Outsourced, at home
Hyped as source of tech talent, H-1B visas usher in cheap replacements for US workers
On Jan. 14, 2010, senior executives at Molina Healthcare in Long Beach, Calif., called their staff together for a somber meeting. The company had done poorly the previous quarter, they announced. Dozens of people in the IT department would have to be let go.
What the fired employees didn’t know was that the previous day, the US Department of Labor had approved applications for 40 temporary workers from India to be placed at Molina, through a company called Cognizant.
The fired employees — all US citizens or green card holders — were earning an average of $75,000 a year, plus benefits; the new workers, brought on H-1B visas, earned $50,000, with no benefits, according to a lawsuit filed by the ex-employees. The lawsuit alleges that Molina was flush with cash at the time, and that the real reason employees were fired was their nationality.
“The business model is to replace Americans,” said James Otto, their attorney.
Not just at Molina, he said. “It’s happening across the country.”
The issue of “offshoring” American jobs has sparked emotional debate for decades, ever since factories began moving to cheap-labor destinations like India and China. But over the last dozen or so years, a quieter transformation has been taking place: the transfer of high-tech jobs to non-US citizens here in the United States.
H-1B visas, which allow immigrants who are sponsored by their employers to work in the United States for a limited term, have become ground zero in the looming battle in Congress over the complex issue of immigration reform. Supporters of the program argue the US economy badly needs more high-tech workers from overseas. Americans aren’t studying enough math and science, the argument goes, so we must look elsewhere to grow our economy.
“In Silicon Valley, Austin, Chicago, or anywhere else in the United States I hear from CEOs that the H-1B visa system is inadequate for today’s human capital marketplace,” Robert Greifeld, CEO of the firm NASDAQ OMX, told Congress in 2011. The cap on visas “is robbing America of the next generation of great companies.”
Vivek Wadhwa, a former H-1B visa holder, speaks about foreign high-tech workers in messianic terms. “We can either trip up the entrepreneurs who are going to reinvent America and save the world, or we can fix this problem,” he told the same congressional hearing. “It’s imperative that we allow Silicon Valley, our entrepreneurs, our technologists to do their magic and to save us.”
But if these workers have such superior abilities, why not make it easier for them to become Americans? Why bring them here on temporary H-1B visas that keep them chained to the company that sponsored them for years?
The reason that many employers use H-1B visas is not because of foreign workers’ special skills, but because these workers come relatively cheap.
Twenty percent of the 134,780 H-1B petitions approved last year went to just four firms: Cognizant Technology Solutions, Tata Consultancy Services, Infosys, and Wipro. The latter three are among India’s biggest outsourcing giants. Cognizant, headquartered in New Jersey, grew out of a partnership between Dun & Bradstreet and an Indian firm.
Iconic US companies, including Walmart and 7-Eleven, hire these firms to do IT work. The outsourcers can do it inexpensively, not only because they ship some of the work to India, but also because they bring temporary workers to the United States. Sometimes temporary workers come, learn the job, and take the work back to India for good. Other times, the job stays here but is filled by a rotating cadre of H-1Bs. When Molina Healthcare fired its IT staff, it didn’t apply for H-1B workers to replace them. It got them through Cognizant, the largest consumer of H-1B visas last year.
Indeed, outsourcers have hijacked the H-1B program. Consider that Facebook, the epitome of a tech company that can seek out the world’s best talent, was approved for just 307 H-1B workers. ExxonMobil got 58. The vast majority of participating companies got just one or two. Yet Cognizant got 9,281 of the visas. Tata got 7,454.
People are starting to notice. Cognizant is named as a defendant in the Molina case. And it isn’t the only one to face a lawsuit.
Tata agreed in February to pay $29 million to settle a class-action lawsuit brought by Indian workers who were forced to hand over their US tax refunds to the company. Some 12,800 Indian workers are eligible for a payout from the lawsuit, which was brought by a Tata employee who worked at a Target in Hayward, Calif. Meanwhile, a criminal grand jury in Texas is investigating allegations that Infosys asked American employees to falsify paperwork in order to evade restrictions on the number of H-1B workers it could bring from India.
Wipro, which has a large presence in Massachusetts, appears to be the only one of the four left unscathed.
US newspapers haven’t paid much attention to these legal battles. But the Indian press has been all over the story, speculating about what a change in visa rules would mean for India’s outsourcing industry.
It is no secret that Cognizant’s business model rests on importing foreign employees. Cognizant explains clearly to its investors in its SEC filings that tighter restrictions would damage its bottom line. “The vast majority of our technical professionals in the United States and Europe are Indian nationals,” the company wrote in 2011.
But on Capitol Hill, Cognizant’s lobbyists don’t highlight its Indian workforce. A glossy eight-page hand-out entitled “Cognizant: An American Success Story” declares, “We create jobs in America,” and, “Our US employee base is some 23,000 strong.”
This is highly misleading, said Ron Hira, associate professor of public policy at Rochester Institute of Technology, who researches outsourcing and immigration policy. Almost all of those 23,000 workers, he said, are foreign nationals on guest-worker visas. (Alan Alper, a Cognizant spokesman, declined to say what percentage of its US workforce is American. He also said the Molina lawsuit is “without merit.” A spokeswoman for Molina also said there was “no basis for legal claims” against the health care firm.)
