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Fifty percent pay rise for H-1B visa holders – a boon or a bane?

Fifty percent pay rise for H-1B visa holders – a boon or a bane?
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Image: H-1B visa approvals in 2015and 2014 – source U.S. Department of Homeland Security 

By Charles F. Moreira, Editor

The Protect and Grow American Jobs Act (HR 170) passed by the House Judiciary Committee on 16th November 2017 increased the minimum salary for workers on H-1B work visas in the United States from US$60,000 to US$90,000 and has led much controversy over its benefits or disadvantages to Indian IT workers and IT companies in the U.S.

According to the U.S. Department of Homeland Security, 70.9% of all successful H-1B visa applicants in 2015 were India-born workers, followed by China-born 9.7%, Canada-born 1.3%, South Korea-born 1.3%, Philippines-born 1.1% and less than 1% for nationals of other respective countries.

Employers apply to the government for H-1B visas for employees who are foreign nationals to work in specific roles which qualify as “speciality occupations”. These typically require a bachelor’s degree (or the equivalent) in disciplines science, engineering, information technology (IT), medicine, and business.

This bill comes in the wake of an executive order signed by U.S. president Donald Trump in April 2017, which calls for a review of the H-1B visa programme, so that they should never be used to allow employers to replace American workers and that they must only be granted to the most skilled and highest paid applicants.

The bill will now have to go before the full House of Representatives (the lower chamber of the U.S. Congress), after which a similar version of the bill needs to be passed by the Senate (the upper chamber) before it can be sent to the White House for president Trump to sign into law.

However, some believe that it will face difficulty being passed by Congress, especially due to disagreements between both Republican and Democrat members of Congress on the one hand and the White House on other matters related to immigration reform, including H-1B visas.

One of Trump’s election promises was to discourage U.S.-based companies from exporting especially industrial jobs to lower wage countries such as China, to bring those jobs back to the U.S. for American workers and to more tightly regulate the employment of foreign workers on H-1B visas in the U.S.

“We believe jobs must be offered to American workers first. Does that make sense?,” Trump said whilst signing the executive order, according to a Press Trust of India report in The Hindu of 19th April 2017.

However, India’s National Association of Software and Services Companies (NASSCOM) regards the Bill is driven by myths.

“Unfortunately, this legislation is being driven by myths, not reality, and could harm U.S. businesses, imposing an extraordinary amount of bureaucratic red tape, disrupting the marketplace, threaten U.S. jobs, and stifle U.S. innovation by unfairly and arbitrarily targeting a handful of companies,” said NASCOMM president R. Chandrashekhar in a release.

Established in 1988, NASSCOM is a non-profit industry body which represents the interests of India’s 154 billion dollar IT BPM (business process management) industry which has made a huge contribution to India’s GDP, exports, employment, infrastructure and global visibility. It’s focused on building the architecture integral to the development of the IT BPM sector through policy advocacy, and helps in setting up the strategic direction for the sector to unleash its potential and dominate newer frontiers.

“The Bill is very narrowly focused on H-1B dependent companies,” said Rajkamal Rao, Managing Director of US-based Rao Advisors.

“This will primarily affect low-level techies dependent upon contract jobs to stay in the US. It will be a double whammy for them because they are hired by staffing companies (Indian IT services companies) in the hopes of placing them at low wages. Such companies will have to rethink their business models by moving up the value chain and not just making money through this ‘body shopping”, Rajkamal added.

According to Rajeev Dabhadkar, founder, National Organisation for Software and Technology Professionals, American companies have always paid more than $90,000 to IT services companies like Infosys and Tata Consultancy Services (TCS) to get their work done, and in turn, these companies paid just $60,000 to their employees working in the U.S. and Rajeev believes that this bill will enable Indian workers to be paid as much as American workers.

“With the new Bill, American companies will be forced to cut down on these middle-men as they can’t afford to increase their cost by 50 per cent and Indian workers will finally be able to earn at par with American workers,” Rajeev said.

Swamped by the big boys

Silicon Valley start-ups pay an average of about $150,000 to engineers but they are often unable to get enough Indians to work for them as most of the H-1B quota is taken up by large IT services firms.

