Wolf Richter: In Search of Cheap Labor in Tech – Behind the H1-B Visa Scenes

Yves here. This post focuses on how the procedures in the H1-B visa process meant to protect workers from unfair competition from foreign workers and contractors are a joke. And this is one of the reasons that the calls by disconnected Beltway pundits and technocrats for American students to get more technically oriented education, most of all in STEM fields, is hopelessly misguided. Companies are more and more refusing to supply much if anything in the way of entry-level jobs, sending yeoman’s work in former white collar professions, including accounting and the law, to outsources in India. And the fix of having more specialized training is just as unrealistic. The more specialized the training, the more at risk you are that those skills will prove to be useless. That is why so many mid-career professionals fall far when they lose their perch, since if they can’t use the narrow expertise that they’ve accumulated, they have to fall back on their generalist skills, which means low-level jobs like call center work, retail, or if they are lucky, a position like an office manager in a small business.

By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street

In April, 2014, it emerged that Southern California Edison, a utility with about 14,000 employees at the time, was planning another round of layoffs. Most of them would be in its Information Technology Department, which had 1,800 employees and 1,500 contract workers. SCE admitted to the plan but told the LA Times that it hadn’t finalized the number. State Senator Alex Padilla then told the paper that as many as 500 employees and 500 contractors would be let go.

Laying off workers and outsourcing some functions was part of its “ongoing efforts to act as cost effectively and prudently as possible in operations for its customers.” These efforts at the IT department would “enable an increase in quality, speed and capabilities while lowering costs,” SCE explained. “By better leveraging the knowledge, skills and expertise of industry vendors, SCE will adopt a proven business strategy commonly and successfully used by other top U.S. companies.”

Namely laying off American employees and bringing in cheaper H1-B visa holders from India.

IT workers in the process of getting axed often sign severance agreements that contain non-disparagement and confidentiality clauses that bar them from discussing the situation in public. Plus there are fears that if they discussed the situation publicly, they might be blacklisted and not find another job. But now some of these affected SCE employees have talked to Computerworld.

SCE confirmed having hired Infosys, in Bangalore, and Tata Consultancy Services in Mumbai, two of the largest users of H-1B visas, to provide the H1-B workers.

“They are bringing in people with a couple of years’ experience to replace us, and then we have to train them,” one longtime IT worker told Computerworld. “It’s demoralizing, and in a way I kind of felt betrayed by the company.”

The H-1B program “was supposed to be for projects and jobs that American workers could not fill,” another worker said. “But we’re doing our job. It’s not like they are bringing in these guys for new positions that nobody can fill,” he said. “Not one of these jobs being filled by India was a job that an Edison employee wasn’t already performing.”

Some of the affected SCE employees have been training their replacements either at the office when the Indian workers are already here or via Web sessions with people in India. And these Indian tech workers didn’t have the skill levels of the American people they’d be replacing, the sources told Computerworld.

Ron Hira, a public policy professor at Howard University, and a researcher on offshore outsourcing, called it “one more case, in a long line of them, of injustice where American workers are being replaced by H-1Bs”:

Adding to the injustice, American workers are being forced to do “knowledge transfer,” an ugly euphemism for being forced to train their foreign replacements. Americans should be outraged that most of our politicians have sat idly by while outsourcing firms have hijacked the guest worker programs.

The majority of the H-1B program is now being used to replace Americans and facilitate the offshoring of high wage jobs.”

On the surface, it shouldn’t be this way. To obtain H-1B approval from the Department of Labor, the company has to “attest” to a whole laundry list of things (PDF), including: “Working Conditions: The employer attests that H-1B, H-1B1 or E-3 foreign workers in the named occupation will not adversely affect the working conditions of workers similarly employed.”

“The SCE case is clearly one where the hiring of the H-1B is adversely affecting the wages and working conditions of American workers,” Hira said. “There isn’t a clearer cut case of adverse impacts – the American worker is losing his job to an H-1B.”

There are other issues as well, Computerworld notes: H1-B workers are mostly “under 35 years of age, according to government data, and the SCE workers interviewed said many older workers were being laid off.”

This has been happening in all kinds of tech companies and IT departments, and it has been happening for years, though it has largely been kept quiet by restrictive severance agreements. Another element in the great mystery of why wages in the US have been losing ground.

What has sort of kept a lid on it is the limited number of H1-B visas given out each year, though companies have been clamoring for more. Just how much corporate demand is there?

US Citizenship and Immigration Services opened the lottery for H1-B visas for fiscal year 2015 on April 1, 2014. On April 7, it reported that it had already reached the statutory cap of 65,000 visa petitions for the general category and 20,000 under the advanced degree exemption. But tech companies have been lobbying in Washington to get this raised. Because the Holy Grail in business is cheaper labor. And bringing in cheaper labor puts downward pressure on wages for everyone else.

The housing market has been healed by the Fed’s bold actions, we’re told incessantly. And now there’s a new mantra: instead of a home, let them buy toxic, rent-based, synthetic structured securities. Read…  The American Dream Dissipates at Record Pace

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  1. guest

    Companies are more and more refusing to supply much if anything in the way of entry-level jobs, sending yeoman’s work in former white collar professions, including accounting and the law, to outsources in India.

    Indeed, with a perverse outcome: after a while, the only way to find experienced, skilled IT professionals (software engineers, project managers, system integrators) is to import them from India.

    The reason is that, just like in every other profession, people start at the bottom and acquire experience and skills, and then those competent enough move on to the upper layer. Which means that entry-level positions are actually essential — it is the pool from which the future top-people will be drawn. By offshoring those entry-level jobs, the IT pyramid starts to resemble a diamond. Old experienced project managers, software architects, etc, get pensioned or fired, but there is no younger generation to take their place.

    if they can’t use the narrow expertise that they’ve accumulated, they have to fall back on their generalist skills, which means low-level jobs

    Precisely! And this affects every profession — engineers and metalworkers face the same difficulties.

