Gates and others pressed Congress, from the late 1980s into the 2000s, to take action to help them recruit foreign talent. “It makes no sense to educate people in our universities, often subsidized by U.S. taxpayers, and then insist they return home,” Gates testified. “These top people are going to be hired. It’s just a question of where.”
The H-1B Visa Program
In response to intense industry lobbying, Congress enacted a special visa program in 1990 as a stopgap measure. The new H-1B visa program would permit an annual quota of sixty-five thousand temporary three-year visas to be issued to college graduates to work in the United States in “specialty occupations.”
Former Democratic congressman Bruce Morrison of Connecticut, who helped write the law, saw it as a temporary fix—a bridge for channeling talented foreign students into high-tech America while the government broke the immigration logjam. The visas were made renewable for a second three years to help keep precious talent in America long enough to recruit them as U.S. citizens. The visa quota was kept fairly low, Morrison said, to encourage bright foreigners to become Americans.
Inevitably, there was hot debate over how to protect Americans from being shoved out of solid, high-paying high-tech jobs and replaced by younger, cheaper foreigners. In speech after speech, members of Congress vowed that American jobs would be protected. But in the end, Morrison said, no ironclad protections for Americans were written into the 1990 law. The law did require U.S. employers to pay H-1B visa holders at prevailing wages and not to undercut existing U.S. salary scales. But there was no legal mandate requiring employers to keep qualified Americans in their jobs or to scour the labor market and hire Americans before foreigners for any high-tech opening. “H-1B does not require that and never has,” Morrison said.
The law had so many loopholes that it was easy for companies to evade it, Morrison told me. American companies figured out a legal dodge: They could legally get rid of American employees and replace them with foreigners by working the switch through subcontractors. Under the law, Morrison explained, “you can’t fire your own worker and hire an H-1B worker, but you can fire a contractor that has supplied you with American workers and hire another contractor who will supply you with H-1B foreign workers.”
Fired and Replaced by Cheaper Foreigners
With such loopholes, the H-1B program soon altered the economic landscape in the high-tech world, eliminating hundreds of thousands of prime American jobs. IT giants such as Microsoft, Intel, Oracle, Cisco, and IBM, which had pushed the H-1B legislation, were among the first to exploit it. But other companies quickly saw its benefits. One was AIG, the insurance giant, which wanted to cut costs by replacing much of its main information staff in Manhattan, New Jersey, and New Hampshire.
Linda Kilcrease, a former AIG computer systems manager, described how in September 1994 senior AIG executives summoned 250 of the company’s most experienced IT staffers to a sudden meeting at a local hotel. “After we were seated, an executive stood in front of the room and coldly told us that the computer systems were outsourced,” she said. “We were each handed a folder of papers that detailed our 60-day notice and severance.” Summarily fired, the Americans were being replaced by H-1B visa workers from India—workers they were ordered to train, or else lose all severance benefits. The firings came as a shock to Kilcrease and her colleagues because they had been instrumental in developing AIG’s IT capabilities and the company was then enjoying strong profits. They knew that theoretically H-1B visas are designated for foreigners with special, otherwise unavailable job skills. But Kilcrease, a ten-year veteran at AIG who led a team of twenty computer programmers and systems analysts, commented after working with the Indians that “it was clear that Syntel [the firm supplying the Indian workers] did not bring in any special skills that we did not have.”
Cost-cutting was AIG’s evident motive, Kilcrease asserted. “This profitable company boasted they were saving $11 million as they made us train our H-1B replacements,” she said. “The company that provided the foreigners to AIG, Syntel, was punished for paying foreigners less than the prevailing wage. I sought to sue AIG via four government agencies. This failed as they did nothing illegal, no matter the harm to their employees. I secured [another] job, but retirement benefits were destroyed. In my fifties, I cannot start over, [and] there remain no protections to prevent abuse.”
