Where Does H-1B Fit?

While many blame the H-1B visa program for taking jobs from American workers, particularly during the recession, hiring managers say it's not that simple

InformationWeek Staff, Contributor

February 2, 2002

14 Min Read

As unemployment in the business-technology sector continues at near-record levels, a growing chorus is questioning whether the United States needs to continue bringing tens of thousands of foreign IT workers here each year under the visa program known as H-1B. It's a topic that can stir up emotions quickly.

"High-tech companies paid off Congress so they could have cheap labor" and similarly heated accusations can be found on chat boards and in discussion forums (including InformationWeek.com's Listening Post) where the unemployed hang out to swap job-hunting tips and rumors of employment opportunities. Other postings charge that major tech companies lay off thousands of American workers and replace them with cheaper foreign labor. This dialogue has become more vitriolic since suspicion of foreigners rose after Sept. 11.

The anger and frustration of some unemployed IT workers is palpable. One mainframe consultant with more than 20 years of experience in Cobol and CICS (who insisted on anonymity) says he's been looking for work in the Boston area for more than 15 months without success, "due mostly to the flood of foreigners with six-year visas that the fools in Congress allowed to enter the country."

Are foreign technology workers really taking jobs away from Americans? In most cases, it's not that simple, employers and industry groups say. So what is the right role for the H-1B visa program in what's now a slowed-down technology industry? The program may simply be an anachronism, a holdover from the heady days when technology was booming and talent was in short supply. Or it may be an indication of something deeper: that the country isn't training enough IT people with the right skills to fill corporate America's needs. Most business-technology managers, however, say bashing H-1B misses the point, which is finding qualified people, wherever they are, for increasingly demanding work.

Computer makers, software developers, consulting firms, and service providers employ the vast majority of H-1B workers in the IT field (H-1B visa holders also include physicians, chefs, and others such as "fashion models of distinguished merit and ability," according to the wording of the legislation). Numbers are hard to get. Most companies contacted by InformationWeek that import foreign IT workers declined to discuss the topic. The Labor Department and the Immigration and Naturalization Service won't release current information on the largest corporate sponsors of H-1B workers because a coalition of attorneys representing many of the biggest users of the program has challenged the accuracy of the method used to compile H-1B statistics, an INS spokeswoman says. The most recent list of leading employers of H-1B workers dates back to February 2000, before the economic downturn: Motorola, Oracle, Cisco Systems, Intel, and Microsoft make up five of the top six on the list; PricewaterhouseCoopers, KPMG, and Deloitte & Touche are in the top 35.

What angers some unemployed American IT workers and labor supporters is that many of the companies that have announced large layoffs have been among the biggest users of H-1B visa workers. Motorola, which declined to discuss its use of H-1B workers, revealed plans to lay off more than 40,000 workers last year. U.S. unemployment rates for computer scientists, analysts, programmers, and operators more than doubled last year, according to the Bureau of Labor Statistics. "Labor dynamics are changing," says Howard Rubin, an analyst at Meta Group and former adviser on technology issues to President Clinton. "Major companies can now hire people with top skills for $60,000 a year. We don't need people on H-1Bs anymore. We can replenish staff from our own population."

Kaur, an H-1B visa holder, estimates that she's paid 20% less than her U.S.-born colleagues

Gurdeep Kaur, an H-1B worker, came to the United States from India in 1998. The 30-year-old Windows NT security administrator was, by her own admission, a bit naive: On her first job, she took the salary she was offered without question. Only later did she learn that salaries can be negotiated--to a point. Kaur now works for a New Jersey Internet consulting firm, which she declines to identify, and estimates she's paid 20% less than her American-born peers. "They told me that I can't get more, that there were visa and H-1B fees, and that later they'll pay for my green-card application," she says.

Keeping her technology skills up to date and learning new ones is very important for someone in her situation, Kaur says. "You have to get the background; it gives you an edge over others" applying for the same position, she says.

Microsoft is one of the few companies that's still hiring a substantial number of technology workers, both Americans and those with H-1B visas. The software company expects to hire about 5,000 new employees this year, down from around 7,000 last year. "Microsoft is big on aggressively following up on laid-off workers," says David Pritchard, Microsoft's senior director of technology staffing. Workers with H-1Bs are most likely to be used in jobs for which it's hard to find U.S. workers, such as programming in Arabic or Chinese, he says. Even so, the company is hiring fewer H-1B workers because the domestic technology-talent pool is better now than it has been in years.