    1. k;l

      THe only way to make profits in a market economy are to increase efficiency through production (which in the long run leads to undermining of profit) or squeeze labor, which also has its limits. America is a one trick pony with labor squeeze.

      1. Glen

        A one trick pony? Seems unfair to the pony.

        Maybe we can start importing CEOs, CIOs, and CFOs from India. They certainly could be no worse than the clowns currently masquerading as MOTU at our TBTF basket cases. They would definitely be much, much cheaper.

    1. James Levy

      In the end the biggest problem with QE and ZIRP was not inflation (the standard bugaboo) but the ability of the 1% to amass vast war-chests so that they could simply take all the fines the government might issue, even if you could prove unfair practices or fraudulent dealings, and shrug it off as a cost of business. If you are Apple sitting hundreds of billions in cash, what fear have you of being fined? It’s like fining a football player who makes 9 million a year $70,000 (considered a huge fine) for dirty play–so what? It’s a cost of doing business. In the end QE and ZIRP gave the 1% all the money they needed to buy the political system and game the regulatory one. That will be the true legacy of these policies, not hyperinflation (for that the money would have had to circulate and drive up costs uniformly–luckily for us, it never got past the top 5% ha ha ha).

      1. Gusets

        In the end the failure of QE and ZIRP to do what they were pitched to do, means a deflationary spiral in America, …and wait until the Chinese crack-spread the American electronics market with their high-end phablets listing at only $149. Their high-end laptops with W8.1Pro sell for $349. Can you spell CR8OR?

    2. Gusets

      This multinational company from LA blew into our town, advertised they were going to start a consultancy, picked up the greybeards who knew the local market and could bring in contracts. We all worked like champs for the summer, 6x12s. Then the Senior VP called from LA to thank us for our hard work, asked us all to have our files zipped on thumbdrives when he came up, so he could go over all the projects with us.

      Like typical high-tech drones, there we were in the coffee room that Friday, with our thumb drives hanging around our necks like high-tech nooses. He was an imposingly well-dressed hard-charging kind of dick head, took all our thumbdrives in his meaty hand, then announced we would all be laid off.

      They did it one person per day to avoid mass layout notification requirements. So you just sat there, your computer account locked, staring out the window, as your co-workers disappeared one by one. Maybe the phone would ring from some Santosh or Klatoo down in LA, asking you stuff about your files. No severance, not even a handshake, while you sat there as a call center consultant to your replacement.

      All the hard work we did went directly to an India back office.

      But wait, there’s more!!

      The Indians were yclept. They had academics up the ass, but no field experience. They could talk your ear off about this or that line of code, but their *end-product* was an abysmal failure. The local clients who bought into this i-scam experienced huge IT recovery costs, and finally drove this India front-company out of town.

      Ha, ha.

      Caveat Empire

      Now the RINO Congress of 1000 Years has five, count ’em, five immigration riders on the Gang of Eights 40,000,000 ‘Blue Visas’ legislation already voted and approved, they will be calling for UNLIMITED H-1Bs, at which point, every American should do a OWS sit-down in front of every one of those India front companies. As it stands right now, an estimated 99% of new high-tech jobs are going to the H-1B Hindus, and 50% of those H-1B Hindus, now over 2,000,000 in the US, have incomes over $100,000.

  2. Dan

    This whole thing has gotten significantly worse over the last few years. The bar for bringing in foreign technology workers (with supposedly skills that can’t be sourced locally) has dropped to the ground. To add insult to injury, one of the recent bills passed and signed by Obama allows wives/husbands brought here on their spouses H1B visa, the ability to work – supposedly to help their self-esteem.

    And if you really think they are bringing in technology geniuses, you should have to support their code. A software engineer in India is not much different than the career path for a lawyer in the US – they do it for the money, no real love or interest in technology.

    1. MartyH

      An anecdote on spouse work-visas. A colleague took a promising job with a start-up in Spain. The work was a interesting as advertised. It was a start-up so the management team is imperfect but that will probably work itself out as they get “on the job training.” The colleague and spouse had to move back to Bulgaria because she was unable to find work and the cost of living situation made that second income mandatory. There is some justification it would seem.

      Overall, the H1-B game has been a cynical means to cost-reduce US operations. They want the perfume to cover the putrid smell of letting people who created and understand the organizational technology go. The commercial media, mouthpiece of “Management” is quick to squirt as much perfume on the problem as possible. It has been a demoralizing fact of life in the tech industry at least since the late 1970s when Tata and friends started chipping away.

    2. hunkerdown

      A friend of mine attending a local community college reported that one of her Indian fellow-students felt she was entitled to get a high-paying degree without having to work for it. Indeed, I have heard stories of Java code from India littered with == instead of Object.equals.

      The sudras serve the Brahmin.

    3. k;l

      I’ve also seen whole industries that didn’t play this game ten years ago: management, even k-12 teaching, in on the game. I know the exemptions triple or more the 65k per year number, but how do they get them all a visa?
      A disturubing trend I’ve seen is that foreign students at American universities seem to have a leg up on getting hired. The B.S. is “A young person doesn’t want to live in Clevland.” Not at that price to pay off U.S. loans. We’re talking mid-management positions that don’t even require an MBA.

  3. allan

    From Science magazine:

    Another funny thing happened on the way to the STEM shortage

    [A] report on the class of 2015 from the respected National Association of Colleges and Employers (NACE), which conducts multiple surveys of employers’ hiring intentions throughout the year, projects a 9% drop in the salaries of new computer science bachelor’s degree graduates, from $67,300 in 2014 to $61,287 this year.

    But there is good news:

    … senators Charles “Chuck” Grassley (R–IA) and Jeff Sessions (R–AL)—both longstanding opponents of the H-1B visa and increased high-skill immigration—have been named, respectively, chair of the Senate Judiciary Committee and head of its immigration subcommittee.

