Visas are Not Forever; By. K. Subramanian

CAS article no: 0009/2015

In the U.S., debates over immigration policy are recurrent and also vitriolic. There is an ongoing debate on the current policy and system of issue of H-1B visas, in particular, about their use or abuse by companies. Most papers in the Bay area have covered sob stories narrating how U.S. employees are being replaced by foreigners (read, Indian!) holding H-1B visas and those who are under quit orders are required to train those who are ousting them out!

There is a backlash against the current system of issue of foreign worker visas on what are called H-IB category of visas. The LA Times wrote an editorial on February 15, 2015 alleging how, while the idea underlying H-IB is good, “in practice…. the system is broken. Congress needs to fix it.” The New York Times carried long article. (Pink Slips at Disney. But First, Training Foreign Replacements, June 3, 2015.) It narrated the episodes of reputed companies such as Southern California Edison (SCE) and Walt Disney cutting down jobs to reduce operating costs and replacing the U.S. employees with H-IB visa holders. It followed it up with an edit on June 15 which was forthright. It added, “A huge industry has risen to meet labor demand in the information-technology sector, with the imported workers being employees of the outsourcing firms.” How has this come about and what is the current state?

Questions relating to issue of H-IB visas, the rationale behind the scheme, its operation and efficacy have been studied at length by many economists and think tanks. The broad consensus is that while the legal (and administrative) system as conceived in 1990 when H-IB visas were introduced was laudable, over the years, it has been warped beyond shape for various reasons. Efforts to correct the system undertaken from time to time have met with failures. This is the result, in part, of technological developments and, in greater part, of the extraordinary lobbying clout of U.S. multinational corporations such as Microsoft, Apple, etc.. The same majors are in collusion with the leading Indian outsourcing companies.

As for technology, the nature of globalization has undergone changes beyond recognition. In the early nineties, when the H-IB was introduced, globalization was confined to manufacturing and, especially, to electronics. It did not extend to the services or the blue collar segment. The transformation came about a decade later through revolutionary changes in the ICT (Information, Communication and Technology)sectors. Moreover, when H-IB visas were introduced, the technological part (R&D) was located in the headquarters. Tech companies had perforce to recruit the skilled labor personnel in the U.S. employment market. There was a clear perception of gaps in the availability of technically qualified manpower to meet the demands of a growing U.S. economy. The need for importing skilled personnel to fill these gaps was deeply felt and accepted. It was thus decided to grant H-IB visas to foreign nationals to fill these gaps and for a temporary period.

It was truly an uneasy compromise. Actually, the demand from the US multinationals was for a higher quota. Politically, it became necessary to fix a quota. Even while limiting the quota to 65000, there was an implicit understanding that it would operate flexibly and, if necessary, it could be raised. In fact, in some years, the quota was increased. However, in recent years it has remained stable at 65000. Another significant element attached to the package was that the quota for unskilled labourers would be limited to 10,000. This was to assuage the fear among unskilled U.S. workforce which felt threatened by the influx of Mexican labourers robbing them of jobs in construction, retail or as menials.

Further, there were well thought out safeguards. It was enjoined that the employers must make efforts to get an American employee before seeking approval to employ a foreign national and only if they are unable to get one locally. The visa would be approved only on application by a specific employer and for a specific job. Changes will have to be notified and approved afresh applying similar criteria.The employer must pay the employee the actual or higher wage as prescribed under U.S. laws. Visa would be eligible for three years and might be extended for another three years. There were many other conditions to safeguard the welfare and working conditions of H-IB workers. There were also elaborate reporting requirements both to the Labor Department and to the Department of Homeland Security.

The system began to fray and, along the way, the role of recruitment of tech personnel got shifted from mother companies in the U.S. to outsourcing companies. Technological changes in the ICT sector made it possible to segment services and commoditize them. At the U.S. end, it was observed that, for the mainland MNCs which needed manpower, the administrative costs of handling visa applications with U.S. agencies such as Labor Department and Home Security turned heavy. Thus, when a specialized company is at hand, it made sense to shift the burden to it. More importantly, it was the comparative cost advantage- the difference between U.S. wage level and the level at which outsourcing agencies supplied them- that led to a close and growing nexus with outsourcing agencies.

