Boosting U.S. IT Skills Or Replacing U.S. Workers? H-1B Visas In The Crosshairs

Mafhuz Ahmed graduated from George Mason University in 1992 with an engineering and computer science degree but few job options in his home country of Bangladesh.

So Ahmed took advantage of the then-new H-1B skilled worker visa program to work in the quality assurance group of Mobil for $38,000 a year.

"I was very eager to prove myself and work very hard because I was given this opportunity," Ahmed told CRN.

Ahmed quickly caught Mobil's eye by automating a lot of its manual testing work, prompting the oil giant to sponsor Ahmed for permanent U.S. residence on a green card.

Two decades later, Ahmed is the CEO of Digital Intelligence Systems, a $350 million solution provider based in McLean, Va., with roughly 4,000 employees and 23 offices worldwide. And as Ahmed's company has grown, coming in at No. 61 on the 2015 CRN Solution Provider 500 list, the H-1B visa program has grown as well.

CRN looked at the H-1B visa usage for every member of the CRN 2015 Solution Provider 500 list, other major IT outsourcing firms and all North American distributors, gathering data on each company about the number of H-1B applications over the year, application certification rate, median salary offered to H-1B applicants, most popular occupation and most popular location.

Some 233,000 H-1B visa applications were received for the 2016 federal fiscal year, which begins Oct. 1, up from 172,000 last year and 124,000 two years ago, according to the U.S. Office of Foreign Labor Certification (OFLC). Moreover, 65 of the 113 solution providers and distributors examined by CRN filed at least one H-1B visa application in 2014, with 40 filing at least five and 17 filing at least 100 applications.

Since only 85,000 H-1B visas are granted each year -- 20,000 of which are reserved for master's degree holders -- the U.S. Citizenship and Immigration Services (USCIS) has resorted to a lottery process every year since 2013 to select the winning applications, according to the USCIS. The lottery wasn't used during the recession due to lower demand.

But as application figures have surged, the H-1B visa program has increasingly become embroiled in controversy.

BOTH SIDES OF AN ISSUE

Proponents of H-1B visas argue that the program fulfills the intent of the 1990 Immigration Act by addressing shortages of U.S. citizens and residents in specialized technical fields, while others counter that H-1B visas are primarily used to save big corporations money by replacing in-house American IT staff with foreign workers at third-party firms.

"If it is utilized in the correct manner, H-1B visas can be a great value," said Ahmed, whose company applied for 34 H-1B visas in 2014 and offered a median salary of $97,000, according to the OFLC. "But there's always an individual in some place who's willing to work for a dollar lower," he said.

Ahmed knows from first-hand experience that it's easy to exploit H-1B workers since they're trying to prove themselves and often have few opportunities back home. To protect both H-1B visa holders and American IT workers, Ahmed would support more robust regulation of the H-1B program.

Jeff Davis is a backer of the H-1B program. He's the CEO of St. Louis-based Perficient, No. 56 on the 2015 CRN Solution Provider 500, and relies on skilled workers on temporary visas to fill knowledge gaps around IBM's business process management tools and integration technology.

"There are not enough people with the skills we need, so we rely on H-1B to supplement those skills," said Davis, whose company applied for 252 H-1B visas in 2014 and offered a median salary of $93,200, according to the OFLC.

Davis credited the H-1B program for helping to drive economic growth, arguing that the temporary workers not only consume goods, but also pay taxes on wages that sometimes reach into the six figures. He attributes most of the recent controversy to fear-mongering from people running for elected office. H-1B visa holders are considered nonresident aliens and therefore have to pay taxes on their U.S. source income.

"There are no unemployed, skilled IT workers in this country," Davis said. "The only people I've heard talking about that are politicians. And that's because they don't have any idea what they're talking about."

Compete America -- a coalition of corporations, trade associations, research institutions and universities backing more access to foreign-born workers -- agreed with Davis, pointing to a 2013 study by Change the Equation, a nonpartisan education advocacy organization, that found the U.S. economy generates 122,000 new job openings for computer-related occupations each year but is only graduating 51,000 students each year with bachelor's degrees in computer science.

"There simply aren't enough qualified American STEM [science, technology, engineering, mathematics] workers to fill all the open STEM jobs," Scott Corley, Compete America's executive director, wrote in an email to CRN. "High-skilled immigrants are job-creators, not job-takers."

