Date: Sat, 27 Nov 2004 01:13:01 -0800 From: Norm Matloff To: Norm Matloff Subject: pending H-1B/L-1 changes (text has been updated--NM) To: H-1B/L-1/offshoring e-newsletter Given all the developments on H-1B/L-1 during the last week, many readers might have been puzzled by my silence. The cause for this has been that I was in Hong Kong for the last week. I gave a seminar at a local university, and visited with family members. Needless to say, I oppose the pending legislation. The proposed exemption for foreign nationals holding MS/PhD degrees from U.S. universities is NOT warranted. See my previous postings on this, e.g. http://heather.cs.ucdavis.edu/Archive/ProposedMSPhDExemption.txt What may not be clear to some of you, though, is that I do not welcome the so-called worker "protections" in the legislation either. The proposed "protections" which most press accounts have focused on during this past week involve third-party employment of L-1s. Those "reforms" are basically the Chambliss bill, and are pretty much useless. See my comments made at the time the Chambliss bill was introduced, at http://heather.cs.ucdavis.edu/Archive/Chambliss.txt and also http://heather.cs.ucdavis.edu/Archive/Chambliss2.txt http://heather.cs.ucdavis.edu/Archive/Chambliss3.txt http://heather.cs.ucdavis.edu/Archive/Chambliss4.txt http://heather.cs.ucdavis.edu/Archive/Chambliss5.txt Note that the main industry lobbyists actually SUPPORT these reforms. That should tell you something right there. That brings me to one of the "reforms" the pending legislation includes regarding H-1B, which would change the number of levels of experience used in one common method for prevailing-wage calculation from two to four. Guess what--this change is actually something the immigration attorneys have WANTED to have! I have written before on this topic, in discussing my interview with immigration attorney Donna Fujioka of Oakland, California, March 5, 1998. The reason the immigration attorneys welcome this change is that it means that they won't have to set a higher salary for a worker who is just slightly above the current Level I for years of experience. Of course, the attorneyts had other ways around this "problem." Again, the two-level method is only one of various methods the attorneys have at their disposal. But the point is that what the industry lobbyists have succeeded in doing here is falsely making it look like Congress is ameliorating the effect of expanding the H-1B program by throwing in a "reform" friendly to U.S. citizens and permanent residents but which actually is intended to FAVOR the hiring of H-1Bs. The industry lobbyists have hereby reached new levels of clever deceit. Another "reform" changes the prevailing-wage rule from requiring employers to pay 95% of prevailing wage to now pay 100%. Obviously, that is not a change of any consequence, since that 5% discrepancy is much smaller than the actual amount employers typically underpay their H-1Bs. While we're on the subject of the 95% rule, though, I'd like to point out that it does illustrate that it's not just the small companies who exploit the loopholes in H-1B law. It's the big companies too. See for example the wages claimed by Intel in their H-1B filings at the Dept. of Labor Web site; you'll see that a number of the figures are not even amounts, which seems bizarre until you divide them by 0.95--and get nice round numbers. So you can see that Intel exploits the H-1B loopholes too, even the penny ante ones like this. This is hugely important, because you often see implicit or explicit claims that the Intels and the Microsofts are the innocent parties, with the true villains being that Tatas and Wipros. Such claims are false, which should surprise no one, just as it surprises no one when they hear that big corporations make full use of every tax loophole they can find. As I've mentioned before: In the analysis I did, I found that the median prevailing wage quoted by Intel for its H-1Bs was $65K. Not only does that look low compared to the $72-74K figure I cited above, but it's even worse: Remember, Intel claims that these people have Master's and PhD degrees, and $65K is way lower than what people with Master's and PhDs in engineering make. The NSF data, for instance, show a national median of $100,000 for PhDs in engineering; only 5% of Intel's H-1B prevailing wage figures were even above $90K, let alone $100K. In fact, the 75th percentile for the Intel H-1B application forms was $73K; in the other words, the top 25% of Intel H-1Bs only make as much as the top 50% of Americans nationwide in this field. That brings me to the last type of "reform" in the proposed legislation, which beefs up enforcement of H-1B law. As I've said many times, enforcement is NOT the main issue with H-1B; the main issue is the LOOPHOLES. Most big firms underpay H-1Bs in full compliance with the law, because of the huge gaping loopholes. Putting in more provisions for enforcement has always been a good way to distract attention from the real H-1B issues. So, keep all this in mind while reading the San Jose Mercury News article and editorial enclosed below. Norm http://www.mercurynews.com/mld/mercurynews/business/10269886.htm?1c Nov. 25, 2004 Tech visa loophole closed by Congress By Karl Schoenberger Mercury News An immigration reform measure quietly passed by Congress could sharply limit how Indian offshoring companies use low-wage technology workers on temporary visas in the United States. The little-noticed legislation, tucked in a massive spending bill passed Saturday, would close a loophole in regulations for the L-1 visa, which is intended to allow foreign firms to transfer managers and employees with specialized knowledge to their offices in the United States. Critics of the offshoring industry say that L-1 visas are used far more broadly and are being exploited to evade caps on the H-1B visa program for admitting temporary skilled workers. Last year, 57,245 L-1 visas were granted -- nearly one-third of them to Indian nationals. The H-1B visa program, which helped provide workers for much of Silicon Valley's tech boom, has been controversial. Some tech workers and political leaders argue that the visas make it too easy for low-paid foreign workers to replace highly paid Americans in software programming and other skilled tech jobs. Under political pressure from the critics, the annual quota for H-1B visas has been reduced to 65,000 in recent years -- not nearly enough to meet new demands from the offshoring industry. In response, India's largest software contractors have dramatically increased their reliance on L-1 visas. L-1 visas issued to Indian nationals increased by nearly eight times between 1998 and 2003, according to the State Department. The leading offshoring companies -- Wipro, Infosys Technologies and Tata Consultancy Services -- say they follow the letter of the law when sponsoring L-1 workers. Typically, L-1 and H-1B employees work on site with U.S. clients to provide support for contract work being done by their colleagues in India. The offshoring companies say L-1 workers are legitimate in that role because they don't work directly for the client. But critics say the offshore companies, known derisively as ``body shops,'' are using the L-1 visa as a ``back door'' into the U.S. labor market while denying American tech workers fair access to jobs and driving down wages. The new legislation, which President Bush is expected to sign soon, would require companies to keep L-1 visa holders under their direct management control when working with a customer. L-1 visa holders couldn't work as subcontractors or be supervised by the customer. The tightening of the L-1 regulations by Congress will make it more difficult for offshoring firms to dispatch manpower to client locations, said Greg Siskind, an immigration attorney in Memphis who advises L-1 employers. ``The L-1 was not being used properly by these companies'' when they put workers at customer facilities, he said. However, Victor Chayat, a Tata spokesman, said Wednesday that the legislation would not affect Tata's operations in the United States because the company is already in compliance with the regulations. ``We're providing software development projects to our customers, not bodies,'' he said. In a statement Tuesday, the National Association of Computer Consultant Businesses, a Washington, D.C., trade group, applauded Congress for prohibiting ``the abuse of the L-1B visa by foreign IT consulting firms.'' But advocates of more stringent reform said the measure did not go far enough. Unlike the H-1B visa program, there is no limit on the number of L-1 visas that can be approved, and there is scant oversight of how the visas are being used. ``The body shops are probably going to find a way to to go around this,'' said Jack Martin, special projects director for the Washington-based Federation for American Immigration Reform. ``And it's going to be very difficult for a consular official overseas to know how the applicant will be managed at the work site to maintain compliance with the law.'' The number of H-1B visas issued to Indian nationals is still about double that of L-1 visas. In tightening the L-1 program, Congress also passed a provision Saturday to make available 20,000 more H-1B visas to foreigners who have earned graduate degrees in U.S. universities. But these additional visas won't directly apply to India's offshoring companies. Tata, based in Mumbai, is one of the heaviest users of the L-1 visa. Chayat said it had about 4,700 L-1 and 2,600 H-1B workers in the United States at the end of March, but would not provide numbers for earlier years because Tata was privately held until August. Tata's L-1 workers were at the center of a highly publicized flap that triggered calls for congressional reform. In 2002, about 20 American employees at a Siemens plant in Florida were forced to train their Tata replacements or lose their severance packages. The laid-off employees questioned the logic of a visa intended for workers with exclusive technical skills, when in fact they had to be trained by Americans laid off ostensibly because they lacked such skills. They concluded it was all about wages -- calculating that their Tata L-1 replacements made about a third of their $70,000 salaries. ``There was nothing unique to Tata in what they were doing,'' said Michael Emmons, 42, one of the Florida workers. ``Their long-term goal was to take the whole thing to India, but they couldn't do that without knowledge transfer. And the L-1 visa is the golden egg for knowledge transfer -- and taking our jobs overseas.'' http://www.mercurynews.com/mld/mercurynews/news/opinion/10275537.htm?1c Nov. 26, 2004 Make visa programs work for America OVERSIGHT NEEDED TO STOP ABUSE OF H-1B, L-1 PROGRAMS BY EMPLOYERS SEEKING LOWER WAGE COSTS Mercury News Editorial The decision by Congress to allow 20,000 additional highly skilled immigrants into the Untied States this year is an important step toward shoring up America's competitiveness. But equally important was Congress' acknowledgment that the two programs for skilled workers, the H-1B and L-1 visas, are broken. A bill to fix the programs, which passed Saturday, is a good first step. But it's unclear whether it will be sufficient to stamp out the abuse of the programs, which hurts both the companies who attempt to make legitimate use of the visas and the American workers who end up unfairly displaced by immigrant workers. The two programs are different. The L-1 visa was designed to allow multinational companies to temporarily transfer to the United States workers who have specific knowledge of company products, services or operations. The H-1B is meant to bring in highly skilled foreigners for jobs that cannot be filled by American workers. The worst abuse occurs with the L-1 visa, which some companies use to turn themselves into international temp agencies. These companies import tech workers with generic skills, pay them below-market wages and outsource them to other companies for specific projects. At a time when American tech workers are being displaced by offshoring, this ``onshoring'' of low-wage workers is unconscionable. The bill seeks to remedy the problem mainly by restricting the outsourcing of L-1 visa holders to third parties. The situation with the H-1B visa is more murky. Many tech companies use the visa legitimately, hiring highly skilled workers whose presence here has helped build America's technology leadership. But there's mounting evidence that some employers misuse the visa to cut labor costs. They bring in workers whose skills are commonplace and pay them below-market wages. The government has done little to enforce a requirement that H-1B workers be paid a ``prevailing wage.'' Every time an undeserving worker gets a visa, a deserving immigrant is shut out. That's because only 65,000 H-1B visas are issued each year. This year, the visa cap was reached on the first day of the fiscal year. The bill permitted an additional 20,000 foreigners with post-graduate degrees from American universities to stay in the country. Forcing these talented individuals -- many of whom have been educated at taxpayers' expense -- to go home makes no sense. Two other measures in the bill should help. One forces the government to collect more data on how the visas are used, while the other strengthens its power to police abuse. But Congress cannot consider its work done. It must use its oversight authority to closely monitor the visa programs and be ready to act if abuses persist.