The number of H-1B visas issued last year came in under the maximum allowed by law: 163,200 H-1B slots were filled, while the limit was 195,000. Still, that's an increase from the year before, when the limit was 115,000. "The combination of increasing unemployment and increasing immigration concerns us," says Ned Sauthoff, past president of the U.S. chapter of the Institute of Electrical and Electronics Engineers, a professional group of more than 350,000 members in 150 countries. "We don't know if there's a causal relationship, but we're concerned. If a company needs to increase workers, the primary source should be from our own population," he says. "We wouldn't complain if H-1B workers were more qualified. But if the guest worker is equally or less qualified than an American worker, that's not good."

Noel Williams, CIO at HCA, a Nashville, Tenn., operator of 200 hospitals and health-care facilities, hasn't noticed any falloff in the number of H-1B workers since the economy soured in comparison with the high-flying days when IT talent was scarce. HCA comes in contact with H-1B workers mainly through the consulting firms it works with, including one in India. "We still have a lot of projects under way and we use a lot of contractors, particularly for software development, so they H-1B workers come in from there," she says.

The H-1B program is about saving money, not hiring the best and brightest, says Sharon Marsh Roberts, head of the government relations committee of the Independent Computer Consultants Association. "Companies want cheap labor," Roberts says. "The question isn't whether one can find a Visual Basic programmer, but whom to find at the price one wants to pay."

Hewlett-Packard says it's no bargain to get workers through the H-1B visa program. In truth, it's less expensive to recruit and hire American IT workers, says Mary Dee Beall, HP's government affairs consultant. HP found that the relocation, applications, and legal fees to convert an H-1B worker to permanent-resident status with a green card averaged $15,000 to $20,000 per worker, Beall says. But she adds that the company will continue using them, though the decline in tech spending has reduced its need for H-1B workers. A year or two ago, HP used the program to hire a lot of software engineers. Its use of the program now is aimed more at unusual skills "such as a scientist working on a particular research project or someone you meet at a conference," Beall says. "And because they're uniquely talented, we end up paying more."

That the full quota of H-1B visas wasn't issued last year shows that the marketplace is working as it's supposed to, says Harris Miller, president of the Information Technology Association of America, a group that lobbied for an increase in the number of H-1B visas granted yearly. "The cutback is occurring naturally in the marketplace," he says. Unemployed business-technology workers need to do a better job of upgrading their skills and keeping them upgraded. "People with marginal or submarginal skill sets are finding it harder to get jobs," Miller says.

U.S. Rep. Thomas Tancredo, R-Colo., doesn't buy that argument. He's introduced a bill to roll back the number of H-1B visas granted each year to the 1997 level of 65,000 (see story, below). Tancredo says he's "absolutely opposed" to the visas: "I was never convinced of organizations' claims of a great need for people with particular skills."

The H-1B program started in 1932, when the Immigration Act was amended to permit foreign workers to come to America to fill on a temporary basis jobs that couldn't be filled by the domestic labor force. The number of visas was set at 34,000. It was increased to 58,000 in 1976 and then to 65,000 in 1990.

During the Internet boom, the ITAA declared there were more than 1.6 million unfilled IT jobs in the United States. It launched an intense lobbying campaign and, with support from large tech companies such as Intel, Motorola, and Sun Microsystems, convinced Congress to increase the number of H-1B visas to 115,000 in 1998 and to 195,000 in 2001. The cap will revert back to 65,000 in 2004.

To bring in a foreign worker, a company must file an application with the Labor Department specifying the job, the salary, the duration of the assignment, and where the work will be performed. The company must also promise to pay the prevailing wage and provide evidence that the pay is fair. Once the application is certified by the Labor Department, the company files a petition with the Immigration and Naturalization Service for an H-1B visa for a specific person and pays a fee of around $1,000 for the visa. H-1B visas are good for three years and can be extended for another three years.

One reason the number of applications filed is much higher than the number of visa recipients is that consulting firms and other companies file applications for workers to staff jobs they've bid on but haven't yet won. If a project goes through, the company continues the application; if not, it drops the application. "It's not unusual for companies like Motorola and Deloitte & Touche to warehouse them," says a source in the Labor Department, who says those two companies remain among the leaders in filing H-1B applications. In general, the source says, the department "usually processes at least two to three times as many applications as visas."