    1. k;l

      I’ll believe it when I see it–Republicans love the cheap, macroeconomic destruction of cheap, unlimited, indentured labor. Liberals seem to love non-Caucasians, maybe a residual memory from their National Liberation supporting days in the 1970s before they totally sold-out! It must hurt to look at that shriveled, vampiric orifice in the morning knowing you helped destroy lives and Western Civilization.

    2. Gusets

      Senators Charles “Chuck” Grassley (R–IA) and Jeff Sessions (R–AL) have been named, in order to shepherd through the process of the five, count ’em, five immigration riders the Republicans are splicing onto the Gang of Eights ‘40,000,000’ Blue Visas bill, a bill that was already voted on and approved. These riders call for unlimited funding for DHS to engage in NO BID contracts, call for a $B Federal Secret Police, call for SuperMax prisons in every State together with special prosecutors and hanging judges, …and of course, unlimited H-1Bs.

      Do you really think they are ‘opposed’? They’ll blame it on the Obamacrats for not giving them ‘time to read it’. Americans should take the time to read this bills. They’re freely available online, and no harder to read than R code, but once you get the handle of it, you’ll probably fly off that handle that your Congress are such tr8ors.

  4. YankeeFrank

    I saw this happening at an investment bank I worked at for five plus years. When I arrived in the early 2000’s the place had no Indian developers. 3 years later there had been mass layoffs of full time employees and half the workplace was Indians with poor skills (I was a contractor which perversely gave me more protection). It wasn’t just that they were inexperienced either. They just weren’t that smart. They did everything rigidly, as if they were copying things from guide books of some kind, and once they left the rigid confines of doing things this way they floundered. Someone explained to me, an Indian who had been in the US for many years and had a green card, that of course we could get experienced, intelligent developers from India but that would defeat the effort because they were priced at a premium, thereby defeating or partially defeating, the purpose of bringing in cheap workers in the first place.

    What they’ve done to US workers across the board over the past 15-20 years is an abomination, and at some point they are going to sincerely regret the hollowing out of all of our industrial knowledge. They already are regretting the rise in China’s power due to them offshoring all of our manufacturing. The people who run this country have committed mass treason and its only because they own the media and everything else that its taken this long for many to start figuring it out.

    1. craazyboy

      Don’t worry. Everything will be fine. What I see as the natural outcome of all this is the TPTB will outsource the Arms Race with China and Cold War with Russia to India!!!!

      BWAHAHAHAHAHA they will bellow, while twirling their moustaches(Hilary too) and taking a puff off their Cuban cigars.

      The “Year 2000” problem kicked H1Bs into high gear in the later 90s, but they never scaled back. Back then I was hoping we could get H1B Congressmen for $15K/year, but that never did happen. Too late now, I think.

      1. Gusets

        Your RINO Congress of 1000 Years gave the TBTF access to Americans’ passbook savings accounts, the last store of wealth which hasn’t already been looted. The TBTF will prop up Draghi’s EuroTrash junk bonds, then your local bank or credit union will have a ‘holiday’ some bright day, as all your taxes meant for health and human services, will go instead to FDIC’ing the TBTF takeover of small US banks. Ponzi being what it is, and passed legislation giving bank investors priority over depositors, means that soon every bank in the US will be converted to a money-laundering profit center, and your last life savings will be looted and gone. I know this seems impossible to comprehend, …but so did the H-1B Hindupocalypse

    2. hunkerdown

      Whenever I see some post on some Q&A site stating the problem in stilted English and providing no evidence whatsoever of having even worked the problem, as if it were just handed to them, it’s a safe bet the poster is Indian. It’s worse than knowledge transfer — they hit up those sites not for insight, but to have others do their work for them.

      1. Ernesto Lyon

        Yes. I don’t answer those noob questions anymore.
        Why should I help improve my competition? No thanks.

    3. jrs

      Well as far as outsourcing goes (and not just H1Bs) you may not have to worry about Indians that much longer, the latest trend is to outsource development work to China. The wages are probably lower and there is a perception the quality is better than India.

    4. Propertius

      What they’ve done to US workers across the board over the past 15-20 years is an abomination, and at some point they are going to sincerely regret the hollowing out of all of our industrial knowledge.

      Who are “they” and why should “they” regret anything?

      The .01% are an international class. It makes absolutely no difference to them whether technology comes from the US, the EU, China, India, or Russia. I see no evidence that “they” have any interest in maintaining either the technological or economic infrastructure of any particular country.

    5. Pepsi

      I agree wholeheartedly. The truth in all the heartbreak is that there is no benefit to outsourcing and insourcing and whatever you want to call it, just a one time payout to people on the top and a fucked company from thereon. We need to utterly reform everything.

    6. k;l

      My friend works in a retail pharmacy. (It doesn’t matter which one; they’re all the same.) About a quarter of the pharmacists are H1-b visas. Their inability to transfer work and their visa contingent on the boss, has allowed massive speed-up and assistant firing. These pharmacies are unsafe (and according to the board, all liability is on the pharmacist–they can say no to working there after all–lol.), customers don’t like the bad attitude, hygiene of the pharmcsits, they don’t have the same intensive training in health and interactions U.S. pharmacists have. Wages are suppressed, even nominally, unpaid overtime and de facto working during the measly three holidays/year and the weekend so the company doesn’t have to hire support staff.
      Why do they stay? The PPP between the salaries is no longer that much more and the work conditions are probably worse than India, if for no other reason a small proprietary Indian pharmacy does not have the computer metric-camera Big Brother hostile workforce. The reason is cost-of-living arbitrage: the PP of the dollar salary is about one-half million dollars. It’s the same reason Mexican migrant workers work U.S. plantations–that 100 dollar savings at the end of the month is 500 in Mexico. The ‘market price’ of labor is the lowest amount to keep a sucker coming to work. That doesn’t mean it need cover the bare necessities. If enough people cram into a cardboard box, share raemen noodles for a few years before mal-nutrition/exhaustion gets them, that’s market rate.