Corley also argued that the H-1B visa program has not depressed wages, pointing to a Brookings Institution study that he said found that wage growth in H-1B occupation is actually stronger than the national average. Brookings Institution is a public policy think tank based in Washington, D.C.

Ron Hira, a professor of public policy at the Rochester Institute of Technology, disputes that claim, arguing that lax rules and enforcement allow IT service providers to bring in foreign workers at far below American market wages for staff augmentation and fixed client contracts.

By relying on H-1B workers rather than solely U.S. citizens and residents, Hira said outsourcing and consulting companies lower labor costs and significantly boost their margins.

"These are extremely profitable business models, and the H-1B and similar programs are at the heart of these models," Hira said.

Although some businesses actually need IT talent from abroad, Daniel Costa, director of immigration law and policy research at the Economic Policy Institute, said the visas are too often employed as part of a strategy to lower labor costs.

"The H-1B visa can be a good thing if it's used the right way," said Costa. "But it shouldn't be used as a corporate subsidy to push down wages."

OUTSOURCING GIANTS

A CRN analysis found that the application process is dominated by a handful of outsourcing giants with foreign ties, with just two India-based firms – Infosys and Tata Consultancy Services, No. 4 on the 2015 CRN Solution Provider 500 – submitting 55 percent of all H-1B applications from channel-focused firms in 2014.

Both Infosys and Tata are currently being investigated by the U.S. Department of Labor for allegedly violating labor rules by replacing workers at utility company Southern California Edison with H-1B workers. The companies told CRN in June that they are fully compliant with U.S. immigration laws and are cooperating with the government's request for information.

"TCS maintains rigorous internal controls to ensure it is fully compliant with all regulatory requirements related to U.S. immigration laws, including those related to the H-1B visa," Tata spokesman Ben Trounson said in an email to CRN.

Similarly, Infosys said it is committed to complying with U.S. immigration laws.

"The U.S. Department of Labor regularly selects a percentage of visa and labor condition applications for extra scrutiny in this industry, and we work closely with the DOL to assist them in this activity in the ordinary course of our business," the company said in an email to CRN.

Infosys paid the U.S. government $34 million in October 2013 to settle allegations that the company was having employees with B-1 visas perform actual labor. B-1 visa holders are only allowed to visit the U.S., participate in meetings and negotiate contracts.

Moreover, Infosys, Tata and six other solution providers – India-based Wipro; Deloitte, which has 56 percent of its workforce outside the Americas, according to the company; Ireland-based Accenture; Cognizant, which has two-thirds of its workforce in India; France-based Capgemini; and Syntel, which has three-quarters of its workforce in India -- accounted for more than 95 percent of all H-1B applications coming from the channel.

Only Deloitte offers an H-1B median salary above the solution provider average of $88,500, while all but Deloitte and Capgemini pay their H-1B workers average wages that are below $72,500.

Conversely, solution providers offering the most generous H-1B median salaries tend to use the program more selectively – 11 of the 13 channel firms averaging more than $97,000 in H-1B wages filed fewer than 100 H-1B applications in 2014.

HOW SOLUTION PROVIDERS USE THE PROGRAM

The high-profile investigations and lawsuits around major H-1B players has made solution providers reluctant to publicly discuss how they use the skilled worker visa program. Accenture; Avanade; Capgemini; CGI; Ciber; Cognizant; CompuCom; CSC; Deloitte; Dimension Data; SS&C Technologies; Tyler Technologies; Unisys; Virtusa; Wipro; and WWT all declined or were unavailable to comment for this story.

Nicole Joraanstad of OneNeck IT solutions was willing to speak on-the-record, though, and said the Scottsdale, Ariz.-based company primarily uses the H-1B program to fill shortages in high-level positions around its vendor relationships with Oracle and Baan Corp.

OneNeck, No. 81 on the 2015 CRN Solution Provider 500, typically looks to make its H-1B visa holders a permanent part of the workforce by sponsoring them for a green card once their visa is set to expire, according to Joraanstad, the company's manager of talent acquisition. H-1B visas are valid for three years and can be extended to a maximum of six years.

The application process for green cards is much more stringent, Joraanstad said, and entails proving that there are no U.S. citizens available to fill the vacant role. Since OneNeck only wants to bring in H-1B candidates that could be successful in the green card process, Joraanstad said the company stays away from using H-1B visa holders for entry-level technical jobs such as Windows Level 1.

