Salary concerns renew H-1B visa opposition

By Ed Frauenheim
Staff Writer, CNET News.com
October 6, 2005 4:00 AM PDT

As offshore outsourcing boomed in recent years, the protracted controversy over the embattled H-1B immigrant labor program finally seemed to subside as U.S. jobs were exported overseas and theoretically lessened the need for foreign workers.

Yet nearly 15 years after its inception under the Immigration Act of 1990, the program remains in full force and headed for new battles. Just last month, the Indian government made a proposal to the World Trade Organization, demanding that the annual cap for H-1B visas be raised from 65,000 to 195,000.

The pivotal question: If jobs are leaving U.S. shores, is the program still needed?

"The law should specify a minimum salary (for H-1B workers), above the median wage of comparable U.S. workers."

--Kim Berry
president, Programmers Guild

The H-1B program was created to keep U.S. companies competitive in the global economy by allowing them to hire professionals from other countries. Industry leaders argue that the program serves as a brake on offshoring by easing shortages in skilled labor within U.S. borders.

Critics, however, have long maintained that the program is ripe for abuse and serves only to replace American workers with cheap foreign labor. Despite safeguards to prevent employers from paying anything less than the prevailing wage for a given job, opponents say loopholes are routinely exploited.

H-1B visas allow skilled foreign workers into the United States for up to six years. The permits have generated heated disputes in the tech arena, where many of the visas are used. In 2003, 39 percent of H-1B visas approved were for workers in computer-related occupations.

Concerns about the program are being raised anew after a recent study examined federal data to rank the lowest-paying employers of H-1B computer workers last year. The Programmers Guild, an advocacy group for U.S. technology workers, claims to have found new evidence indicating that H-1Bs in computer occupations are being paid relatively little by a lot of employers--raising the prospect that visas are being used to hire cheap workers who threaten U.S. jobs and wages.

The median annual wage paid in the United States to workers in computer and math occupations was $62,620 in May 2004, according to the Department of Labor. Among companies seeking at least 100 H-1B visas last year, many employers planned to pay substantially less than that amount, according to the Programmers Guild report.

Of 100 employers in the category that planned to pay the lowest salaries, the report said, none intended to offer more than an average of $48,355 a year. Seventy-four of these companies pledged to pay an average salary of less than $45,820--a figure in the 25th percentile for U.S. math and computer workers.

H-1B rules require employers to provide at least the prevailing wage for the position or the actual rate the employer pays to similar workers--whichever is higher. The study focused on documents called Labor Condition Applications (Click for PDF), for which employers must state the minimum wage they plan to pay H-1B workers.

The Programmers Guild does not accuse the companies of violating H-1B wage rules. Instead, the guild's findings point to a flaw in the program that benefits employers, Programmers Guild President Kim Berry said.

"The law lets them use so many sources to determine prevailing wage," said Berry, whose organization reportedly has 1,000 members. "The law should specify a minimum salary, above the median wage of comparable U.S. workers."

Defenders of H-1B visas deny that it is a cheap-labor program, noting that a number of changes made to the law last year were designed to make it tougher to exploit workers. Companies are now required to pay 100 percent of the prevailing wage, up from 95 percent, and the Labor Department's investigative power has been strengthened.

But critics maintain that another change in the law last year, one involving surveys used to determine the prevailing wage, worsened the wage problem. The shift increases the number of wage levels in surveys from two to four, a change Berry said makes it easier for unscrupulous employers to pay a low wage by categorizing experienced H-1B workers as novices.

Employers can also choose a job title with a lower pay level, said Norm Matloff, a computer science professor at the University of California at Davis.

"Hire a programmer as a 'system analyst' instead of under a 'software engineer' title," said Matloff, who strongly opposes the H-1B program. "Either one can mean programmer, but the 'system analyst' people tend to be the IBM mainframers, i.e., people who don't have the hot skills and thus who tend to have lower salaries."

"I don't think it's an Indian issue. Ultimately, it's an issue of economics."