Such mass firings were terrifying to employees, but a boon to companies. H-1B fever spread rapidly during the dot.com boom of the late 1990s and the Y2K angst over a potential computer apocalypse at the stroke of midnight on December 31, 1999. Silicon Valley and its political allies in the Clinton administration, claiming they needed more foreign “techies” to head off trouble, got Congress to triple the annual H-1B visa quota from 65,000 to 195,000. Companies such as IBM and Microsoft, which have overseas subsidiaries, added to that total by using another visa, the L-1, to bring in their own foreign employees without any quota.
So the numbers of “onshored” foreign workers in America shot up. Microsoft acknowledged in 2007 that one-third of its 46,000-member workforce in the United States was foreigners on work visas or green cards. Even in hard times, when Americans were being laid off in large numbers, the foreign worker tide kept rising. In 2009, the industry lobbying group TechAmerica reported that while the industry cut 245,600 U.S. jobs, it added more than 100,000 H-1B visa workers.
Syntel: Grad Student to Billionaire
Once again, the driving force behind the wave of imported IT workers on H-1B visas was the aggressive coterie of Indian offshoring firms, Infosys, Wipro, Satyam, and Tata. They have recruited tens of thousands of Indian knowledge workers at home and sent them into America. Other so-called body shops or multinational temp agencies, some owned by Americans, have copied the Indian strategy. But the four Indian firms have dominated the field. During the recession, from 2007 to 2009, four of the five largest users of H-1B visas were Indian firms—Tata, Infosys, Wipro, and Satyam—each receiving several times more visas than American giants such as Microsoft and Cisco, according to Ron Hira of Rochester Institute of Technology, who has frequently testified to Congress on offshoring issues.
“Tata has about 18,000 people in the United States, 17,000 of them are on H-1B or L-1 visas,” Hira said. “Infosys has 8,000 H-1Bs visas and L-1 visas in the U.S. Wipro is similar. The visas cost them about $11 million a year.” A small investment, given how profitable the H-1B trade has been for these Indian companies. From 2000 to 2010, Infosys exploded from a $203 million company with 5,400 employees to a $4.8 billion company with 113,800. Syntel Inc. was founded in 1980 by Bharat Desai, a graduate of the Indian Institute of Technology and the University of Michigan, and its H-1B trade made Desai into one of America’s four hundred richest people, with a net worth of $1.35 billion.
Milton Friedman: H-1Bs Unneeded Subsidy
With the American economy going through rocky years, the explosive growth of the H-1B visa program has fueled charges that it is undercutting American wage scales and job security. Labor Department reports have repeatedly charged that H-1B visa firms are breaking the law by paying wages well below prevailing American rates and often submitting fraudulent visa applications. In 1994, former labor secretary Robert Reich singled out Syntel for enabling AIG to fire 250 American workers and hire Indians. An investigation, Reich said, had found that “Syntel had willfully underpaid its Indian computer programmers by nearly 20 percent below the wage they were required under law to be paid.” Reich also cited eighteen other cases of underpaid H-1B workers. A year later, the Labor Department’s inspector general reported evidence of pervasive cheating by U.S. companies that were paying substandard wages.
In 1995, Reich was back on Capitol Hill urging Congress to fix what he called the “seriously flawed” H-1B program. Not only were U.S. employers cheating by paying submarket salaries, he said, but they were improperly firing American workers. “We have seen numerous instances in which American businesses have brought in forei
gn skilled workers after having laid off skilled American workers, simply because they can get the foreign workers more cheaply,” Reich said. The H-1B visa program, he went on, “has become a major means of circumventing the costs of paying skilled American workers or the costs of training them.”
Even Milton Friedman, the normally pro-business free market economist from the University of Chicago, criticized the H-1B program as an improper subsidy to Corporate America. He mocked the idea that big corporations such as Microsoft, IBM, or Intel needed help from Washington to build a foreign talent farm system. “There is no doubt,” said Friedman, “that the program is a benefit to their employers, enabling them to get workers at a lower wage, and to that extent, it is a subsidy.”
