H-1B Visa Cap Met

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On August 12, 2005, the U.S. Citizenship and Immigration Service (USCIS) announced that it had already reached its cap of H-1B visa applications (65,000) for fiscal year 2006, which began August 1, 2005. This is, once again, the earliest recorded period that the limit has been reached, and it immediately prompted the IT Association of America (ITAA) to call for raising the cap.

H-1B visas may sound like old news to many of our readers because we've been covering the issue since 1996. The legislation controlling these and L-1 visas has had a very interesting history, and many believe that the momentum for offshore outsourcing and the devastation of the IT employment market have their genesis in the H-1B debate.

Yet during the 2004 election cycle, Congress was loath to increase the H-1B cap because the issue of offshoring IT jobs had become a political hot potato.

Lobbying Pressure to Increase Misinformation

Now that the elections are over, we can expect the return of high-pressure IT industry lobbying to raise the immigration cap. During this period of lobbying, we anticipate that a lot of misinformation about the need of the H-1B and L-1 visas will be circulated. With this in mind, we believe everyone in IT should have a clear understanding of how the legislation came into being and how to differentiate the claims of IT worker shortages from the claims of IT immigration visa shortages that high-tech will bemoan.

History of H-1B

The H-1B program is a temporary worker visa category created by the 1990 Immigration Act as a response to claims of an impending shortage of skilled labor. It allows U.S. employers to recruit skilled workers from abroad for professional "specialty occupations."

H-1B eligibility requires at least a bachelor's degree or the equivalent. The visa holder can remain in the United States for up to six years and then can petition for renewal of eligibility.

Originally, Congress set the cap at 65,000 H-1Bs per year, but by 1997, a growing demand for H-1B workers created a visa shortage. Congress then passed the American Competitiveness and Workforce Improvement Act (ACWIA), which reset the annual quota at 115,000 for 1999 through 2000 and 107,500 for 2001 before returning to 65,000 for fiscal year 2002.

After intense lobbying by IT firms in 2002, Congress voted to increase the number of H-1B visas to 195,000. This was known as the American Competitiveness Act in the 21st Century (AC21). The H-1B cap returned to its original level of 65,000 in October 1, 2003.

Reforms and Restrictions

H-1B legislation in the ACWIA included some reforms and protections directed at the largest employers of H-1B visas. These are employers with a workforce consisting of 15% H-1B employees. These reforms require the following:

  • Employers must attest that no U.S. workers are laid off for the three months before and the three months after hiring an H-1B employee.
  • Employers must prove that they have made a significant effort to recruit U.S. workers.
  • H-1B workers must receive the same fringe benefits as U.S. workers.
  • Employers are required to pay a $500 fee to file a Labor Condition Application (LCA) and are at risk of paying penalties for any violations.
  • Employers must pay the prevailing wage to H-1B workers.

Unfortunately, the enforcement of these reforms has been spotty. Numerous studies have indicated that the use of the H-1B visa mechanism has created an underclass of employees who--because of their concerns over their visa status--have become essentially indentured servants to their employers.

Meanwhile, trafficking in H-1B visa applications has become an industry in its own right. Web sites such as VisaPro drum up a brisk business by providing legal services to would-be applicants from developing countries.

Shortage of Workers or Visas Holders?

A lot of energy and resources have been exerted to determine if, in fact, there is a shortage of high-tech workers, as the ITAA insists. A 1998 UC Berkley study focusing on wage growth in the sector was one such study. According to the study's hypothesis, if there were a labor shortage, one would expect to see earnings of high-tech workers increase more rapidly than earnings of other workers in other sectors. However, instead, the study found that high-tech engineers and managers have actually experienced lower wage growth than their counterparts in other sectors.

The study reported that throughout the entire U.S. economy, professionals in other industry sectors with 20 years of experience in 1985 earned 48% more than a professional with no experience. By 1995, this difference had increased to 73% more. However, in the high-tech industries, an engineer or professional with 20 years of experience earned 55% more than a new-hire in 1985 but only 59% more in 1995. The study concluded that the influx of immigrant labor in the high-tech sector was actually depressing wages and that in fact this was strong evidence against the existence of a labor shortage.

Meanwhile, the National Research Council (NRC) was investigating the impact of H-1Bs on the IT workforce to determine if it was creating age discrimination in the IT industry. Like the UCB study, the NRC committee also did not find the shortage of high-tech workers that the industry had claimed in their congressional lobbying efforts.

What most studies, including a Government Accounting Office (GAO) study, indicate is not a shortage of IT workers but a shortage of the lower-paid, highly trained H-1B visa holders that industry execs want in order to minimize costs.

The L-1 Visa Holder

One other interesting technique that the multinational IT industries are using to obtain their workers from overseas--without the strictures of the H-1B visa caps--has been the use of the L-1 visa. L-1 visas are transfer visas that allow multinational corporations to transfer employees into the country. There are no restrictions on the length of time that the worker can stay, and there are fewer restrictions on how the company treats the employee. Large organizations like IBM and Microsoft are now using L-1 visas in preference to H-1B visas to lower the cost of employing highly trained individuals in the United States. Department of State statistics show that the use of L-1 visas has increased substantially since fiscal year 1998. The number of L-1 visas issued in fiscal year 1998 was 38,307 and rose to 41,739 in fiscal year 1999. It peaked in fiscal year 2001 at 59,384 and decreased only slightly in fiscal year 2002 to 57,721.

IT Industry Tactics Still Unclear

According to a Computer World report, IT industry groups are already starting the process of lobbying in an effort to remove all caps and impediments to H-1B visas. "It's becoming increasingly difficult for the best talent in the world to come to the U.S.," said John Palafoutas, vice president of the tech industry lobby AeA in Washington. Palafoutas said it's possible that a "market-based" solution could be crafted that would include automatic triggers to increase the cap if there is a strong demand for H-1B visas.

The industry groups won't say how much of an increase in the visa limit they want this year, but Robert Cohen, spokesman for the ITAA, told Computer World, "It should be significant." Cohen said, "I think it's a real problem, and the longer we put off addressing it, the less competitive we will be."

Immigration Versus Exploitation

On the surface, the opponents of the H-1B and L-1 visa programs might be viewed as xenophobic complainers. However, the issue is much more complex.

The real concern of most labor groups studying the issue of H-1B visas is not the influx of foreign workers, but the exploitation of the individuals by multinational IT corporations with the complicity of the U.S. government. Instead of focusing the resources of the country to train new IT workers--or retrain aging IT workers with years of experience--the industry has learned that it can pressure Congress to use immigration as a cost-savings wedge on labor expense. Meanwhile, Congress sees that it can spend less money supporting higher education and retraining by merely allowing the importation of non-citizen workers who make few political demands.

One result, according to this view, has been the decrease in the number of U.S. students enrolling into IT programs. Why? Because students see the writing on the wall: IT in America provides limited opportunities with lower pay and increased competition from outside labor forces.

The ultimate fear is that the U.S. will end up with of two classes of IT workers: Older, under-employed U.S. citizens who must compete against younger, low-paid IT visa holders who are indentured to the employers that sponsor them in this country.

But then, perhaps that's exactly what we have in IT today.

(For more information about the issue of H-1B visas, see the North American Alliance for Fair Employment report "The US H1-B Visa Program" by Reem Assil.)

Thomas M. Stockwell is Editor in Chief of MC Press Online, LP.