Reducing the Potential for H-1B Abuse

In any type of war, it’s very important to identify the enemy and their supporters.  The enemy of American IT professionals are foreign labor speculators and foreign Business Process Offshoring specialists.  We can identify both of these enemies in an NAICS Industry classification that contains both of these types of employers

In the war against global labor arbitrage, we have multi-fronts, one is comprised of foreign employers who have broken through our borders and are granted temporary work visas to facilitate offshore outsourcing. A second front is a beachhead comprised of semi-domestic labor brokers, concentrated in the skilled labor occupations, who provide the logistical supply-line for the enemy.

I may have found a useful tool for identifying these enemies of American prosperity; employers in an industry defined as NAICS 54 Professional, Scientific, and Technical Services. Though not all are enemies, some employers concentrated in NAICS 54 have focused on destroying our domestic Information Technology capabilities (Computer-related occupations) for personal gain. In the future, any specialty occupation can and will be targeted in the arbitrage scheme.

According to the IRS, all U. S. employers must obtain an Employer Identification Number (EIN). Associated with the EIN is an NAICS Industry classification, the Industry classification prefix number 54 could be used to automate protections for the American worker by removing carte-blanche business immigration privileges from NAICS 54 employers. Currently, only H-1B Dependent employers and Willful violators are required to conduct labor market tests and advertise open positions to domestic candidates. If an H-1B worker will earn more than $60,000.00 per year, even these modest requirements are lifted.

H1B Dependent Employers


Before making an H1B application, an H1B dependent employer must make "good faith" attempts to recruit resident US workers using "procedures that meet industry-wide standards" and "offering compensation at least as great as that offered to the H1B alien". Given the wide variety of recruitment methods used in different industries, this provision is likely to cause some confusion both for the BCIS and employers. For example, Internet advertising might be in "good faith" and "meet industry-wide standards" for the IT sector, but would it for, say, the engineering industry? This is a matter that will demand careful consideration on the part of H1B dependent employers.


It is worth noting, however, that the recruitment attestation described above is not required by H1B dependent employers seeking to employ aliens with Master's (or higher) Degrees, or those earning in excess of US$60,000. Non H1B dependent employers are not required to make such an attestation in any event.


Source: Workpermit.com

Perversely, NAICS 54 Professional, Scientific, and Technical Services is an industry that exists to earn a margin on value created by the accomplishment of others. In addition to classifying Offshore Outsourcing specialists, NAICS 54 also contains human resources and domestic consulting firms. Mismanagement and dwindling-receipts for these firms increase the temptation to charge foreign-workers large performance bonds, require personal service agreements (enforced in distant jurisdictions), and encourage fabrication of the foreign-worker’s credentials.

In this hyper-competitive business atmosphere, NAICS 54 employers are dependent upon margins from decreasing wages and foreign incursion into domestic service markets. Without intervention, these employers will destroy themselves and thwart innovation as maturity and employment-security within the industry are further discarded.

The professional sports industry is much like NAICS 54, in that the owners earn margins derived from the player’s skills. In sports, we have rules and referees, many of these rules are enforced so that players do not injure others, but also so they do not injure themselves. Without rules and referees, parents would not allow their children to play and the sport would suffer with substandard recruits. In soccer, we have the “yellow-card,” a warning, followed by the “red-card” which means ejection from the game in all languages.

It is my contention that NAICS “54 Professional, Scientific, and Technical Services” and all sub-classified employers should be considered “H-1B Dependent” regardless of number of employees -- a default “yellow-card” is issued so to speak.

If the “yellow-card” and “red-card” have no meaning, then the respect for the referee is diminished and violence in the game has no consequence. When the referees have been removed, the business of business is no longer a competitive game and civility is set aside, opponents and competitors become enemies and the game becomes war.

Crossposted to NoSlaves.com

Offshoring probably not the true threat to I.T.

Here is what the "brightest and the best" have built for themselves.

The true problem with the I.T. market is foreign worker encroachment, offshoring would not be of much consequence without H-1B and L-1 visas.