--Sanjay Puri, chairman
U.S.-India Political Action Committee

Conflict over H-1B visas is, in some ways, a white-collar version of the debate over immigrant workers who do much of the manual labor in the United States in industries such as agriculture and restaurants. Although H-1B workers come to America legally, unlike some of their usually less-educated counterparts, opinions have clashed about whether the visas are providing a way for companies to avoid paying higher wages to domestic workers.

Circa the dot-com boom, the H-1B system was rocked by reports of corruption. Technology staffing firms, sometimes called body shops, allegedly were trafficking workers from other countries. The Programmers Guild sees its study as a sign that body shops abusing the program are alive and well--even as American tech professionals are trying to recover from years of layoffs in what seems to be a tepid hiring climate.

Moreover, the guild said, the study reinforces the notion that the H-1B program benefits primarily India-based employers operating in the United States, not American companies.

The organization's report says the lowest-paying companies are "disproportionately run by Indian nationals." It added that some Indian-run firms are "hiring almost exclusively young Indian nationals to displace American workers in our own country."

"There's a clear connection between the Indian diaspora in the United States, the use of H-1B and offshore outsourcing."

--Ron Hira, author,
"Outsourcing America"

The research shows that nearly 37 percent of H-1B approvals in 2003 were for workers born in India. Berry estimates that 18 or 19 of the 20 lowest-paying employers, among companies seeking at least 100 visas, are led by Indian citizens or U.S. citizens of Indian descent.

To make this claim, the guild did not conduct an exhaustive study of the companies on its list. Its analysis of the employers' leadership is based largely on a review of surnames and where companies have operations.

Berry denied any ethnic bias in his group's research, defending its methodology as a way to illuminate what he sees as a chief problem of the visa program: tech staffing firms bringing over low-paid H-1B workers even when qualified U.S. employees are available.

"This is a niche that Indians have developed," he said. "It helps to understand the problem to point out what the data shows. Body shops are essentially onshore offshoring."

Sanjay Puri, chairman of the U.S.-India Political Action Committee, acknowledged that Indians or Indian Americans own many of the companies that hire H-1B workers. But he said abuse is unlikely because visa holders have many more options today than in earlier years, when their plight was often likened to indentured servitude.

Indian H-1B holders not only can change employers in the United States but also have more opportunities back home, as India emerges as a tech powerhouse, said Puri, a U.S. citizen who also leads a technology services company.

"They are smart enough to move around. They might come in at low wages, but they're not staying at low wages," he said. "These guys can have five different job opportunities from companies in India."

Indeed, many Indians have taken leadership roles in the U.S. tech industry. Research by AnnaLee Saxenian of the University of California at Berkeley found that in 1998, Indian engineers were running more than 775 technology companies in Silicon Valley.

Even if tech jobs are multiplying in Bangalore and Mumbai, U.S. guest worker visas are important to India-based firms and the Indian government. And in today's global economy, businesses that thrive overseas can have benefits for U.S. companies as well.

"If U.S. immigration laws change and make it more difficult for us to obtain H-1B and L-1 visas for our employees, our ability to compete for and provide services to clients in the United States could be impaired," India-based tech services giant Wipro Technologies wrote in a public filing this month. (The L-1 is another type of work visa.)

Others insist that the use of guest worker visas by India-based tech firms has helped promote offshoring. Members of the Indian-American community have learned to use the H-1B program to do tech work through the visas and send some of the work offshore, said Ron Hira, a professor at Rochester Institute of Technology and co-author of the book "Outsourcing America."

"There's a clear connection between the Indian diaspora in the United States, the use of H-1B and offshore outsourcing," said Hira, who is of Indian descent.

Like the Programmers Guild, he, too, has found evidence that some large India-based tech companies seeking H-1B visas proposed to pay lower wages than their U.S. counterparts.

But Hira said critics of the H-1B program should focus more on the evidence that many companies appear to be paying disproportionately low salaries, instead of singling out a specific group. "That's the important outcome of the study, rather than what country the owners of the companies are from," he said.

Puri agreed. "I don't think it's an Indian issue," he said. "Ultimately, it's an issue of economics."