clayton, D-N.C., along with several labor unions, says that the United States should promote better training for its own people instead of importing cheap foreign labor. When Clinton signed the bill, he also doubled to $1,000 the fee charged to employers who petition to employ H-1B workers and said the funds generated by the fee should go to the Department of Labor for training U.S. workers.

But professor Richard Florida, director of the Software Industry Center at Carnegie Mellon University in Pittsburgh, says companies are still getting foreign workers too cheaply. "The fee is way out of whack with what recruitment costs really are," he says. Companies spend $20,000 to $50,000 to recruit IT professionals and pay employees bonuses as much as $20,000 for referrals. "Higher fees could be used for retraining programs," Florida says. He says the employer fee should be raised to $5,000 or more.

Sharon Coker Photo by Alan Blaustein While government pundits debate the fees and legal issues, lives are changing and jobs are being filled daily because of the visas. For York Xia, 42, a long journey ended when he began a new career this summer as database administrator for Web portal Respond .com Inc. in Palo Alto, Calif.

Xia arrived in Canada from China in 1988 on a student visa that let him pursue a Ph.D. in pharmaceutical chemistry at the University of Montreal. To defray living expenses and send money home to his wife, who had been denied a passport while he studied abroad, Xia worked as a programmer for Phoenix International, an IT outsourcing group. By his third year of studies, Xia was more interested in technology than in chemistry and completed his Ph.D. in computer science.

During the early 1990s, Canada granted Xia asylum because of political upheaval in his homeland. When stability returned in 1993, Canadian immigration helped Xia's wife obtain a passport and granted her asylum as well. Then, encouraged by several Chinese immigrant friends who were sponsored by Computer Sciences Corp. under the H-1B visa lottery, Xia contacted companies in Silicon Valley to find someone to sponsor his H-1B application for a job.

"I wanted to move to Silicon Valley for many reasons," Xia says. "It's the top place in the world for a computer scientist to work." But he says money was also an important factor because he had two children in school. Getting Xia hired under the H-1B visa wasn't an automatic or an easy process for him or for Sharon Coker, Respond.com's VP of human resources--and they were lucky. If Xia's application hadn't been processed before the fiscal year's quota of 115,000 foreign workers was used up in March, he would have had to wait another year, and by then, the job might have gone to someone else.

The H-1B visa program was created by the Immigration Act of 1990 to let U.S. companies, universities, hospitals, state and local governments, and other employers hire skilled foreign nationals for as long as six years. In 1998, Congress temporarily raised the annual cap on H-1B visas from 65,000 to 115,000.

Most H-1B visas have gone to workers such as Xia, who have advanced degrees and experience in computer technology and can fill critical openings in the IT workplace. High-tech employers say that without this help, jobs will go unfilled. IBM last year joined with more than 200 members of Business for Legal Immigration in lobbying for congressional action on the visas.

Many people agree with Florida that the H-1B visa process needs to be overhauled. "The present system is unworkable," says immigration attorney Matthew Udall in Pasadena, Calif. "It encourages a society of indentured servants" who can't move easily from job to job.

Once in the United States, an H-1B worker is trapped into working for the company that sponsored him or her for the full six years. Changing jobs for whatever reason is virtually impossible as the visa is held by the employer, not the employee. Regulations also stunt the entrepreneurial spirit of those who wish to start their own businesses and make even greater contributions to the economy (see story, p. 156).

Wage abuses are more often a problem with IT employment contractors or "body shops" that sponsor foreign workers, not the hiring companies themselves, says Hal Salzman, senior research scientist at the Center for Industrial Competitiveness at the University of Massachusetts, Lowell. But it can be a problem. "Reputable companies generally pay comparable wages. They also provide their H-1B workers with stock options and enroll them in 401(k) plans," Salzman says.

Respond's Coker also notes circumstances in which H1-B workers can switch jobs. "We recently acquired several foreign IT professionals from a Bay area company that was relocating to San Diego," she says. "Not all their engineers wanted to move their families, so the company agreed to transfer them to us. During the several months it took the Immigration and Naturalization Service to process our application, the employees were subcontracted to us, and we reimbursed the company's payroll costs."

Of course, H-1B visas require employers to pay foreign workers the prevailing wages paid to native-born workers for the same job. But even Clinton noted that the law lets transferring workers go on the payroll before paperwork is approved "could weaken existing protections that ensure that the H-1B program does not undercut the wages and working conditions of U.S. workers, and could also increase the vulnerability of H-1B workers to any unscrupulous employers using the program."

There are many pitfalls associated with the sponsoring process. "It's especially complicated for startup companies to compete for foreign workers," attorney Udall says. "They have to do a thorough job of documenting that they're a real company, doing real business, with enough capitalization to pay H-1B workers the prevailing wage, and that they've been unable to hire domestic workers for specific positions."

HR managers such as Coker find applicants through resumés E-mailed from abroad, by searching Internet employment boards, and by participating in job fairs, where there's usually a crop of recent graduates from American universities looking for business sponsors.