(These are images of India's infrastructure, click to enlarge)

When will the hundreds of millions of hungry people start recycling stolen copper?

Playing Politics with Global Competitiveness

Remember, that pesky report, finally released last year, the Commerce Department, Technology Administration (TA) report concerning offshoring of highly-skilled jobs? The U.S. House Committee on Science and Technology commissioned the report in 2004: "An Overview of Workforce Globalization in the U.S. IT Services and Software, U.S. Semiconductor and the U.S. Pharmaceuticals Industries." Executive Summary

The Technology Administration (TA) report was released on July 24, 2006. Apparently there are two versions of the report, a 336 page (draft) and a 360 page version. The differences may be important because a twelve-page, "six-month assessment," does not reconcile with the larger report and nobody seems to know who wrote the first five pages of the twelve page summary.

This is not the first data that the Administration has withheld from Congress, USCIS neglected to file required reports on H-1B visas (Lou Dobbs Video 1/27/07) and NASA seems to be having documentation problems.

(October 22, 2007) Gordon, Miller, Udall Direct NASA to Halt any Destruction of Records Relating to the NAOMS Project

The Committee followed up with a letter requesting certain documents and other information. Therefore, we were surprised to read in the media today that, after that phone conference, NASA officials had directed the lead contractor at Ames Research Center for the NAOMS survey to archive all its materials on this project, return the archived material to NASA and then purge it from their computers and files (“NASA Sits on Air Safety Survey,” Associated Press, Oct. 22, 2007).

Here are some relevant passages concerning the TA report:

I have been trying to get the original draft report for almost a year through every means available to me, but I have not been able to get the Chairman of hisCommittee or the Subcommittee of jurisdiction to join me. It was with some reluctance that I filed a Resolution of Inquiry about this report to force the Committee to face up to its responsibility to learn as much as we can about what is happening to American jobs.

This Committee has jurisdiction over the Technology Administration. We know they spent $335,000 producing their report. The American public, and this Committee, deserve to see the full results of their work.

…If you just want to trust someone who whispers in our ear that you [Congress] don’t really need to know what government experts have to say - from the same folks who brought you the Dubai ports deal, have refused Republican Senators information related to Hurricane Katrina and have refused to stay at Senate hearings to answer questions - then oppose this resolution.

H. Res. 717, Directing the Secretary of Commerce to deliver a draft report on offshoring jobs Opening Statement By Hon. Bart Gordon, 3/29/2006 [1]

The report was also released to Manufacturing & Technology News. The following are quotes from the MTN press release: Commerce Department Report On Offshore Outsourcing Finally Sees The Light Of Day, July 24, 2006:

The $335,000, 336-page report obtained last week never saw the light of day. Manufacturing & Technology News submitted a Freedom of Information Act request to the Department of Commerce on March 17, 2005, seeking release of the study, but that request was denied. Eventually, what was produced and provided by the Commerce Department in September 2005 was a 12-page document bearing a July 2004 publication date that bore little resemblance to the work done by analysts at the Technology Administration, all of whom have recently been told they will be laid off due to severe budget cuts for the agency and the issuance of a reduction in force (RIF).

That document is quite different from the original 12-page summary, and it is apparent why Bush's political appointees so vehemently refused its release. The administration "was scared of anything having to do with outsourcing," says one source who is familiar with the report's travails. The Bush team "could not afford even a discussion" of the outsourcing issue.

That [12 page] summary put a positive spin on offshore outsourcing and includes analysis written by political appointees that was not in the original work.

"The report speaks for itself," said Ben Wu, who was in charge of the report's demise while at the Commerce Department's Technology Administration. Wu now works in the state of Maryland's economic development organization. Phil Bond, who was in charge of the Technology Administration at the time, said he had nothing to do with re-writing the report. He has since been named president and CEO of the Information Technology Association of America (ITAA), an organization that took the lead in Washington in defending the practice of offshore outsourcing of IT jobs.

The 360-page version of the report describes the types of IT services and software jobs that are being outsourced. It states the obvious: that Indian outsourcing companies "are expanding staff annually by the thousands."