  5. roadrider

    And the fix of having more specialized training is just as unrealistic. The more specialized the training, the more at risk you are that those skills will prove to be useless. That is why so many mid-career professionals fall far when they lose their perch

    Yves, you could not have illustrated my own situation more perfectly. People not familiar with technical field just assume that if you have good skills you will have no problem finding another job if you become unemployed. But what actually happens is that each job you take fits you into a smaller and smaller box. Most jobs only make use of a fraction of the skills you have so even if you make an effort to keep them up to date employers will not value them since you haven’t used them at work for a while. And when (not if in these times) you lose your job you’re tossed into a market where only the latest fads (and yes, demand for most technical skills is fad-driven) are valued. Then they discriminate against you because you’ve been out of work.

    The H1-B scam is a significant problem and it is a fraud-ridden, poorly regulated program that mainly benefits foreign-owned outsourcing/off-shoring firms and cheapskate employers. But its merely piling on to the completely domestic issues of age discrimination, lack of legal protection for workers, job scarcity due to misguided austerity policies and abjectly poor hiring practices by most employers, particularly in technical fields.

    1. jrs

      Specialized training could help for re-training, but that again assumes companies willing to hire someone who has retrained from the narrow niche they did before, now most tech workers more than have the ability to easily retrain this way, but if the employers are rigid and insist one have worked in exactly x position and who cares about training if you haven’t done it in your last job, then forget it.

      I don’t believe the H1B system merely piles on. Without a surplus of workers the abuse of workers that goes on wouldn’t be possible, nor would so much age discrimination, etc.. It’s a necessary condition for it.

      1. Gusets

        Retraining and the ‘STEM’ initiative seems like a good idea, …until you look at the nuts and bolts.

        I retrained as a STEM teacher after I got replaced by a Hindu in IT. My master teachers had no STEM abilities, they were relying on me to bring that to the teaching table. I was taught all the latest ‘inverted classroom’ crap from MicroSoft and their India backoffice i-education theory. When I did my student teaching, the mentor whispered, ‘Throw away everything from teaching college.’ Wow, was he right.

        American elementary education is 85% liberal arts majors, women. They don’t know math or science, and rely on the textbook cartel to provide them with low effort ‘memorize, test and forget’. It doesn’t get any better in middle school or high school either. And the teachers union does NOT want to retrain or ‘Common Core’. Who would?

        You’re responsible for doing fresh-routine STEM standup six hours a day, developing your own STEM differentiated lesson plans every night so nobody gets ‘left behind’, you have constant pressure from the school board to met after work and plan your ‘teaching to the test’, you have student grading, parent:student interactions, you have metrics out the ying-yang, you’re writing your own tests, which is a science and art in itself, … and making $50,000 a year for working 12-14 hour days and weekends.

        Nobody in their right STEM mind would do that, and guess what. American students have no interest in STEM either. They just want the toys and the robots and the laptops.

        Our entire culture was created and shaped by Madison Avenue, and now we’ve turned a corner into a virtual world that Asian kids are ready to lead, but American kids are only willing to play at, and that is so sad, because Americans created Technology! I started coding on punch cards. Jesus!

        1. jay

          Grade two pieces of a homework a week, ignore the rest or give check marks.

          As a new teacher the first rule is never grade all the work you give out. You will go insane.

          You are working far too much. Only put in what others (students, parents and admin) are wiling to reciprocate. If they aren’t then punch the clock and worry about people who actually care.

          Words from an ex teacher

  6. diptherio

    Laying off workers and outsourcing some functions was part of its “ongoing efforts to act as cost effectively and prudently as possible in operations for its customers.”

    For their customers?!? Oh come on! Who do they expect to believe that one? Do Computerworld’s stockholders know that management is acting with a view towards the interest of the customers? That’s CEO malpractice right there–I thought they were supposed to be protecting shareholder value, not working for the benefit of the customer….fortunately, Americans are adept at believing mutually exclusive things (it is only right that companies work to benefit their owners exclusively & companies have the best interests of their customers at heart).

  7. TG

    Cheap Labor Uber Alles!

    First of all, kudos for writing about this in such a clear and forthright manner. The rich and powerful have so hammered opponents of a cheap-labor immigration policy as ‘racists’ that it’s hard to find such a clear discussion.

    But to extend, this policy will not just hammer American tech workers – eventually it will destroy America as a center for excellence in science and technology. Remember, the immigration policy that gave us people like Einstein and Fermi and Szilard etc. was a greatly restrictive one, that used our opportunities to recruit the best from around the world, while restricting overall immigration (even those with PhDs in physics) to very low levels.

    Einstein never expressed a desire to move to Bangladesh, did he? And when we turn the United States into just another overpopulated sweatshop, the next Einstein will also want to move to a better place…

    Imagine a University that decides to hire all nominally qualified applicants without limit, and then split the money for salaries and office and lab space up amongst everyone. Very soon the University would be overcrowded, wages would crash, the best would turn away and anyone with any talent would soon leave. Yes?

    1. steve dean

      There is already seperate visa called the O-1a that is available for those scientist and others that posses extaordinary abilities.

      O-1A – individuals with an extraordinary ability in the sciences, education, business, or athletics (not including the arts, motion pictures or television industry)


      Universities are already allowed unlimited H1-b visas and wages for teaching asistants is pretty dismal.

      1. Ivy

        The wages often mirror the H1-b candidate communication ability.
        That has been seen and heard by numerous students that have suffered through halting pidgin English or worse from teaching assistants, graduate assistants or lecturers.
        Sympathize with them as they try to complete required courses while stacking on debt.

