Date: Thu, 12 Apr 2007 20:16:51 -0700 From: Norm Matloff To: Norm Matloff Subject: exceptionally good article about H-1B and offshoring To: H-1B/L-1/offshoring e-newsletter After an odd initial foray into the "plight" of foreign students at Harvard who may have to return home due to lack of H-1B visas, this is an excellent article on the role of H-1B in facilitating offshoring. When I am asked, say by reporters, about H-1B, I rarely mention the H-1B/offshoring connection (HOC). It's definitely a serious issue, but I feel it focuses too much on the Indian offshoring companies, thereby letting Intel, Microsoft et al off the hook. As I've said before, the Intel/Microsoft crowd abuses H-1B just as much as TCS and Wipro do. Nevertheles, HOC certainly is a great thing to bring up in response to one of the industry lobbyists' favorite lines, "If Congress doesn't allow us to bring in more H-1Bs, we'll be forced to move work offshore." Of course this flies in the face of the industry's history. A great rejoinder to that line was given by Eileen Appelbaum (Searching for Skills, Lorraine Ash, Gannett News Service, in the Asbury Park Press, August 15, 2005): % But Eileen Appelbaum, an economist and member of a National Research % Council committee that studied the impact of H-1Bs on the U.S. % economy, does not accept the way the H-1B option is typically framed: % One can have an H-1B worker in an American job, or lose that job to % exportation. % "Industry said in 2001, "Let us have the H-1B visas and we'll do the % work here, or you can say no and we'll just move the work offshore,' % " she said. "Well, they got all the H-1Bs they wanted, and they % still moved work offshore. In 2005, that's an argument industry can't % make with a straight face." Unfortunately, the industry is STILL making that argument today, because the lobbyists know that this evokes a visceral response, along the lines of, "We can't lose the IT industry like we lost the electronics industry, so we better bring in the H-1Bs." Thus, even members of Congress sit up and take notice when HOC is pointed out to them. Recall too that in the NPR show I discussed earlier this week, the host really dwelled on it, castigating the two industry lobbyist guests who kept ducking his questions on HOC. HOC is not news. It was discussed in that National Research Council report in 2001. Prof. Ron Hira's work later even quantified HOC, showing that the typical setup for an offshoring project is to have one worker onshore (as an H-1B or L-1) for every two workers offshore. (See (R. Hira, U.S. Immigration Regulations and India's Information Technology Industry, Technological Forecasting & Social Change, 2004.) The onshore worker handles liaison, gets training, etc. A February article in Businessweek also highlighted the problem (see my critique, at http://heather.cs.ucdavis.edu/Archive/H1BFacilitatesOffshoring.txt). But I must say that the enclosed article is really good. It does the best job I've seen so far in explaining exactly how HOC works. It is includes some blockbuster sound bites, such as this one, by an Indian government official, no less: # "It has become the outsourcing visa," the Indian commerce minister, Kamal # Nath, said by telephone this week while attending global trade talks in New # Delhi, at which India is pushing the United States for a larger H-1B quota. # "If at one point you had X amount of outsourcing," he said, "and now you # have a much higher quantum of outsourcing, you need that many more visas." There are a couple of little glitches here and there in the article--Sergey Brin immigration to the U.S. as a child with his family, NOT as an H-1B, for instance, and I disagree with the notion that H-1B is fine as long as the workers get green cards--but all in all, this is one of the best articles I've see this year. Oh, and what about those foreign students at Harvard, whom the Harvard Crimson has said are so brilliant but who supposed will be forced to return home, with the U.S. losing their talents? For those that ARE brilliant (no, a Harvard degree doesn't guarantee that), they have other options besides H-1B. There is the O-1 Visa for Aliens of Extraordinary Ability, and someone of outstanding talent can apply for self-sponsorship for a green card under the National Interest Waiver. Norm http://www.iht.com/articles/2007/04/12/business/visa.php Outsourcers corner market for U.S. skilled worker visas By Anand Giridharadas Published: April 12, 2007 MUMBAI: After four years at Harvard, many foreign students there will have to leave the United States this summer. Some of them, wielding lucrative offers from Wall Street investment banks and other American businesses, will have to start at those companies' overseas offices thousands of miles away. Few may think to blame far-off foreign companies for their plight, but India's thriving outsourcing industry is guzzling ever more of the coveted H-1B visas that the Harvard graduates and thousands of others would need to stay in the United States. Enacted in 1990, the H-1B visa law allows skilled, specialized foreigners to work in America for up to six years and then pursue permanent residency. The visa has been championed as a way to attract the world's best and brightest to America to study, work, start families and, like Sergey Brin, co-founder of Google, stumble upon innovations that generate vast wealth and jobs. "Where innovation and innovators go," Bill Gates, the Microsoft chairman, said recently, "jobs are soon to follow." But the H-1B visa is being put to a starkly different use: It is now a critical tool for Indian outsourcing vendors to gain expertise and win contracts from Western companies to transfer critical operations to places like Bangalore. "It has become the outsourcing visa," the Indian commerce minister, Kamal Nath, said by telephone this week while attending global trade talks in New Delhi, at which India is pushing the United States for a