Commerce Department Report On Offshore Outsourcing Finally Sees The Light Of Day

I won’t bore you with the details of the Executive Summary other than: 1 in 4 American jobs are likely candidates for offshoring, U.S. enrollment in high-tech is down and high-tech jobs are going overseas at alarming rates.

An overview and timeline of the investigation into the withholding this report can be found here: Globalization and the American Workforce, July 24, 2006.

Bringing the story up to date, I’ll paste in a few more paragraphs from the TA’s, "Committee Concludes Series on Offshoring With Look at the Affect of Globalization on the U.S. Science and Engineering Workforce," Nov 7, 2007

This hearing – the fourth and final in the series – explored the implications of the globalization of research & development (R&D) and innovation for the American science, technology, engineering and mathematics (STEM) workforce

Witnesses sought to explain how U.S. workers need to constantly "re-tool" their skills to adapt to the changing marketplace. Witnesses also discussed the new opportunities and challenges created by globalization, including the reshaping the demand for STEM workers and skills; as well as how offshoring is affecting the STEM workforce pipeline and how incumbent workers are responding to globalization.

Witnesses included: Dr. Michael S. Teitelbaum, vice president of the Alfred P. Sloan Foundation; Dr. Harold Salzman, senior research associate at the Urban Institute; Dr. Charles McMillion, president and chief economist of MBG Information Services; Mr. Paul J. Kostek, vice president for career activities of the Institute for Electrical and Electronics Engineers – USA; and Mr. Henry Becker, president of Qimonda North America.
Committee Concludes Series on Offshoring With Look at the Affect of Globalization on the U.S. Science and Engineering Workforce, Nov 7, 2007

After all of the wrangling to get this report and the Alfred P. Sloan Foundation’s finding that there is no shortage of highly-skilled workers, I found this in the press yesterday.

H-1B visas are critically important to firms such as Breault Research to remain innovative and globally competitive. Nationally, more that 60 percent of H-1B visas are held by workers in computers, science, engineering, and medical positions. More than 40 percent of H-1B visa workers possess graduate or doctorate degrees.

This year, the United States capped new H-1B visas at approximately 65,000, not nearly enough to meet industry demands. The cap was hit on the first day applications were accepted, meaning that much-needed, well-educated high-tech
workers were not available to U.S. companies.

Giffords, a member of the House Science and Technology Committee, will outline several H-1B visa reform ideas and solicit comments and suggestions from the executives. The Tucson lawmaker is planning to introduce legislation in December that accurately reflects industry needs.

U.S. Rep. Gabrielle Giffords to Discuss High-Tech Visa Reform Legislation at Optical
Engineering Firm Breault Research, Nov 27, 2007

Technology and Innovation Administration Subcommittee Members
As of March, 2007, member names in bold are also members of Congressional Caucus on India and Indian Americans.

Democrats:
David Wu (Oregon),Chairman
Jim Matheson (Utah)
Harry E. Mitchell (Arizona), Vice Chairman
Charles A. Wilson (Ohio)
Ben Chandler (Kentucky)
Mike Ross (Arkansas)
Michael M. Honda (California)
Bart Gordon (Tennessee), ex officio

Republicans:
Phil Gingrey (Georgia), Ranking Member
Vernon J. Ehlers (Michigan)
Judy Biggert (Illinois)
Adrian Smith (Nebraska)
Paul Broun (Georgia)
Ralph M. Hall (Texas), ex officio

http://science.house.gov/subcommittee/tech.aspx

The H-1B and L-1 Offshoring Visa

Revisiting InformationWeek's article on Senator Grassley's inquiry of H-1B and L-1 abuse, caused some intrigue on my part.

Information Week: Who Gets H-1B Visas? Check Out This List, May 17, 2007

From Senator Grassley's publication, "....top 20 H-1B visas with L information" corporate sponsors of the H-1B visa represent 39.6% of the 85,000 visas available to "for-profit" corporations. I've reclassifed the list of Top 20 corporations into the following categories:

Business Process Outsourcing Specialists (12)
Accounting Services (2)
Producers of Tangible Goods (6)

Of the top 20 corporate H-1B visa sponsors, only 6 produce tangible goods, 2 provide accounting and financial services, while 12 of the top 20 corporations specialize in Business Process Outsourcing (BPO) i.e. facilitate the off-shoring of technical services.