Foreign workers in the United States under H-1B are supposed to leave once their jobs are completed, but some don't claim their plane tickets home and end up staying illegally. Tracking H-1B workers with expired visas and expelling them isn't high on the INS's priority list, because it's focused on finding foreigners who have expired student and tourist visas or who pose a criminal threat.

Jim Ziegler, CEO of consulting firm Pace, discovered that on his own. Last year, he had to let go six of his 12 H-1B consultants. After trying unsuccessfully to find them other assignments, he offered them tickets home. "Most said they were going to stay in the United States," he says. As required by law, he informed the INS that the H-1B sponsorship was over, but he says it made no difference. The report "just goes into a black hole once you send it to INS," he says.

The life of a foreign technology worker isn't all milk and honey here in the land of opportunity. ICCA's Roberts recently got a call from a young H-1B technology worker who wanted the organization to intercede on her behalf with the contract agency that held her visa. The worker said her pay was too little to live on and she had to share a small apartment with three other people. In addition, the company wanted her to repay her travel expenses, though travel costs usually are paid by the hiring firm. "The agency was trying to save money and she was the nearest possible scapegoat," Roberts says.

The Labor Department received 269 complaints involving abuse of H-1B workers in 2001, up from 140 the year before. It found violations in 54 cases and ordered companies to pay more than $1.3 million in back wages. A typical case was that of Kay Software Inc., a Mountain View, Calif., staffing firm that was ordered to restore back pay of more than $17,000 to four H-1B workers. Kay was later acquired by HCL Perot, a subsidiary of Perot Systems Corp.

Raj Subbaram, a manager at HCL Perot and himself an immigrant from India with permanent resident status, often hires H-1B tech workers to fill the staffing needs of clients such as Cisco, eBay, and Sun. Among other reasons, he says foreign workers' willingness to work long hours adds to their appeal. "The H-1B guy is ready to put in a lot of hours, up to 14 hours a day, and they don't charge for the extra hours," Subbaram says.

They're often paid less than American workers, despite requirements that they be paid prevailing wage rates. Employers seeking to hire H-1B workers can base their prevailing wage rate on third-party salary surveys up to 2 years old. An H-1B worker in a job since the beginning of 2001 might still be getting the 1999 prevailing wage. During that time, annual increases in IT salaries averaged about 8%.

The INS requires a company applying for an H-1B slot to state that it searched for and couldn't find a qualified American worker for the job. But the INS doesn't verify that a search was conducted unless a complaint is filed. Many hiring managers say they prefer to recruit the best person for the job--and if that person turns out to be a foreign national, so be it. Some unemployed Americans don't believe that most employers conduct thorough searches for U.S. workers before hiring foreign ones.

As to whether foreign workers are taking American jobs, "that's not how we look at it," Owens Corning CIO and senior VP David Johns says. The goal at the Toledo, Ohio, manufacturer is to find the most qualified person for the job, and only then to consider his or her immigration status. "We don't look specifically for H-1B workers; we have to find the appropriate resources" for the work, he says. The company has 220 IT employees, and "not that many" are on H-1B visas. "The more technical they are, the more applicable H-1B is," Johns says. H-1B workers aren't cheaper than American workers, he adds.

Terry Shea, director of IS for The Sporting News, a publishing company in St. Louis, doesn't have an H-1B worker on his three-person IT staff, but he has no objections to hiring one. "I don't care who, what, or where they are," he says. "I just want to find the best person." Shea blames the bad job market for the growing outcry about the H-1B visa program. "People are simply afraid in times of uncertainty, and they're going after the most vulnerable target," he says.

IT project manager Peter Fitzgerald of Walnut Creek, Calif., was laid off in November--along with his entire development team--and says he's run the course of emotions: depressed, stressed, and as he puts it, "incredibly frustrated." He's been looking for work in everything from project management to networking to help-desk support, and hasn't turned up anything. But he doesn't blame H-1B workers, the INS, or the government. "It doesn't matter who's taking the jobs because most people are out of work," he says. "The H-1B workers are getting dumped on, too."

-- With Marianne Kolbasuk McGee

Photo by Ken Schles

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