  8. nomoreclintons

    Let’s not forget dear Hillary’s association with TATA and her support for an h-1b limit increase:


    April of last year:

    Asked by Marketo’s Fernandez about how she would deal with the shortage of H-1B visas, which tech companies rely in to bring in non-U.S. workers such as computer engineers, she suggested thinking longer term and working with colleges –using cash from Silicon Valley – to train people in the U.S. to fill those jobs, while in the shorter term pressing for more H-1B visas. She also supported a continuing push for immigration reform. “It is one of our competitive advantages around the world,” she said, referring to U.S. openness to immigrants.

    1. Ivy

      Killary was also adept at selling out America’s manufacturing jobs to China during her Wal-Mart board stint last millennium.

      For the good of the country, she should triangulate her way into a grandmotherly dotage.

  9. Larry B.

    Perhaps H1-B should be paid a premium? Maybe in exchange for the H1-B visa companies should pay, say, 20% over the market rate? If they really are indispensable there should be little complaint from the corporations, they will still get their “vital” workers, and it would limit the amount that H1-B’s could undercut other employees on the wage front.

    1. Vatch

      I like your suggestion! If there’s really a shortage of STEM workers, then the foreign H-1B STEM workers are performing a vital service for U.S. corporations, and they deserve to be handsomely rewarded.

    2. steve dean

      Many visas are issued for body shops located in Maine, as the prevailing IT wage in Maine is amongst the lowest in the country.

    3. Llewelyn Moss

      I believe the H1B program states that visa holders MUST be paid the prevailing rate for the skill they are hired for. But like everything else about this corrupt program, it is not enforced. Companies make up all sorts of excuses in the rare cases they get questioned by the wink/nod gubmint.

    4. BobW

      I don’t think that the workers should be paid a premium, but I wholeheartedly believe that their should be a heavy “import duty” on imported labor. Since the companies say there is a dreadful shortage of highly qualified candidates, then take the average wage of the highest 10% base wages and charge the companies a twenty or thirty per cent “duty” for each worker. (for instance if the top 10% IT earners make an average of 150K, then the duty would be 30K or 45K) The duty is then to be used to finance training to US citizens (ONLY) to keep our strongest (only?) industry alive and domestic!

  10. Nial

    You are discussing the upper end of the labor segment.
    Tens of millions of good unionized jobs among American building contractors and tradesmen have also been replaced with cheap labor imports from Latin America.

    Why pay Joe a living wage to do the job correctly the first time when you can hire Jose to do it for one fifth the price? Sure it may have to be redone once or twice, or things will fall apart a year later, but just think of the savings to the labor arbitrager who hires them. Also the issue of where does Jose spend or send his money?

    Thank you Mr. Richter for an informative series that we all enjoy.

    1. Gusets

      I have nothing against Jose, I’ve worked side by side with Mexicans and CAs, they kick ass and are just ordinary Americans with the same family values we have. Where I have a problem is with Jaulei coming in from China and undercutting Jose on the construction black market, but Jaulei is doing the most incredibly non-Code compliant, non-standard quality throw together, it is truly frightening. I had one job where their electrical was so bad, if the lights went out for no reason, and you put your hand on the panel cover, the lights would go back on again. They didn’t bother to install a ground. You were the ground. I don’t think Americans fully realize this trainwreck, after all, the only thing buoying up our economy, according to the St Louis Fed, is used car loans and student tuition loans. Now Chinese hot money is blowing up assets from the West to the East Coast. That will all crater.

  11. greg kaiser

    The downgrading of scientists and engineers by greedy short sighted managers was underway, a part of the “Reagan Revolution,” by the time I graduated as an Electrical Engineer in 1987. Managers were already hiring H1b visa holders that must work for less and toe the line or lose their status. That, of course, was an obvious extension of the union bashing that was accelerating the concentration of wealth that’s almost wiped out the middle class today. The article indicates the spread of the malady to accounting and law [since the early 2000s] that’s been afflicting the human race since the beginning of civilization . . . with some short periods of remission like 1940 to 1970.

  12. Glen

    While I agree that this is a travesty, I wish the same concern was available to all sectors of the economy. Somebody who lost their job in manufacturing due to outsourcing, is not going to care about those affected by H1-B displacement if it is going to make there electricity cheaper.

  13. steve dean

    The H1-b cap is actually much higher than the 60,000 that is often quoted in the media. It was actually 135,000 in 2012.

    Laws exempt up to 20,000 foreign nationals holding a master’s or higher degree from U.S. universities from the cap on H-1B visas. In addition, excluded from the ceiling are all H-1B non-immigrants who work at (but not necessarily for) universities, non-profit research facilities associated with universities, and government research facilities.[5] Universities can employ an unlimited number of foreign workers as cap-exempt. This also means that contractors working at but not directly employed by the institutions may be exempt from the cap as well. Free Trade Agreements carve out 1,400 H-1B1 visas for Chilean nationals and 5,400 H-1B1 visas for Singapore nationals. However, if these reserved visas are not used, then they are made available in the next fiscal year to applicants from other countries. Due to these unlimited exemptions and roll-overs, the number of H-1B visas issued each year is significantly more than the 65,000 cap, with 117,828 having been issued in FY2010, 129,552 in FY2011, and 135,991 in FY2012


    1. Llewelyn Moss

      Plus an H1B visa is good for 6 years. So if you bring in 130K/year, that means there are 780K H1Bs working in the US in any given year.

      Just wait til they double the quota with the upcoming immigration bill.

  14. Hayek's Heelbiter

    I worked for an international investment bank based in Germany for 22 years, whose former president has skated through numerous indictments and dodgy business dealings.

    Let us see at what point his karma will catch up with him.

    One day without notice (not quite, as I discovered the secret plans when the VP didn’t realized he’d left the timeline in the print queue. I didn’t reveal what I knew, as the VP had two small children and it would have been the end of his career. Here’s an ethics question for you. I did, however, subtly encourage my colleagues to prepare their resumes), bank management announced they were outsourcing our department.