The 6 Producers of Tangible Goods are also the most vocal U.S. proponents of the H-1B visa, yet these American Superstar corporations only employed 20.38% of the H-1B and L-1 visas on the Top 20 list -- 7685 H-1B and 2129 L-1 visas. (7685 = 9.04% of the total 85,000 H-1B visas)

Seventy Three percent (73.43%) of the "Top 20" H-1B and L-1 visas were employed to assist in Business Process Outsourcing /Offshoring of Information Systems services. Legitimate U.S. employers are being denied H-1B visas and legitimate U.S. employment candidates are being denied employment due to misuse of guest-worker programs.

In 2004, the National Science Foundation reports 52,544 (of 57,405) Bachelor's degrees in Computer Science were awarded to Citizens/Permanent Residents, 4,861 BS-CS degrees granted to foreign students. http://www.nsf.gov/statistics/wmpd/tables/tabc-6.xls

Business Process Outsourcing specialists employed 35,365 of 48,159 guestworker visas from the Top 20 list.

Concerning (2006) H-1B misuse and fraud, IBNLive reports:

"... companies with operations in U.S. are bearing the brunt of such [H-1B] frauds, last year, companies like Wipro and Infosys applied for 20,000 H-1B visas each."

If we subtract these 40,000 H-1B applications from the total of 123,480 applicants for 2006, it becomes obvious why the H-1B cap was reached in one day this year.

Visa Consultants selling H-1b visas



http://www.youtube.com/watch?v=bOqOxYr4F18


Top 20 H-1B Employer list 2006:

2006 H-1B and L-1 visas in Top 20 list -- Total visas = 48,159

Business Process Outsourcing Specialists (12)
TATA CONSULTANCY SERVICES LIMITED = 8293
INFOSYS TECHNOLOGIES LIMITED = 5202
WIPRO LIMITED = 4841
SATYAM COMPUTER SERVICES LTD = 3830
PATNI COMPUTER SYSTEMS INC = 1831
HCL AMERICA INC = 1421
LARSEN & TOUBRO INFOTECH LIMITED = 1090
I-FLEX SOLUTIONS INC = 876
MPHASIS CORPORATION = 809
TECH MAHINDRA AMERICAS INC = 781
COGNIZANT TECH SOLUTIONS U S CORP = 5746
LANCESOFT INC = 645
Total H-1B and L-1 visas reported = 35,365
Percentage of "Top 20" Total = 73.43%

Accounting Services (2)
ERNST & YOUNG LLP = 913
DELOITTE & TOUCHE = 2067
Total H-1B and L-1 visas reported = 2980
Percentage of "Top 20" Total = 6.19%


Producers of Tangible Goods (6)
MICROSOFT = 3285
IBM CORPORATION = 2367
INTEL CORP = 1222
ORACLE USA INC = 1198
CISCO SYSTEMS INC = 893
MOTOROLA INC = 849
Total H-1B and L-1 visas reported = 9814
Percentage of "Top 20" Total = 20.38%

Source: GRASSLEY, DURBIN RELEASE NEW INFORMATION ON L VISAS

Data: http://grassley.senate.gov/public/releases/2007/062620072.pdf

More on labor shortage propaganda myth

From transcript:

BILL TUCKER, CNN CORRESPONDENT (voice-over):
There is no shortage of students studying for careers in Math and Science. There is a shortage of jobs. That's the simply bottom line finding of a new study from the Urban Institute. The study shows that between 1985 and 2000 435,000 U.S. citizens and permanent residents a year graduated with Bachelors, Masters, and Doctoral degrees in Science and Engineering. That's three times the number of jobs in Science and Engineering added per year, 150,000 during that time.