One Million Foreign Visa Workers
With the expansion of the annual H-1B quota and with renewable visas, the accumulation of “onshored” foreign workers expanded far beyond the original, limited stopgap program.
The Labor Department does not keep track of the totals. But in 2011, Paul Almeida, president of the AFL-CIO’s Department of Professional Employees, estimated that one million or more foreigners were working in the United States on H-1B visas. His estimate was based on the expanded annual quota of 195,000 visas, renewable for up to six years, meaning 195,000 more workers could be added each year for six years. High-tech industry spokesmen discounted his estimate as a wild exaggeration. But a 2010 report from the Department of Homeland Security lent credence to the AFL-CIO figures. In just one three-year period, from 2006 to 2008, the DHS reported that the government had approved 828,677 H-1B visas. Add another three years of visas and the total could be well over 1 million.
What’s more, early backers of the H-1B program, like former congressman Bruce Morrison, contend that the program has strayed far from its original intent of recruiting the world’s “best and brightest,” as Bill Gates had put it. “These are not Einsteins or superstars,” Morrison objected. “That has always been a lot of hype. H-1B never required that they be the best and brightest in the world. It only required a bachelor’s degree.”
But what most disturbs Morrison and reformers in Congress is how H-1B visas have been misused to knock hundreds of thousands of Americans out of good high-tech jobs in hard economic times. “If I had known in 1990 what I know today about offshore companies using the H-1B program to import foreign workers, I wouldn’t have drafted the law so that they could use it that way,” Morrison told me. “You know, some jobs are going to wind up going abroad because of globalization, but the government shouldn’t have its thumb on the scale, making it easier.”
Indian information industry leaders bristle at American criticism. India has “been viewed as taking away American jobs,” wrote Som Mittal, president of NASSCOM, India’s National Association of Software and Services Companies, which includes the H-1B staffing companies. In an op-ed for the San Jose Mercury News in December 2010, Mittal argued that India should be seen as “a country that is creating jobs in the United States.”
NASSCOM contends that Indian firms are saving U.S. corporations $20 billion to $25 billion a year in costs. Trade union and academic critics contend that money should have been spent on jobs for Americans.
Pfizer’s Switch
What makes the operations of the Indian companies so controversial is that typically they help American companies get around the H-1B law. The Indian firms act as buffers that shield U.S. business from the reach of the law. Pfizer’s huge offshoring shift starting in late 2008 offers a window on how the H-1B game works.
In late 2008, Pfizer forced drastic cutbacks among one thousand information specialists at its global research center in Groton and New London, Connecticut. These workers, almost all Americans, had been hired years earlier through outside contractors, but they had worked at Pfizer for so long and had become so integrated into Pfizer’s operations that they were widely regarded as tantamount to permanent Pfizer employees.
For many years, Pfizer liked this system. But when similar contract workers and long-term temp employees at Microsoft—its so-called permatemps—sued for health and retirement benefits and won their lawsuit in 2005, Pfizer became gun-shy and decided on a massive personnel switch. In November 2007, Pfizer adopted Corporate Procedure 117, a new personnel policy that laid the groundwork for it to shed hundreds of long-term American contract or contingent workers by discontinuing their contracts.
What made Pfizer’s massive personnel switch possible was the availability of a large complement of less expensive Indians. In 2005, Pfizer signed up two Indian staffing agencies, Infosys and Satyam, now known as Mahindra Satyam, as “strategic partners” to provide IT specialists as part of its drive to cut $4 billion in costs. Months before the big layoffs, people at the Groton research center noticed a trickle of Indians arriving for three-month assignments to be trained by Americans.
In late 2008, the big layoffs came. They swept through Pfizer’s Informatics Division, which did the intricate computerized work for Pfizer’s complex clinical drug trials. Informatics IT teams developed databases and software for Pfizer’s pharmaceutical R&D and assembled the data for Pfizer’s applications to the Food and Drug Administration for approval of new drugs. That work required especially skilled people, not only masters of complex information software, but people who could work well with Pfizer scientists, earn their trust, and keep the whole process moving on schedule.
