The Myths And Facts Driving The H-1B Debate

The emotion around the H-1B debate is as intense as ever. The facts and concerns about the U.S. guest worker program are changing, however, as demand for foreign-born talent soars, the IT job market improves, and worries about abuse or unintended uses of the H-1B grow. Offshore outsourcers have helped reshape the debate, as a handful of the largest ones scarf up more than a quarter of all unrestricted H-1B visas for their U.S. offices. Congressional reformers are questioning how companies use these visas, and new research is providing better insight into who gets them. The comprehensive immigration reform championed by President Bush died in June, taking with it several proposals for revamping H-1B visas. But there's still a chance the H-1B program will look markedly different next April, when the government again accepts applications. Here are the myths--and facts--that will go a long way toward driving the H-1B debate. MYTH: H-1B visa abuse is obviously rampant. Sen. Chuck Grassley, R-Iowa, one of the main agitators for H-1B reforms this year, says the potential for widespread abuse exists but acknowledges lawmakers don't have a clear picture. "We're looking into these programs because we just don't know the extent of the abuse," he says in an e-mail. "I don't know if companies have gone too far, but it's evident that some are trying their best to find the loopholes." Stephen Yale-Loehr, a Cornell University law professor and lawyer who specializes in immigration issues, says he doesn't think there's a "huge fraud problem" with H-1Bs. FACT: H-1B abuse is happening. There are plenty of ways to abuse the system. One is to advertise for H-1B applicants only. Another is to seek H-1B visas for jobs that don't yet exist--as do "body shop" companies, which then hire out people, sometimes through employment agencies, for contract work. But the most likely source of H-1B abuse pertains to the rule that employers pay the "prevailing wage" for skills in a certain geographic area. That's a standard rife with loopholes, says John Miano, founder of the Programmers Guild, which acts as an advocate for the software programming community. Depending on available data, an employer can use the median wage for all U.S. employees working in an occupation and location, the average of an employer's current workers, or the Department of Labor's skills-based prevailing wage system. Classifying workers in the lowest of those levels can mean paying them in the 15th to 20th percentile. "Between all these measures, you usually have enough leeway to take $20,000 to $30,000 off the market wage without breaking the law in any detectable manner," contends Miano. Ron Hira, an assistant professor of public policy at the Rochester Institute of Technology who's on leave as a research associate at the Economic Policy Institute, points to the U.S. Citizenship and Immigration Service's most recent report to Congress, which shows that the median wage in 2005 for new H-1B computing professionals was $50,000. That year, InformationWeek's Salary Survey found a median staff base salary of $69,000 and total cash compensation of $71,000. MYTH: The chance to change the H-1B law died with comprehensive immigration reform. "There's no question that a comprehensive bill would make it easier to get our reforms passed," says Grassley, who promises to keep working for ways to end the fraud and abuse he suspects. A number of standalone bills have been introduced over the last year or so, including the SKIL bill, which aims to raise the cap to 115,000, as well as the bill by Grassley and Sen. Richard Durbin, D-Ill., that would have put many more restrictions on H-1B employers, like requiring them to post the jobs they want to fill on a government job board. Any of these bills could resurface, and new ones could be introduced. FACT: The H-1B cap has changed repeatedly in the past decade without comprehensive reform. The H-1B cap has seesawed. In 1998, Congress lifted it from 65,000 to 115,000. The American Competitiveness in the 21st Century Act, signed by President Clinton in late 2000, raised the cap to 195,000, then lowered it in fiscal 2003 to 65,000. Employers are pushing for a cap increase, with some of the biggest names in the tech industry, including Microsoft and Google, testifying for it before congressional committees. That public profile could keep a cap increase on the political agenda and bring reforms along with it. Newer and more radical proposed immigration changes, such as creating a merit-point system on which to award green cards, don't have much of a shot. The demand for more H-1B visas will make it harder to push aside.