In dialog with Lou Dobbs:

TUCKER: Now Lou, that's the Urban Institute, the Alfred P. Sloan (ph) Foundation, Duke, Harvard, the RAND Corporation. Studies done independently of each other, different researches, different funding, all reaching the same basic conclusion that there is no worker shortage. Lou, the problem is not a lack of workers. The problem these studies all conclude is a lack of companies hiring them. And as we've reported many, many times on this program those companies either off-shore the work or as you mentioned at the top, demand more H-1B visas and then pay those workers less -- Lou.

end transcript:

The Urban Institute employment/educational study uses 1985-2000 data, an aggregate of domestic Engineering degrees from the ASEE, shows similar results for 2000-2006. <Posted Here>

While researching another project, I revisited some data posted by Senator Grassley, concerning the top 20 corporate users of the H-1B and L-1 guestworker visas. The document provided to Senator Grassley was sorted by total H-1B visas, I decided to combine the 2006 H-1B and L-1 visa usage for 2006 and sort by corporate headquarters. The Grassley publication can be found here: http://grassley.senate.gov/public/releases/2007/062620072.pdf

Click image to enlarge:

Of the 48,159 H-1B and L-1 visas used by the top 20 (H-1B) corporate employers, 28,974 went to corporations based in India. Providing the lionshare of highly skilled guestworker visas to offshoring specialists is counter-productive to the long-term prospects of keeping innovation and high-tech employment in the USA.

NASSCOM, the premier trade body and voice of the software and services industry in India, publicly states:

Elaborating on the report, Mr. S. Ramadorai, CEO, TCS and Chairman, NASSCOM said, "Today [2005] the Indian IT and BPO industry is estimated to be USD 22 billion. The industry is in a strong position to leverage the global software opportunity and establish India as the premier IT destination in the world. Extensive innovation by various industry stakeholders could accelerate the growth in export revenues and increase India’s share in the global market substantially in the near future. In order to achieve this, we will require breakthrough collaboration by industry players, central and state governments and NASSCOM."

Said Noshir Kaka, Partner, McKinsey & Company, "Our research suggests that the total addressable market for global offshoring is approximately $300 billion, of which $110 billion will be offshored by 2010. India has the potential to capture more than 50 per cent of this opportunity and generate export revenues of approximately $60 billion by growing at 25 per cent year-on-year till 2010. Inherent advantages like abundant talent supply, strong cost- and-leadership oriented companies, regulatory support, scaleable high-quality infrastructure, and a growing domestic market have been instrumental in driving the growth of this sector." http://www.nasscom.in/Nasscom/templates/NormalPage.aspx?id=2599

In 2005, the Indian IT offshoring industry had already claimed $22 billion of its goal of $110 billion. "Central government" and "regulatory" support have given India the inside track on H-1b, L-1 and Employment based visas. According to my estimates, non-citizen computer-related workers in 2005 held 52.4% of employment, depriving American wage-earners $82.3 billion in domestic salaries. I contend that guestworkers visas are almost 4 times more harmful to American IT wage-earners than offshoring. <Computer-related employment estimate>

In light of the new Engineering studies, CompeteAmerica and the American Immigration Lawyers Association must be working hard, formatting the next pro-guestwoker slogan. After all, an estimate of initial employment H-1B attorney fees is somewhere between $212,000,000.00 and $330,000,000.00 annually. <posted Here>

A current pro-guestworker slogan, is that foreign graduates of American colleges cannot obtain employment based green-cards due to the backlog. But in fact, dual-intent provisions of the H-1B and L-1 visas have created the backlog for those studying in the U.S. and wishing to immigrate here.

The Institute of International Education (IIE) reports the following new admissions to the U.S. educational system for the 2006-2007 school year. <Source>

Undergraduate = 63,749
Postgraduate = 72,726
Other = 20,703

Total = 157,178

There is no guarantee that these student will graduate, nor that all students are interested in immigrating to the U.S. Additionally, the IIE reports that there were 83,160 enrolled in Community College Associate's Institutions. <Associate Degree link>

<INTERNATIONAL STUDENTS BY FIELD OF STUDY, 2005/06 & 2006/07>

Preliminary numbers from travel.state.gov show that there are adequate employment options and citizenship programs to facilitate foreign students.