The notion that the American economy sometimes needs an influx of temporary workers has been around for more than a century.
In the 1800s, Chinese laborers built railroads in California, but the Chinese Exclusion Act kept them from becoming citizens. During World War II, thousands of Mexican “braceros” were brought to harvest fields left empty by farmers who had gone to battle. After the war ended, thousands of braceros were deported.
Not since the braceros have so many workers been transported so systematically into the United States on the assumption that they will go back home.
Many temporary workers want to stay here, but can’t. Their companies won’t help them get green cards. Advocates say more H-1B visas are needed because green cards take too long for fast-moving high-tech firms.
That doesn’t explain why the biggest users of H-1B visas help so few temporary employees become citizens or permanent residents. Cognizant sought 669 green cards for employees last year. Wipro sought 30. Infosys sought 21. Tata sought only four.
The reality is that once employees get green cards, they command an American salary and can go elsewhere if they don’t receive it. Much of the competitive advantage of having that worker disappears. Employees on H-1B visas understand this all too well. Online discussion forums are full of workers strategizing about how to escape companies that haven’t given them a raise in years. On one forum, a person identifying himself as a Cognizant employee wrote that he suspected his bosses of deliberately submitting shoddy paperwork for his green card to keep him longer in a low-wage job.
When the H-1B visa program was invented in 1990, no one expected that Indian companies would be its biggest subscribers. “Exploitation of the H-1B by outsourcers is a new abuse,” said Bruce Morrison, a former Connecticut congressman who authored of the 1990 Immigration Act, which gave birth to H-1B visas. Morrison said the law — which vastly expanded employment-based green cards — was designed to curb the abusive practice of bringing temporary workers to fill permanent jobs. He crafted the bill with different professions in mind: nurses, physical therapists, and mechanics who serviced data processing machines, many of whom were from Taiwan and Korea.
“Rather than increase H-1Bs, we need to increase green cards — and deliver them to new hires immediately,” Morrison said. That “would eliminate the disincentive to hire Americans.”
But some companies have become addicted to H-1Bs. For them, the visas created a dream workforce: Young people with no family obligations who feel grateful for the chance to work long hours for relatively low wages. Workers who literally can’t leave for better-paying jobs. Disposable people who go home after three years or six years — just when they start getting expensive.
While some temporary workers might be magical geniuses capable of saving the US economy, many are not. Jay Palmer, principal consultant for Infosys, describes in court documents how the company brought workers straight from school — “freshers” — who needed months, if not years, to get up to speed. Some were being paid in rupees sent to Indian bank accounts, according to Palmer’s lawyer, Kenneth Mendelsohn. He said they survived on a stipend paid through a debit card, as they worked for the oil-field services firm Baker Hughes in Texas. “Six or eight Indians were living in a two-bedroom apartment.”
Cognizant, Tata, and Infosys are not even the worst offenders. Smaller staffing companies known as “body shops” have been known to charge H-1Bs the cost of their airfare — a practice reminiscent of indentured servitude.
But the biggest problem with H-1B visa abuse is not the treatment of foreign workers. It’s the way it distorts the US tech sector, exacerbating the very scarcity of American tech talent that the visas are supposed to solve.
John Miano programmed computers for 17 years. He used to work as a tech consultant for Dun & Bradstreet. He once helped clean up a coding project at AIG that went astray after AIG replaced its own tech staff with temporary workers.
But then Miano lost his job.
“As the business world around us becomes more and more competitive, large companies such as ours must find new ways to become more nimble,” executives at Dun & Bradstreet explained in a memo in 2000. “To assist us in this endeavor,” they wrote, they were going to hire Cognizant and Wipro.
Miano was one of the first to see what was happening to Americans in the computer industry. “We were on a death march,” he said. He formed a computer programmers’ guild and even testified before Congress. In 2002, he gave up and went to law school.
Try telling Miano that we need more H-1Bs because American kids don’t study enough computer science. “Why should they?” he asks. “There’s no future in it for them.”
But even Miano doesn’t want to get rid of the H-1B program. He just wants to reform it so that it only brings the magicians who boost our economy, not the braceros who ruin it.
I am not a nativist. Immigration makes this country strong. But let’s dispense with the fiction that all temporary workers are living the American dream and doing work that Americans can’t do. H-1Bs should be for companies that want highly skilled foreigners to work for them, not for factory farms of entry-level laborers leased out to the highest bidder. We can’t allow them to make it impossible for firms that hire Americans to compete.
What if, instead of increasing the number of H-1B visas, we gave citizenship more quickly to more highly skilled people? And what if, instead of harping on how unqualified Americans are for these jobs, we celebrated companies that train and hire Americans?
Neeraj Gupta came to the United States from India on a student visa. Later, he got a H-1B visa. Eventually, he became a citizen. Recently, he founded Systems In Motion, a technology services company. Instead of bringing H-1Bs, he hired Chris Miller, an underemployed man from Novi, Mich., who worked at a furniture store. After the company’s training program, Miller became one of his best employees.
“The right investments in our people can make the US an engine for job growth in the technology industry,” Gupta told a congressional committee two weeks ago.
“Our people,” Gupta had said. Let’s invest in our people. Right here in the United States.