How Congress connives in the offshoring of American IT jobs

Rep. Darrell Issa rails about the outsourcing of US jobs, but his visa bill would make things worse

Earlier this month, Rep. Darrell Issa (R-Vista) spoke out against Southern California Edison's misuse of the government's H-1B visa program to outsource its American information technology jobs.  

Reports of Edison's behavior are "deeply disturbing," said Issa, who wants to expand the H-1B program to help high-tech companies import high-quality computer engineers and other top-flight workers from abroad--and whose district abuts Edison's service area. 

"This appears to be an example of precisely what the H-1B visa is not intended to be," Issa said: "a program to simply replace American workers en masse with cheap labor from overseas."

What Issa didn't say was that Edison's outsourcing, which we described on Sunday, has been permitted by Congress for years. A bill Issa introduced in 2013 to reform the H-1B program would do almost nothing to stop the abuses he complained about. In fact, by expanding the availability of these visas, it might make things worse.

Issa's staff reportedly is reworking the 2013 measure for reintroduction in the new Congress. But details about how it deals with H-1B outsourcing have been impossible to come by. We've asked for a briefing, but Issa's office hasn't responded.

The H-1B program allows foreign workers with special talents to work for three years in the U.S., in the hope of obtaining permanent residency and ultimately citizenship. The idea is for employers to fill slots for which adequately trained Americans aren't available, not to replace existing workers with cheap foreign labor. Google, Intel, Microsoft and other high-tech firms, which say they're short of highly trained software engineers, have lobbied hard to expand the program beyond the 65,000 visas available annually. 

But about half of all H-1B visas end up in the hands of outsourcing firms that use them to import workers, mostly from India, to replace Americans in middle-level IT jobs. That's how SoCal Edison has been able to shed 500 domestic IT workers. 

Few experts are fooled. "No one I know of is making the argument that this is really about a 'talent search,'" says Hal Salzman, a workforce expert at Rutgers University who follows the issue closely.

Salzman questions whether the shortage of highly-skilled workers in science, technology, engineering, and math--STEM subjects--really exists in the U.S., in part because wages in those fields haven't risen, as one would expect in a shortage. Instead, he says, wage data "suggest there's a shift toward guest workers" who can be paid less than Americans.

Nor is there any doubt about what Congress could do if it really wished to end the outsourcing of U.S. jobs to foreign workers. Legislation introduced by Sens. Dick Durbin (D-Ill.) and Chuck Grassley (R-Iowa) and passed by the Senate in 2013 as part of a comprehensive immigration reform act would have done the job. 

The measure would have increased the cap on H-1B visas to 110,000 from 65,000, and would have made it easier for many of those workers to get a green card. But it also would have imposed stricter limits on outsourcing companies staffed largely by foreign workers, such as India-based Tata Consultancy Services and Infosys, which provide outsourcing services to SoCal Edison.

A company with more than 15% of its workforce in H-1B status would be barred from hiring them out as contract workers to other firms. This could shut down Tata and Infosys. The latter was sufficiently fearful about the measure that it warned investors about it in its 2014 annual report. But the measure was stripped out of the comprehensive immigration bill, which died last year and hasn't been resurrected.

Some experts observe that even such strict limits might not keep companies such as Edison from exploiting H-1B visa holders to replace American employees. "If you clamp down on Tata, Edison would just take its business to IBM," says Norman Matloff, a computer science professor at UC Davis who follows the H-1B issue. IBM offers U.S. clients outsourcing services out of India, but its U.S. workforce is so large that its H-1B percentages wouldn't come close to breaching the threshold in the Durbin/Grassley measure.

Nor would the restriction address another flaw cited by critics of the H-1B program: it's exploited by American high-tech companies such as Google and Microsoft to hire young, lower-paid and immobile foreign workers. Because their visas are tied to their employment, it's almost impossible for them to change employers at will, as can U.S. citizens or permanent residents. The "immobility bonus" of H-1B workers, Matloff says, may be even more valuable to Silicon Valley employers than the wage differential.

That may be why the roster of firms lobbying in Washington to expand the H-1B program is dominated by the high-tech industry. Microsoft, Intel, Oracle, Qualcomm, and Google were among the eight top employers of lobbyists on immigration last year, according to the Center for Responsive Politics.

Immigration experts say the key to restoring the H-1B system to its ostensible purpose--allowing employers to hire foreign workers to fill critical slots for which Americans or permanent residents can't be found--is to raise the minimum pay scale. Current legislation sets an effective floor on H-1B wages of $60,000, well below the median wage for many specialty occupations, including information technology.

Issa's 2013 bill would have raised wages only modestly, while sharply increasing the number of available visas to 155,000. A measure sponsored by Sen. Orrin Hatch (R-Utah) would expand the program to 115,000 visas, but do almost nothing to raise the wage. 

Bringing required H-1B wages into line with prevailing wages would reduce or eliminate incentives for employers to seek employees abroad instead of hiring them in the U.S.; Salzman recommends imposing a minimum salary of $120,000 on H-1B visa holders to eliminate the replacement of veteran U.S. workers by young and inexpensive imports. Giving all H-1B holders faster access to green cards, Matloff adds, would eliminate the immobility bonus. Employers of workers in information technology and other specialized fields would no longer have a reason to shun candidates--or fire employees--with American citizenship or permanent residency.

The failure of Congress to take any such steps demonstrates that the H-1B visa program is not really about finding scarce talents to fill crucial jobs, but about creating a young, cheap, and indentured labor force. Matloff and other experts say Indian outsourcing firms such as Tata and Infosys aren't the villains of the H-1B saga, but the scapegoats. The parties driving demand for this mess of a program are the Googles, Intels, Microsofts and SoCal Edisons, who reap all the benefits. 

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