Of 121,200 EB-1st, EB-2nd and EB-3rd preference visas available, only about 13,600 were issued at Foreign Service Ports. My assumption is that the majority of these employment based visas are now issued to those already in the country on other visas.

Employment based visas 2006:
2006 EB First Preference = 37,504
2006 EB Second Preference = 22,430
2006 EB Third Preference = 58,357

Further examination of the "travel" publications reveal some interesting numbers about the impact of "highly skilled" H-1B and L-1 guestworkers.

For 2006:
L-1 = 72,613 --- Spouse/Children L-2 = 61,984
H-1B = 135,421 --- Spouses/children (H-4) of all H visas = 74,326

Total H visas = 372,254 (all H visas i.e. nurses, AG workers, guestworkers & highly skilled)

Unlike, H-4 spouses and children visas L-2 spouses and children can obtain U.S. work authorization.

The L-2 spouse can engage in employment, with an ‘employment authorized’ endorsement or appropriate work permit. http://travel.state.gov/visa/temp/types/types_1271.html

The holder of an H-4 visa may not work on a derivative visa. If he/she is seeking employment, the appropriate work visa will be required. http://japan.usembassy.gov/e/visa/tvisa-niv-h.html

http://travel.state.gov/pdf/FY06AnnualReportTableII.pdf
http://travel.state.gov/pdf/FY06AnnualReportTableV-Part2.pdf
Table of Contents: http://travel.state.gov/visa/frvi/statistics/statistics_3163.html

Classes of Nonimmigrants Issued Visashttp://travel.state.gov/pdf/FY06AnnualReportTableXVIA.pdf

Offshoring - Guestworking and the U.S. Dollar

Fear of offshoring has fueled the highly-skilled guest-worker movement in the USA. My estimate of computer-related occupations, suggests that in 2005, 52.4% of the U.S. jobs in computer-related occupations, were held by non-citizens.

There is now a 1 in 2 chance, that any computer-related job sent offshore, will be the job of a non-citizen. Furthermore, the declining U.S. Dollar is causing the offshore and guest-worker threat to be diminished. The purchasing-power of U.S. Dollar based corporations has been impaired.

Protectionist policies, like buying up all of the available foreign talent (starving the competition) and benching domestic talent is going to become very expensive, considering the crude oil based, 50-cent dollar.

USD Crude Oil, Annual Peak (nominal)
Crude oil 2001 = $23.00
Crude oil 2007 = $58.05 (partial year)
(Crude oil 10/26/2007 = $91.31)

U.S. Dollar Exchange rate:
(01/02/2001) $1.00 USD = 1.058075 EURO
(10/31/2007) $1.00 USD = 0.691273 EURO

Shifting gears, the cost of offshore labor has become more expensive. The Chinese Yuan is pegged, relative to the USD, so I'll use the Euro as the control.

(Assumes Chinese and Indian offshore workers have NOT received any salary-raises)

1/2/2001 to 10/30/2007
Change Indian Rupee to USD 18.80%
Change Indian Rupee to EURO -22.16%
USD to Rupee (as compared to Euro) -40.96%

Change Chinese Yuan to USD 2.12%
Change Chinese Yuan to EURO -33.08%
USD to Yuan (as compared to Euro) -35.21%

Placing yourself in the shoes of the guest-worker, who is expected to send Rupees or Yuan home to your family, in which currency would you prefer to be paid? The USD or the Euro?

Even without a salary increase, an offshore worker in India is now almost 41% more expensive than in 2001, a Chinese offshore worker is over 35% more expensive to U.S. Dollar based corporations.

DATA:

(1/2/2001)
1 Indian Rupee = U.S. $0.0214181
1 Indian Rupee = E.U. $0.0226621

1 Chinese Yuan = U.S. $0.1208141
1 Chinese Yuan = E.U. $0.127831

10/30/2007
1 Indian Rupee = U.S. $0.025444
1 Indian Rupee = E.U. $0.0176401

1 Chinese Yuan = U.S. $0.1233811
1 Chinese Yuan = E.U. $0.085539

http://www.exchangerate.com/past_rates_entry.html