    I, too, had a choice.

    Be fired or train my replacements in India.

    My mentor had always insisted that we had to see Kerala, India at some point.

    So, many years after his death,I found myself doing a data dump with an actually wonderful group of kids in Kerala.

    Then when I came back to New York, the Thursday after I returned to work, I got the standard, “Don’t come in on Monday.”

    Which is just as well, as the people who remain describe the new work environment as a Gulag with better heating and a now privatized for-profit employee cafeteria.

    Anyway, before I started to digress, the whole point of this post was to remind people that the scientific/technical term for training your replacements only to be fired immediately when they are is “to feed your own vultures.”

    1. hunkerdown

      Two small children? Poverty would have been the best thing for them. I say you should have fed that to every alt-weekly in Frankfurt.

      As long as people are willing to tolerate being seen as less important than others, the cycle will continue.

    2. jrs

      I too wonder what kind of severance they offer to make what seems obvious cooperation in one’s own destruction seem worth it.

      1. Llewelyn Moss

        My old company offered severance of 1 week of pay for every year of service (to maximum 26 weeks pay ). The catch is severance is deducted from you eligibility toward collecting unemployment in most states. I hear it had gotten more frugal in recent years.

        You could refuse to take their retirement package but they would just weed you out of the business by giving you poor performance ratings. Then you’d end up unemployed with no severance.

    3. Gusets

      Had to laugh at that story. My local manager intimated that I should start looking for work outside, that maybe he was going to hire me for a contract start-up to backfeed into the company, ‘if they laid everyone off’. OK…

      Then I’m at the copy machine and wouldn’t you know, he had left a copy of his consultant contract that he’d already made with the company! He’s being paid multiple six figures through the local corporate contracting backdoor. Then I find out there are multiple former employees running backdoor contracts, doing the work that other managers were supposed to be doing, but instead, feeding them these subcontracts for payola.

      Everyone was in on the baaksheesh game, exactly like that movie Fight Club. Wink, wink. Nod, nod.
      Neo Social Darwinism, Survival of the Griftest.

  15. Llewelyn Moss

    Apparently the system is not rigged enuff yet against US workers so…

    the Immigration Bills being passed around in congress include Doubling The Number of H1B visas. You see, the real Dreamers are the corporations who own congress. Expect an Immigration Bill to pass shortly and signed by Neoliberal scum Obama.

    Posted this link a few days ago, but it is relevent to this story.
    This video of a law firm explaining the Playbook for Gaming the H1-B program to execs is eye opening.

    Having worked for one of the top 10 biggest US Techs before they offshored my job, I can fully confirm this article. Worked at a complex with about 2,000 employees. By the time I left, the cafeteria at lunch time looked like about 80% Indian.

  16. Vatch

    Here’s a list of the worst H-1B abusers compiled by the Center for Immigration Studies:


    Within the universe of H-1B users there is a much smaller population whose treatment of their workers, or the immigration law, was so abusive as to secure negative attention from the normally sleepy Labor Department. These employers fall into two categories: the broader debarred list, and the worst of the worst, the “willful violators” whose names appear in boldface type on the CIS list.

  17. Pat

    Let’s be honest here, these laws were written with this outcome in mind. You want a real H1B1 visa program that is about addressing an inability to find American workers.

    The H1B1 visa is a temporary stop gap in order to allow companies to train American workers for the job. It is not be used to fill jobs at a lower wage then prevailing market rates, nor is it to be used to train workers from other countries to do these jobs. Any job filled with an H1B1 visa must have been offered and advertised as available at above market rate. Market rate determined by what employees in similar positions are being paid within the region, including all forms of compensation. Companies must prove that there were NO qualified American applicants for said position. Visa is attached to the job, not the person. If the person is no longer doing that job, they have no visa, if the job does not exist there is no visa. Any worker with a H1B1 visa that ends must go back to their own country. Job will pay market rate as determined above but will rise 5% above market rate every six months until the position is filled with an American worker. This penalty will be reimbursed if company has a training program for American workers to fill position AND the position is filled with an American trainee from this program within one year. No job may be given a second H1B1 visa after it has been filled with an American worker. The foreign worker in that job will be eligible for other H1B1 visa work after return to their country, but cannot take another job with a company where they have held an H1B1 job for two years after they have left that job. If it is discovered that any company has installed a former H1B1 visa worker in a foreign work place AND closes or has significant layoffs from moving operations out of the country shall face penalties including but not limited to being denied any H1B1 Visas for 25 years AND be required to pay all laid off employees three years salaries and benefits as severance.

    If you wrote the law like that, I think you would soon discover that there is no significant shortage in America of capable STEM workers. But I’m like that about companies that have openly colluded to keep wages low and deny their employees access to the same free markets they want for their products.

    1. ian

      “The H1B1 visa is a temporary stop gap in order to allow companies to train American workers for the job.”

      That is one of the best jokes I have heard in a long time. I have worked in several places (technical) with H1-B visa holders and not once have I ever gotten any training of value. What training I have received has been corporate baloney on ethics, “diversity in the workplace”, “how to dipose of hazardous materials”, etc… (I am a embedded software engineer). In short – nothing that actually helps me do my job. Meanwhile, the company can check off the little box and say that I received x and so many hours of training.

      One of the worst aspects of the H1-B program is that it masks deficiencies in STEM education and corporate training. If you didn’t allow any visa holders in for a year or 2 you would see the true state of training and education.