Moreover, the requirement that employers hiring workers on H-1B visas must prove that they are not replacing American workers does not apply to most Silicon Valley companies whose employees on H-1B visas comprise less 15% of their overall workforce.

Whilst the large IT services firms which hire a larger proportion of H-1B visa holders are subject to that requirement, however a loophole exempts them if they pay their H-1B workers the current minimum of US$60,000 or more, which is significantly less than what an experienced IT worker’s salary in many parts of the U.S.

The U.S. offers a maximum of 85,000 H-1B visas each year, 65,000 for foreign workers hired for the first time and the remaining 20,000 are for foreign students graduating with advanced degrees from American universities.

Applications for H-1B visas open on 1 April each year and only one application is allowed for each foreign workers.

However, there is no limit on the number of applications an employer can submit and a company with thousands of employees can submit many applications and by law, if the number of applications quickly exceeds the annual quota, officials use a computer-run lottery to select the visa recipients.

Demand for visas has soared in recent years and since 2013, officials have had to resort to the lottery. In 2015, 233,000 applications were received within just seven days, and about two-thirds of them were denied because the quota was met.

Whilst this process appears fair in principle, in practice global outsourcing companies have been getting the lion’s share of H-1B visas to the detriment of smaller companies.

According to Ronin Hira PhD, an associate professor with the Department of Political Science, College of Art and Sciences, Howard University, off the 20 companies that received the most H-1B visas in 2014, 13 were global outsourcing operations.

These top 20 companies secured 32,000 or about 40% of the visas available, whilst the over 10,000 other employers received far fewer visas each, whilst about half of the applications in 2014 were rejected because the quota had been met.

Professor Hira studies visa programmes and he found that the top companies which had received H-1B visas in recent years, include TCS, Infosys and Wipro, all outsourcing giants based in India, as well as Cognizant, with its headquarters in New Jersey and Accenture, a multi-national incorporated in Ireland.

According to The New York Times of 10 November 2015, Professor Hira regards the H-1B programme as critical to how employers fill skills gaps and for really talented people to come to the United States but the outsourcing companies are squeezing out legitimate users of the programme and as a consequence the H-1B programme actually pushes jobs offshore.

Two of those H-1B applications denied by the U.S. Department of Homeland Security were submitted by Mark Merkelbach and his small engineering firm in Seattle which required engineers and landscapers who could speak Mandarin to work on water projects in China and as a result, Merkelbach had to move the jobs to Taiwan.

Another was Atulya Pandey, an entrepreneur from Nepal who founded an Internet company in the United States but due to the denial of his H-1B visa application, he can no longer work on his own business in the U.S.

Yet another was Théo Négri, a young software engineer from France who worked for an Internet startup in San Francisco. Négri had come up with many novel ideas and his employer wanted to keep him on, so helped him apply for a three-year work visa for foreign professionals with college degrees and specialised skills, mainly in technology and science, and with his master’s degree from a French university and advanced computer abilities, it seemed that Négri’s application would be approved but instead it was denied.

Back in France, Négri used his skills to sift through public documents that employers had filed with the U.S. Department of Labour as their first step in their H-1B applications and he found that the outsourcing companies had submitted far more applications than a small company like BuildZoom which he had worked for could manage or afford, since each application costs up to $4,000.

Altogether, the top five outsourcing companies had prepared as many as 55,000 H-1B applications and TCS which had prepared applications for at least 14,000 visas, won 5,650 of them.

Many of the visas were given out through a lottery and a small number of giant global outsourcing companies had flooded the system with applications, significantly increasing their chances of success; whilst he had one application in that year’s lottery, so concluded that the big outsourcing companies were denying small American companies, like which he worked for, opportunities to get H-1B visas for its foreign workers.

Despite this recent bill, it looks like the controversy in the United States over H-1B visas will continue.

Despite their seeming glamour, H-1B visas are a form of modern-day indentured servitude which ties the employee to their employer in the U.S. for its term.

So hopefully, with the rise of China and India as Asia’s economic power houses, coupled with the One Belt, One Road initiative, hopefully, Indian, Chinese and other skilled nationals will eventually be able to find suitably paying work in their own countries or within the region without having to get an H-1B visa to work in the United States.

 

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