Data on H-IB visas clearly established that the system was getting skewed. The number of Indians getting them was continuously on the increase and the number of applications was far in excess of the quota. More importantly, the fact that that these applications are chaperoned by outsourcing companies had hurt the U.S. public, the middle class in particular which was hit the most. According to analysis of data done by Prof. Ron Hira of the Liberal Economic Policy Institute (EPI), top 10 firms accounted for about a third of the H-IB visas in 2013 and 8 of them were outsourcing companies based in India. These are: Infosys, TCS, Cognizant, Accenture, Wipro, HCL, Mahindra and L&T. In 2014, six Indian companies hogged 50 per cent of all H-IB visas.

There has been growing resentment over the operation of the H-IB visa system. There were also allegations of abuse and fraud against major companies like Infosys and Tata Computer Services (TCS). Cases were filed in U.S. courts on information supplied by whistleblowers. These court cases were settled with the authorities on payment of fine without admitting wrongful doing. This is a standard corporate ploy to get rid of of their sins.

Way back in 2007, Sen. Chuck Grassley wrote to the immigration authorities to take action. He said, “The agency can take immediate steps to eliminate fraud in the H-IB program, including cracking down on body shops that do not comply with the intent of the law.”

With the onset of the Great Recession, the middle class turned desperate over losing white collar jobs against the backdrop of rising unemployment. Attacks on foreign worker visas turned louder. Several studies were undertaken which exposed the adverse impact of the visa system on U.S. employment and wages. Study after study revealed that H-IB workers were paid lower salaries than American employees. A Cornell Study found that they were underpaid to the extent of 20 to 30 per cent. An INS study said H-IB employees were paid a median salary which was 25 percent less than the national median for the field. EPI’s report complained that workers recruited by outsourcing Indian agencies were graduates and not highly qualified.

In the wake of recent news reports about retrenchment in Edison and Disney, ten Republican and Democratic Senators have written a letter alleging, “Many H-IB holders are not working directly for U.S. companies, but instead are contractors employed by foreign I.T. consulting companies.” Sen. Grassley went on to say, “ H-IB program has become a government assisted way for employers to bring in cheaper foreign labor.”

Based on recent allegations, leading papers like Financial Times (June 12, 2015) and The Wall Street Journal (June 12, 2015) have reported that the U.S. government is investigating the two Indian outsourcing firms (Infosys and TCS) over their use of visas to bring workers to the U.S. The Labor Department is also investigating the visa abuse. Senators Richard Durbin and Jeff Sessions have been actively pursuing these matters.

Even earlier when there were complaints about the role of outsourcing agencies in the wake of the debates on the reform of the immigration laws, the matter was referred to the General Accounting Office (GAO). The GAO gave its report in 2011. (H-IB VISA PROGRAM-Reforms are needed to Minimize Risks and Costs of Current Program, GAO-11-26, January 14, 2011). It referred to many challenges met by the program and felt that the program as currently structured may not be used to its potential and may even be detrimental in some cases. Although executive agencies can take steps to improve tracking, administration, and enforcement, there are key policy questions about key program provisions that are beyond the jurisdiction of those agencies. What the GAO was that existing legal provisions are weak and ambiguous.Thus there are gaping loopholes in legal provisions. It is a sad fact that our IT companies have been exploiting these loopholes in the legal system and making huge profits. Majors like Infosys and TCS behave like pioneers of IT in India and some of their senior executives try to preach ethical standards for our governments!

In 2013 there were long debates on reforming the program and President Obama was keen to double the quota. Chiefs of major tech companies like Microsoft, Google, Intel, etc. lobbied vigorously for higher quota. However, the proposal was rejected by the House and has not seen the light of day. In the current economic climate with low growth and unemployment, it is unlikely to get a new life.There is clearly a risk that in the coming years the immigration system, especially the H-IB visa, may be radically revamped to eliminate outsourcers. In short, for our IT giants, the H-IB visas are not forever.

(The writer Mr. K. Subramanian, is an Associate of the Chennai Centre for China Studies – C3S. Email: subrabhama@gmail.com)