larger H-1B quota. "If at one point you had X amount of outsourcing," he said, "and now you have a much higher quantum of outsourcing, you need that many more visas." This month, the annual quota of 65,000 H-1B visas evaporated in a single day after U.S. officials received more than 133,000 applications. Last year, the quota lasted nearly 60 days. If the past is any guide, many of those applications were for people with no intention of staying in the United States for the long term. Eight of the 10 largest H-1B applicants last year were outsourcing firms with major operations in India, according to a tabulation of U.S. Labor Department statistics by Ronil Hira, a professor at the Rochester Institute of Technology in Rochester, New York, and a critic of the visas. A year earlier, the figure was four in ten. As Indian outsourcing companies have become the leading consumers of the visa, they have used it to further their primary mission, which is to gain the expertise necessary to take on critical tasks performed by Western companies, and perform them in India at a fraction of the cost. Thousands of H-1B visas every year are being won by individuals acting as outsourcing ambassadors. Highly skilled and easily meeting the objective standards for excellence that the law requires, the employees interact with U.S. companies like Morgan Stanley and Boeing, gathering an outsourcing mandate and lubricating the flow of tasks to an Indian back office. "To deliver the solutions from a remote environment," said B. Ramalinga Raju, chairman of Satyam Computer Services, a leading Indian vendor, "you need a certain number of people being with a customer, understanding his needs and collecting the requirements." Indian vendors have helped lift the proportion of H-1Bs going to Indian nationals to more than half in 2006 from 7.5 percent in 1992. Last year, Indians received 43,167 of the 65,000 visas allotted. Many Indian vendors now itemize the cost of visa fees in their annual reports. Infosys Technologies, a vendor based in Bangalore, noted last year that it had doubled spending on visas over the previous year, to $15 million - more than it spends on fiber optic and satellite connections to the West. Filings with the U.S. Securities and Exchange Commission reveal that Infosys had 6,800 U.S. employees on H-1Bs as of last September. In 1998, the figure was 231. The H-1B's metamorphosis into "the outsourcing visa," which was first reported by The Harvard Crimson, the university's newspaper, is a principal reason why American lawmakers have resisted raising the quota above 65,000. "Our immigration policy should seek to complement our U.S. work force, not replace it," Senator Richard Durbin, an Illinois Democrat, said in a recent statement as he proposed legislation to restrict use of the visas. Because it was designed to create jobs, firms with 15 percent or more of their U.S. work force on H-1Bs must attest in legal filings that they have not displaced a U.S. worker. But Hira, the academic, said he believed that most of the Indian outsourcing firms, by the intrinsic nature of their business, were violating those attestations. "Rather than preventing the outsourcing of jobs, the H-1B program acts in just the opposite way, by accelerating the outsourcing of high-wage, high-skill jobs to low-cost countries," Hira wrote in a paper published last month by the Economic Policy Institute, a left-leaning research group in Washington. With the exception of Satyam, leading Indian vendors - including Infosys, Wipro, Tata Consultancy Services and HCL Technologies - declined to comment for this article. U.S. and Indian companies, as well as the Indian government, have been lobbying hard for a larger H-1B quota, arguing that U.S. immigration restrictions are smothering the innovative synergies needed to sustain a modern knowledge economy. "America should be doing all it can to attract the world's best and brightest," Gates, of Microsoft, told a U.S. Senate hearing last month. "Instead, we are shutting them out and discouraging those already here from staying and contributing to our economic prosperity." Indian vendors cast their fight in similar terms. A visa shortage "is detrimental not only to the interests of companies established in India," said Raju, of Satyam, "but even more so for companies, consumers and investors in the United States." But critics argue that Indian vendors have motives antithetical to those behind the congressional authorization of the H-1B legislation. Rather than building a thriving community of experts and innovators in the United States, the Indian firms seek to funnel work - and expertise - away from the country. While Gates, in his Senate testimony, argued that the goal for H-1B holders should be permanent U.S. residency, the option means little to Indian outsourcing firms, which usually rotate their H-1B workers in and out of the country every few years. Consider the deployment of Atul Pevekar, a 29-year-old Indian engineer for Tata Consultancy Services, an outsourcing vendor. A year ago, and five years out of college, he was sent to Minnesota on an H-1B. His assignment: to work with a U.S. retailer to relay its information technology needs back to TCS's Indian staff, to which the retailer has outsourced scores of jobs. "I am a link between the people who are doing coding in India and the client," Pevekar said by telephone. He earns $60,000 a year, five times his pay in India. But he must leave the country within a year or two. Like many Indian vendors, TCS does not seek permanent residency for most employees, even though the H-1B lets companies do so. And so he will not join, at least not now, that narrative of the industrious outsider who makes a fresh start in the United States, brings his zeal and drive, invents something grand, creates jobs and pays taxes. Instead, he will empty his bank account, take his savings home and vanish from the country as quietly as he arrived.