Silicon Valley is getting more than a little nervous that one of its favorite mechanisms for keeping wages low, H-1B vias, is likely to be severely curtailed by the Trump Administration. Industry stalwarts are raising false alarms that tightening requirements would deprive tech players of “talent” and “specialized skills” that they allegedly cannot obtain elsewhere. However, as Robert Cringley points out in a new story, they look to be able to maintain virtually all of the benefits of the status quo by using a not-as-well-known visa, the L-1B visa.
The reality is quite different. H-1B visas overwhelmingly fill lower-level jobs that would normally serve as yeoman positions for young computer sciences graduates. The US is thus throwing away what it touts as a strategic asset by failing to train its next generation of computer professionals. And that’s before getting to the significant level of H-1B visa fraud. One type is where tech workers are brought to the US with no work lined up. Those workers are treated as near slaves, held hostage in “guest houses” until they find work. And the clients aren’t marginal players; major tech firms use these illegal operators. A second type of fraud is wage theft.
Moreover, it’s false that H-1B visa holders are providing needed and scarce skills. The press has been full of stories of employees being required to train H-1B visa replacements. Disney was challenged by worked who were forced to train H-1B replacements; they lost their challenge on what most people would see at technical grounds, that the H-1B visa holders who took their jobs were employed by contractors, not Disney. That followed ComputerWorld exposing a similar program abuse at Southern California Edison:
Information technology workers at Southern California Edison (SCE) are being laid off and replaced by workers from India. Some employees are training their H-1B visa holding replacements, and many have already lost their jobs…
The H-1B program “was supposed to be for projects and jobs that American workers could not fill,” this 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.
“Not one of these jobs being filled by India was a job that an Edison employee wasn’t already performing,” he said…
The SCE outsourcing “is one more case, in a long line of them, of injustice where American workers are being replaced by H-1Bs,” said Ron Hira, a public policy professor at Howard University, and a researcher on offshore outsourcing. “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,” Hira said.
In 2016, ComputerWorld described Clinton crying crocodile tears over the issue when her dependence on tech titans as donors meant she was guaranteed to do nothing.
Robert Cringley is a fierce critic of outsourcing, and he attributes it to CEOs keen to push up stock prices at the cost of the long-term health of their enterprises. As he wrote in 2015:
Now let’s look at what this has meant for the U.S. computer industry.
First is the lemming effect where several businesses in an industry all follow the same bad management plan and collectively kill themselves…
The IT services lemming effect has companies promising things that can not be done and still make a profit. It is more important to book business at any price than it is to deliver what they promise. In their rush to sign more business the industry is collectively jumping off a cliff.
This mad rush to send more work offshore (to get costs better aligned) is an act of desperation. Everyone knows it isn’t working well. Everyone knows doing it is just going to make the service quality a lot worse. If you annoy your customer enough they will decide to leave.
The second issue is you can’t fix a problem by throwing more bodies at it. USA IT workers make about 10 times the pay and benefits that their counterparts make in India. I won’t suggest USA workers are 10 times better than anyone, they aren’t. However they are generally much more experienced and can often do important work much better and faster (and in the same time zone). The most effective organizations have a diverse workforce with a mix of people, skills, experience, etc. By working side by side these people learn from each other. They develop team building skills. In time the less experienced workers become highly effective experienced workers. The more layoffs, the more jobs sent off shore, the more these companies erode the effectiveness of their service. An IT services business is worthless if it does not have the skills and experience to do the job.
The third problem is how you treat people does matter. In high performing firms the work force is vested in the success of the business. They are prepared to put in the extra effort and extra hours needed to help the business — and they are compensated for the results. They produce value for the business. When you treat and pay people poorly you lose their ambition and desire to excel, you lose the performance of your work force. It can now be argued many workers in IT services are no longer providing any value to the business. This is not because they are bad workers. It is because they are being treated poorly. Firms like IBM and HP are treating both their customers and employees poorly. Their management decisions have consequences and are destroying their businesses.
Cringley weighed in yesterday on Trump’s executive order. He pointed out that, in keeping with Trump’s propensity to use executive orders as press releases, that it didn’t mention the H-1B program. It instead called for a review of all visa programs, with an eye to improving US employment and economic productivity. Cringley notes those aren’t necessarily the same thing; indeed, short term, they are often in direct conflict.
Channeling President Trump, I think Trump IS going to wack the H-1B program, which will affect mainly Indian IT consultancies, but he’ll leave unchanged the L-1B visa program that allows American companies to shift their employees to America from abroad.
Think about it, in this case with IBM as an example. IBM Global Services sees itself as competing with big H-1B users like Tata and Infosys and an H-1B ban or severe limitation would give IBM — or any similar U.S.-based multinational — an advantage, especially if the L-1B visa program is left untouched. With L-1B, IBM can use its own Indian employees MAKING INDIAN PAY AND BENEFITS to do the work here in the USA. No need to pretend you can’t find an American worker as presently required by H-1B. No need to advertise. No need to pretend you are paying a locally competitive wage.
L-1B visas are hardly ever mentioned in the press yet they are even bigger than H-1B already. It’s worse for American workers than H-1B, too. So what if Trump cuts back or freezes H-1B numbers without touching the (presently unlimited) L-1B program? He’ll still be keeping a campaign promise, yet also working to enrich Big Business at the expense of the very people who voted for him.
a 2014 article by Daniel Costa of the Economic Policy Institute in The Hill has one of the rare discussions of the L-1B program:
At least 650,000 college-educated temporary foreign workers are employed in the United States through the H-1B visa program, mostly in the high-tech industry. The H-1B is a well-known guestworker program that is inadequately — but at least minimally — regulated, with an annual limit and a requirement that employers pay a “prevailing” wage. Other visa programs, like the L-1 and the F-1 Optional Practical Training (OPT) program, have almost no rules and receive little scrutiny, but are used to employ hundreds of thousands of foreign tech workers…
Multinational companies use the L-1 visa to transfer employees from their foreign offices to offices in the United States. Over the past five years, an average of 68,000 L-1 visas have been issued per year, but there is no annual limit. There are two types: the L-1A for managers or executives (valid for seven years), and the L-1B for employees that have qualifying “specialized knowledge” (valid for five years). According to government audits, the majority of L-1 workers are in occupations related to computers and information technology (IT), and the biggest users of the L-1 are also the biggest users of the H-1B — outsourcing tech firms like Tata, Cognizant and Infosys — firms whose business model focuses on sending jobs overseas…
The media have reported on major companies laying off U.S. tech workers and replacing them with L-1s (legally), after first forcing the U.S. workers to train their own replacements. And there is no requirement that employers pay L-1s the prevailing wage for the specific job they will fill, which allows employers to pay far below the market rate. This practice takes advantage of the foreign worker and hurts U.S. workers by pushing down wages for everyone employed in similar occupations.
A recent Labor Department investigation revealed that Electronics for Imaging (EFI) in Fremont, Calif. — which earned $200 million in revenues last quarter — required L-1s to work 120 hours a week installing computers, while paying them $1.21 an hour. EFI got into trouble, but only because it wasn’t paying them the California minimum wage of $8.00 an hour. Had EFI paid the minimum wage, it would have been compliant with immigration and labor laws, even though the average hourly wage in Fremont for a worker who installs or repairs computers is $19. If that worker is configuring the network as well, it’s $45.
Keep your eye on this ball. Even an H-1B win may not mean much if tech players simply bring in even cheaper L-1B substitutes.