First come, first serve

Outsourcing companies exploit the H-1B Program

Originally the H-1B program has been designed to attract foreign professionals with college degrees and much-needed special skills to fill jobs when equally qualified Americans cannot be found.

However, in recent years the program has been dominated by global outsourcing companies “squeezing out legitimate users of the program”, which would be tantamount to “pushing jobs offshore”, Ronil Hira, professor at Howard University observes. Her recent survey actually backs this conclusion by proving that thirteen globally outsourcing companies, including the India-based giants Tata Consultancy Services (TCS) and Infosys as well as the India-related Cognizant from Teaneck, NJ, nearly won one-third of all H-1B visas in 2014. The top 20 companies actually received about 40 percent, which amounts to 32,000 out of the annually limited 85,000 visas, while more than 10,000 employers had to be content with far fewer visas each. The survey even displays that about half of the applications were rejected entirely because the quota had been exhausted.

Although the H-1B program provides for a limitation of one application per foreign worker, the total number of applications filed by a company is unlimited. Once the quota is met, visa recipients are selected by a computer-run lottery. So by the opening of the application window on April 1st big companies tend to flood the system with applications. Inevitably this leads to a breakdown of the entire program each year considering that the costly – each application amounts up to $4,000 – applications are accepted first come first served. For this reason for example TCS, that had prepared for at least 14,000 visas, won 5,650, while two-thirds of 233,000 applications within just seven days after were denied as the quota had been met.

To prepare an application, employers are required to submit a labor condition application first. Based on an approved application the companies then are allowed to apply for H-1B visas and actually they – lawfully – use one application to apply for more than one worker.

Hereafter companies employing large numbers of H-1B workers are required by federal law to make a statement of non-displacement of American workers. However, employers are exempt from this requirement if they pay H-1B workers at least $60,000 a year – a salary which is mostly below market rates. Consequently those firms, which primarily employ workers from India, are able to undercut the entire price competition by offering services at a lower cost compared to equally skilled American professionals.

Even if the officials in charge contest an inherent privilege of globally outsourcing companies highlighting the selection process as “completely random”, and Congress most recently allowed an extra fee of $2,000 on big outsourcing companies to lapse, the latter now faces a bill introduced by Senators Richard Durbin of Illinois, and Charles H. Grassley of Iowa. The bill inter alia is meant to raise wage requirements, increase monitoring and enforcement and introduce other protections for American workers against further displacement.
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Reinhard von Hennigs