  18. Jeremy Grimm

    I disagree with the article in small part. Yes, foreign born STEM workers are taking American jobs. Yes they have taken away many entry level jobs from American born STEM graduates. But, the American born new graduates and minimally experienced are used in a similar fashion to replace the experienced STEM workers. Training and personnel development have morphed into an endless treadmill of getting certifications on the latest software from Microsoft or Oracle or …. Echoing an earlier comment — latest fad almost fails to capture the manner of “progress” in software jobs. Thanks to new software like the matching program from yesterday’s links, matching STEM worker with ideal job, and new Oracle database systems for gathering, storing and classifying personnel, all technical and managerial personnel are neatly fitted into inventory bins, quite literally hundreds of them, and then converted into fungible commodities. Human capital has transmuted into human just-in-time inventories. First they came for our factory workers ….

    I wonder how long it will be before the new ties with Cuba start allowing in Cuban medical doctors and changing their licensing so they can practice in the United States. I hope I can at least travel to Cuba to get medical treatment if I need an operation or run into a serious medical problem. Although I can feel sorry for myself as a STEM worker and feel the pain of the factory workers in Detroit and the Mid-West, I am having trouble finding sympathy for our medical doctors. Oh well — that’s beside the point.

    Our corporations have moved much of their research offshore. Looking at the authors names on papers published in Science, it should be evident we already “off-shored” most of our domestic research to foreign born graduate students, post docs and professors. I remember from long,long ago when I got my bachelors degree, many of my engineering professors and their Teaching Assistants (T.A.s) weren’t from around here. Even long, long ago I can remember complaints from my friends how they couldn’t understand their professor’s or their T.A.’s English.

    In my Junior year the University fees went up. I went to the Provost’s Office to find someone in accounting who might explain what my fees paid for. They didn’t pay for land, which the Federal Government had given to my State. They didn’t pay for salaries for my professors or T.A.s. They did pay for some imponderable fraction of the costs of maintaining the University grounds … though the accountant was unable to speculate on what proportion. They didn’t pay for the research labs and graduate offices which consumed the major part of the building space — more than the classroom space. When I asked why the fees were increased and just exactly what that purchased — given the increased, rather than decreased size of lecture classes and sections, the accountant had no answer but did offer a useful non-sequitur. The costs for the University centered on the science labs and their associated graduate offices housing the cheap labor which populated the labs.

    My take away from all this — my state was expending the major part of its support for the University systems to provide for the research laboratories and research graduate students and post docs who where largely — even long, long ago in the 1970’s — foreign born. We were spending a large, if not the largest part, of our state’s taxes to train foreign graduate students in science and engineering. I believed more than a few of us poor natives felt very much discouraged from continuing our educations when under the tutelage of our state university. Indeed, as reported in an IEEE Spectrum article from the 1980’s (sorry no URL — long, long ago lost), NASA investigated why so few promising American engineering undergraduates went to graduate school. They found many of the American undergraduates demoralized, unsure of financial support, and unsure any graduate school would accept them. [There was no grade inflation in math and science in the 1970’s, at least not at my college.] After receiving my bachelor’s degree, one of my favorite fantasies centered accepting my Nobel prise and then very pointedly telling the world how my accomplishments could in no way be credited to my university or any of its professors. So far no Nobel prise, or prospect thereof, but this fantasy remains intact. Enough venting! By my age the anger should have died down — but it burns brightly even now.

    So … the United States, it’s harder and harder for me to call it my country, has dismantled our Industry, shipped the physical capital abroad together with the technical expertise and process expertise. The United States dismantled the engineering, legal and accounting professions driving down their wages to levels comparable with the wages of skilled union workers from before the dismantling of Industry. The United States has moved research off-shore, and used the greater part of its resources to train foreign born researchers in our state universities, now in our Educational-Industrial complexes both state and private. This, while American engineers, accountants, and lawyers watch their wages trimmed like skin from unfortunate captives, and while our skilled factory workers, no longer so skilled, sell burgers, and cheap shirts and move like gypsies all over this large country as their jobs move.

    I feel like one of those “left behind” — from the gutting, sell-off and sell-out of American Industry, Technology and Science. Guillotines and scaffolds are nice, but we’re reaching the point where we may need to settle for clubs and heavy stones.

    1. k;l

      Let me guess, your school was the University at Buffalo (a state funded school). About half the student body is Chinese national, with a good proportion of the others from other lands…Administration just added more deanships and offices of this-or-that office.

    2. Beans

      The same h1-b problems are already well established in medicine and dentistry. Because corporations now hire medical professionals instead of the old days when a self employed doc hung out a shingle, the influx of foreign doctors has become a significant issue. Medical schools are all seeking to expand the number of foreign med/dent students who pay an inflated tuition. Once these students obtain a degree, they can obtain a license, but cannot go into private practice because of their immigration status. The corporations that employ doctors and dentists are their only option. Consequently, the employee doctors have a conflict of interest between their employer and their patient – cross the employer and back home you go!
      The American Dental Association recently published a study citing an expected increase in the number of dentists in the US thanks to a massive expansion of for profit dental schools (which have a substantial number of foreign students paying hugely inflated tuition). The average dental income has steadily fell since 2008 and is expected to continue to fall. So in dentistry, there is an increasing supply of would be dentists seeking an increasingly costly education expecting their future earnings to be less that it presently is.
      The H1-B visa issue is only part of the problem in medicine – and is compounded by loose licensure requirements, for profit educators, financially strapped traditional educators and many folks who will pay any price for a shot to get out of their native hellhole.
      As far as your question about tuition hikes – right now you can blame a lot of that on decreased state funding, ambitions building projects or both.

  19. Vatch

    I was curious how many members of the U.S. Congress have explicitly expressed support for high H-1B numbers. Obviously it’s a lot, since the H-1B visas benefit rich corporate donors. But how many Congress critters would insult their constituents by openly supporting high H-1B numbers? Here are a couple:

    Scott Rigell of Virginia says:

    I support easing the restrictions to legal immigration and believe we should increase the number of H-1B Visas, those given to foreign workers in highly skilled occupations.