When the first Indian IT specialists arrived to replace the fired Americans, Pfizer’s scientific administrators at Groton worried that the Indians were not up to the job and that relying on them was seriously hurting Pfizer’s performance on new drugs, according to Lee Howard, a reporter for The Day, New London’s daily newspaper. They appealed to CEO Jeffrey Kindler to stop the Indian “onshoring.” But Kindler and his aides rejected their appeal and the job cuts rolled on.
“Everybody was scared to death,” I was told by one former systems analyst with ten years’ experience at Pfizer. “You wouldn’t know if one day you would show up and find out that you didn’t have a job. Some people’s contracts had two or three years to go, but Pfizer could let you go before renewal. And if your contract expired, forget it. You were done. In my time, I saw three hundred people laid off, well over three hundred. That’s Americans. People who were there at Pfizer for fourteen to fifteen years. Pfizer people who had been transferred to Connecticut from Ann Arbor, Michigan. People who bought a house in this worst economy of all times. They couldn’t sell their house and leave. No job and they were stuck in their houses. And these were people who had devoted their lives to Pfizer!”
How Pfizer Avoided the Reach of the Law
A stream of Indian IT workers took up posts in Pfizer’s three-story computer center at 194 Howard Street in New London, where some three hundred IT specialists worked. “Five years ago, the Howard Street building was probably all American contractors,” Lee Howard told me. “Then there was a gradual shift, maybe not all H-1Bs, but a handful of Indians. And then it switched to a completely Indian workforce.” Pfizer people talked about them as H-1B visas employees, but some could also have come to the U.S. on B-1 or L-1 visas, which are similar but have even more flexible rules, allowing for pay abroad and no payment of American taxes.
“These contracting companies have apartments rented across the street from Pfizer,” said the former Pfizer systems analyst, who as a $125,000-a-year project coordinator dealt directly with the Indian staffing companies before being fired in mid-2009. “They’d stick five or six people in one apartment. You’d see these people walking over to Pfizer in winter—in sandals, because no one had prepared them…. We never looked at the visas. They were Indians working for an Indian company…. Pfizer did not want to deal with visas. That makes them complicit in the process.”
That last point was crucial. Like scores if not hundreds of other U.S. companies, Pfizer maintained that its hands-off policy on H-1B visas protected it against any charge of violating the visa law by firing Americans to hire
Indians. Pfizer contended that these were not its employees, that it was merely switching from one outside contractor to another, and the contractors were doing the layoffs and replacements. That was the gist of Pfizer’s response to Senator Chris Dodd and Representative Joe Courtney, two Connecticut Democrats who wrote Pfizer CEO Jeff Kindler in November 2008, to “urge you in the strongest terms to reconsider” Pfizer’s replacing American workers with foreign workers. In reply, Pfizer said it was using a dozen outside contractors, some foreign, some American, and they, not Pfizer, had hired the replacements and obtained their H-1B visas. “Pfizer would have had no involvement,” Pfizer asserted, except for a small number of high-level scientists with “specialized knowledge and expertise.”
Calls for Reform
Cases like Pfizer’s and charges that what critics call the “Indian body shops” are broadly abusing the H-1B visa system have triggered a push for reform in Congress to focus the H-1B program on a small window of truly unusual foreign talent and to stop the influx of routine IT workers taking good high-tech American jobs.
In April 2009, a bipartisan bill was introduced by Republican Senator Chuck Grassley of Iowa and Democratic Senator Richard Durbin of Illinois. They proposed requiring U.S. firms to “attest” that neither they nor their subcontractors have fired Americans and “that they have tried to hire an American before they hire a foreign worker.” Others suggested limiting H-1B visas to foreigners with graduate degrees.
Who Stole the American Dream? Page 31