MYTH: Offshore outsourcing and foreign visas have sunk U.S. tech employment, and wages have cratered. There's been huge disruption in the United States--26% fewer programming jobs since 2001, for example. But the tech job market is still robust. There have been corresponding jumps in management and software engineering jobs. Tech unemployment today is the same--2%--as it is for the broad management and professional category that includes 51 million people, according to an average of the last four quarterly surveys by the Bureau of Labor Statistics. At 3.58 million, tech employment is up 8% over the pit of 2004, and back up higher than the boom years of 2000 and 2001. Salaries show signs of growth again after stalling in recent years: The median IT manager compensation is $105,000, and staffer compensation is $78,000, according to this year's InformationWeek Salary Survey of 7,281 IT pros. The typical raise this year--5% for managers, 3.6% for staffers--was higher than it's been in years. FACT: The U.S. tech industry is having trouble attracting new blood. The technology industry points out that fewer Americans are enrolling in technology programs at the university level, and that increasingly large percentages of those emerging from graduate programs are foreign born. Almost 60% of engineering Ph.D. degrees awarded annually are earned by foreign nationals, according to the American Society for Engineering Education. To the industry, that's further evidence that more H-1B visas are needed. Yet critics see a self-fulfilling prophecy, as companies fail to retrain older workers and discourage younger workers from entering the field. "Due to both outsourcing and insourcing, many young people are concluding that technology is a bad place to invest their time," says Mark Thoma, a professor of economics at the University of Oregon in Eugene. MYTH: An employer needs to look for a U.S. worker before hiring on an H-1B visa. Employers do need to run ads checking for available U.S. workers before applying for automatic approval for a green card. FACT: When it comes to H-1Bs, most employers aren't required to prove they couldn't fill a job with a U.S. worker. The exception is H-1B-dependent companies--those that have more than 50 employees and have more than 15% of their U.S. workforce on H-1B visas, or companies that have been caught committing "willful failure or misrepresentation" on past H-1B forms. Those companies must attest that they've made "good-faith steps" to recruit U.S. workers for the job and that they've offered the job to any U.S. worker who applied that was at least as qualified as the H-1B candidate. MYTH: There are only 65,000 H-1B visas issued each year. The cap for unrestricted new H-1B visas is set at 65,000. But since 2004, there have been 20,000 more H-1B visas allocated annually to U.S.-educated foreign workers with advanced degrees. Also, educational institutions and nonprofits can bring 27,500 foreign workers into the United States each year above and beyond the cap (New York Public Schools is No. 22 on the list of biggest H-1B employers). Indeed, the U.S. Citizenship and Immigration Service approved 117,000 H-1B visas in 2005, according to data by the Government Accountability Office in a report to Congress in June 2006. People can work up to six years on H-1B visas, with renewals. FACT: H-1B visas are tougher to get these days. Last year it took almost two months to fill the 65,000 cap; this year, enough applications arrived in two days. One reason is that Indian-based outsourcing companies are applying for more visas to serve U.S. customers. But the appetite for foreign talent is growing among U.S. companies, too, and even the coolest companies don't get to jump the line. Google employed 328 H-1B visa holders in 2006, putting it at No. 53 on the list of recipients, according to congressional research. In June, Pablo Chavez, Google's policy counsel, wrote in a company blog post that the cap on H-1B visas "prevented more than 70 Google candidates from receiving H-1B visas."

MYTH: Nearly all the H-1B visas go to foreign outsourcers, whose workers take their U.S.-learned skills back to India. It's true that use by India-based outsourcers has exploded. But U.S.-based companies and universities in total are still the biggest users. Microsoft hired 3,117 in 2006, according to congressional research, making it the No. 3 employer of H-1B visa holders; IBM hired 1,130; Oracle 1,022; Cisco and Intel, both more than 800; Motorola, 760. About one-third of Microsoft's U.S. workforce is here under some visa assistance. These companies generally hire with the goal of getting the person a green card to work in the United States indefinitely. And much of their recruiting comes on college campuses. "Companies aren't bringing people over. That's very rare," says Rod Malpert, an immigration attorney at Littler Mendelson. "Typically, these people have already been here four to seven years at U.S. universities." FACT: The H-1B visa is the "outsourcing visa." At the same time, the major offshore outsourcing firms have become dependent on the H-1B visa--as have the U.S. companies that hire Indian-based outsourcers to do work for them. Seven of the top 10 employers of H-1B visa holders have most of their staffs in India, and those seven employed a total of 19,400 H-1B workers in 2006. That's 30% of the unrestricted cap. Tata Consultancy Services hired 3,046 H-1B workers last year, according to congressional research. A few will stay in the United States for two years or more, but most do project assignments lasting six to 12 months, says S. "Paddy" Padmanabhan, TCS's executive VP of global human resources development. "Ninety-nine percent go back to India," he says. Sens. Grassley and Durbin proposed legislation to limit that, alleging that such short-term use of H-1Bs only fuels offshoring of work by U.S. clients. Critics label it "insourcing" and consider it a distortion of H-1B's purpose. Yet Indian firms say they're using the visas exactly as intended--for short-term work. The H-1B visa isn't an immigration issue but rather a trade issue, says Kiran Karnik, president of Nasscom, a trade organization that represents Indian IT services and software companies. Nasscom supports different types of visas for short-term work and the indefinite, green card-bound employees at places like Microsoft. "There is no visa appropriate for the IT industry worldwide," Karnik says. MYTH: H-1B visas are a battle for the highest tier of talent--the world's best and brightest technologists. Most companies don't even make the case that they're chasing the most skilled people. A full 56% of visa requests in 2005 asked for H-1B workers at the lowest of the Labor Department's four-tier skill level--just 5% were for the highest level, 8% for the second-highest. Programmers Guild founder Miano says this shows that these workers either aren't contributing substantially to America's ability to compete, or employers are understating workers' skills to justify paying them less. The former assessment, however, ignores the possibility that having a good supply of lower-tier talent could be what companies need to compete. But Norman Matloff, a professor of computer science at the University of California at Davis who has studied the H-1B issue, sees the visa fundamentally as a way to hire cheaper foreigners or to avoid hiring older U.S. workers seen as more expensive. "This is about cheap labor, period," says Matloff. "H-1Bs are being exploited, even as U.S. workers are being displaced." FACT: The very best employers have other options. The premier U.S. tech employers still search the world for the very best people. And if they can't bring them here, they have every reason to do more development abroad. Microsoft recently said it plans to open a development center this fall in Vancouver, British Columbia--a two-hour drive from Microsoft's Washington headquarters--in part for people who can't get U.S. visas. Microsoft plans to hire 200 people there but will have room to expand. Says Cornell's Yale-Loehr, "At the very top end, for truly multinationals like Microsoft and Oracle, it really is a competition for the best and brightest." Continue to the sidebars: U.S. Visa Holders Live With Uncertainty and To H-1B Or Not To H-1B?