    Mike Honda of California says:

    I also know that enhancing the employment-based visa categories, including higher caps on H-1B visas and foreign students with advanced U.S. degrees in science, technology, engineering, and mathematics (STEM) fields, not only makes sense, but doing so makes dollars and cents for our district and our nation.

  20. Phil

    I have seen much of this up close, among friends and acquaintances in IT. Here are some observations:

    1) Most of the IT recruiters in Silicon Valley are South Asian Indian; most of them appear not to understand the vagaries of tech positions – or even care – because their target is getting their Indian clients hired. I have witnessed gross incompetence on the part of several of these recruiters.

    2) A few years ago, the Indian government was very upset with the Obama administration for hinting that new caps might be placed on H1-B (and other work) visas. Why is this? It’s because the Indian government – one of the most corrupt governments on earth – is too busy lining its own pockets with bribe money,instead of developing sufficient employment infrastructure to absorb graduating supply. Littleknown is that most Indian universities and many high schools have teaching faculty that *don’t show up*! Instead, they charge “tuitions” to tutor students after school. Education in India is another basic infrastructure project that is rife with corruption and outright stealing. It’s a scandal.

    3) Aside from IIT and one or two other Indian Universities, the credentials claimed by Indian tech workers graduating from most Indian colleges are almost always false or overstated. It’s also”convenient” that current rules state that if a company that is domiciled in America has an overseas worker employed abroad for one year, that employee has an easier time getting a work visa. Thus, companies like Tata, etc. “employ” workers in India as a breeding ground for easy entry to the US.

    4) The new, proposed caps would permit the spouses of H1-B’s to immediately seek work on entry with the H1-B holder. Can you imagine how many Indian “marriages of convenience” this will bring – where an Indian IT worker will marry another IT worker, so that if either one gets a visa they can BOTH end upworking in the American IT sector.

    5) Example: GE’s new San Ramon Global Software Center- at least 400 developers – is populated by 90% South Asian Indians. How can it be that GE couldn’t find at least half of its developers who were not from India,in Silicon Valley of all places? I have been told that the Indian H1-B’s at GSC are largely incompetent; that nepotism runs amok; and, that critical infrastructure programs in medicine, transportation (including air transport), etc. are of extremely shaky quality as a result. I have also been told by many other experienced IT acquaintances that similar scenarios exist in other companies where H1-B’s are replacing experienced American IT workers.

    6) This H1-B outrage is enabled by AMERICAN CEO’s and their Boards. They need to be outed; every single one of them. Sadly, the American tech worker’s plight has become so tenuous that few are willing to risk their jobs to protest, because they know they can be replaced. the Indian workers are just going where the opportunity is, whether or not they are qualified to do the work, which all too often they are not.

    1. Dan

      WRT to some of the items….

      3) apparently there are different IIT campuses – only one of relevance though.

      4) is going to be a huge issue. not just in marriages of convenience, just the amount of potential workers now eligible is mind boggling. and the reasoning – just for the self-esteem of the spouses, so they feel they can contribute. tell that to the US citizen (non-naturalized) who can’t find a job.
      5) thanks for the warning. i am in the middle of little-india here in silly-valley (Santa Clara/Sunnyvale). It has gotten to the point where the Chinese in the neighborhood complain about the behavior of the Indians. At least the irony is amusing.

  21. Don't get me started


    Don’t get me started on DemoRat Mike Honda (Silicon Valley), let alone his peers Eshoo, Lofgren, Fong, et al , and, above them: Forever War Hawk Profiteer Feinstein and Boxer, on literally mowing over, and burying alive, those California residents who voted for them (at one point or another) because we thought they actually cared about all human beings, no matter how poverty ridden. Not (and shouldn’t really be feeling the ‘requirement’ to say this) that I’ve ever voted Republican or plan to, from what I’ve read and witnessed firsthand.

  22. brooklinite

    As a fellow Indian I agree the frustration and helplessness of an american who has lost an IT Job for an Indian. When the great American CEO’s ran out of revenues to be made, Out sourcing was the magic pill. Most of the American companies have embraced outsourcing to look their balance sheets lean and great. This was fast tracked by well organized tech lobbies in DC. So when some one talk about corruption in India, I have to disagree. Just because its done wearing a suit doesn’t make a difference. The definition of an Employee in America has changed alot from the 60 -2000’s.
    There have been groups opposing this for a long time. But they were successful in reducing the cap from 200k to 65k. India was lucky to get these white collar jobs and I believe there is always going to be some kinda criticism. If this is all I can take, we have done a decent job. We are getting better.
    Its not fun for us either to leave India and come here and not have a social life compared to home.I hate leaving my family and place where I grew up. Of course we do it for the dollar. May be we are poor. Is it our fault that dollar happens to be the reserve currency? or Is it my governments fault for devaluing rupee? No one knows the answer. We are here to live together. Some how we are trying and trying —

  23. k;l

    I guess I’m impressed you tried to be impartial here, which I’ve never seen from an Indian before; but please understand the unilateral rape going on here. Multiculturalism does not exist in India. If the tables were reversed, the Caucasian version of you would be raped and brutally murdered with police looking the other way.

  24. Dont get me started

    Most of the American companies have embraced outsourcing to look their balance sheets lean and great. This was fast tracked by well organized tech lobbies in DC. So when some one talk about corruption in India, I have to disagree.

    I’m curious, “brooklinite,” how the mover$ and disrupter$ “government,” in the United $tates, negates anyone from the $tate of India from being considered corrupt? Especially when so many of those upper cla$$ from India, are those “American” CEOs [also CFOs & COOs] you’re referring to, who still own ‘residence[s]’ in India, and still, actively and vociferously, support Indian $lime bag Robber Barons, such as Narendra Modi.

    And please, let’s don’t pretend that the poverty ridden ever escape India, via a visa, any more than the poverty ridden ever escape the U$, via a visa.

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