Arrow Electronics, for its part, tends to use H-1B visa holders for short-term projects or to fill gaps in emerging technical areas such as security and software-defined data centers or networking, according to Sean Kerins, president of Arrow's Enterprise Computing Solutions business.

The Centennial, Colo.-based distributor views H-1B visa holders as a variable cost rather than a permanent one, Kerins said, and therefore likes to bring them in when unique programming or technical skills are needed for a particular project but not indefinitely. Arrow applied for 58 H-1B visas in 2014, and offered a median salary of $113,000, according to the OFLC.

Digital Intelligence Systems tends to use its H-1B visa holders in one of three areas, Ahmed said: ERP support around its Oracle and SAP relationships; application support for Java and .Net developers; and experienced project management supervisors.

"To do that kind of work, we need experienced people who can come in," Ahmed said. "The U.S. universities aren't producing as many people."

Ahmed expects the company's use of the H-1B program to increase going forward since many of the company’s clients are moving development work back to the states from offshore. Like Arrow, Digital Intelligence Systems usually brings H-1B visa holders on board to work on a specific project, meaning these individuals don't typically stay with the company for more than two years.

Meanwhile, Troy, Mich.-based Syntel, No. 36 on the 2015 CRN SP 500, uses the H-1B visa program to access better talent pools and provide its India-based staff with short-term experience interacting directly with the solution provider's U.S. customers, CEO Nitin Rakesh told CRN. Syntel applied for 511 H-1B visas in 2014, offering a median salary of $59,900, according to the OFLC.

No more than 5 percent of Digital Intelligence Systems’ U.S. workforce is comprised of H-1B visa holders, Ahmed said, with the remaining 95 percent made up of American citizens or residents. Similarly, Perficient’s Davis said that Perficient caps its usage of H-1B visas at 15 percent the size of its overall U.S. workforce, or roughly 300 people at any given time.

Companies with more than 15 percent of their American workforce on visas are considered to be "H-1B dependent" and are required to demonstrate a good faith effort to recruit a U.S. citizen or resident before being allowed to apply for a H-1B visa, said Costa of the Economic Policy Institute.

Perficient opened a recruiting and offshore development center in Chennai, India, five or six years ago to, in part, reach out into the local market and help attract prospective H-1B candidates, Davis said. The solution provider frequently seeks people working in Indian technology centers for Accenture, Infosys or Cognizant who have developed expertise around a particular emerging technology.

The company has enjoyed success recruiting against these outsourcing and consulting giants by emphasizing the hands-on mentorship and field experience that a smaller firm such as Perficient can provide.

"You're kind of a cog in the machine for bigger firms," Davis said.

Unlike Perficient, OneNeck almost never brings H-1B workers to America from overseas, Joraanstad said. Instead, the solution provider focuses almost exclusively on transferring H-1B visa holders from another employer or recruiting foreign students who have finishing their schooling in the U.S.

Similarly, most of Digital Intelligence Systems' H-1B workers were actually brought to America by a different company, and the solution provider leverages its 130 U.S. recruiters to actively work job boards, technology forums and discussion groups and play up the client technologies its employees have access to.

Recruiters tend to emphasize the name of the company's Fortune 500 clients – such as Pfizer or Exxon Mobil – since these brand names provide more pull than the Digital Intelligence Systems identifier, Ahmed said.

The Increasingly long odds of having new H-1B applicants selected through the lottery has prompted Digital Intelligence Systems and OneNeck to attract these visa holders through other means.

"[Otherwise], you're putting your eggs into the basket, and hoping your egg gets pulled," Joraanstad said.

PROPOSALS TO CHANGE THE PROGRAM

Proposals to alter the H-1B program go down two very different paths.

Sens. Orrin Hatch (R-Utah) and Amy Klobuchar (D-Minn.) have sponsored the I-Squared Act in the last several sessions on Congress, which would eliminate the H-1B application backlog and reduce reliance on the lottery process by raising the H-1B visa cap from its current 85,000 to between 115,000 and 195,000 depending upon market conditions and existing demand.

Perficient has recently found that only half of its applications are selected in the lottery, and Davis would like to see the I-Squared Act passed so that more skilled workers can come over. Similarly, Corley of Compete America praised the I-Squared Act for expanding company's ability to bring over highly skilled talent, predicting that the nation's economy and workforce would benefit from such legislation.

The I-Squared Act, though, does not place any new rules or restrictions on how the H-1B visas can be used, which Davis considers a major plus.

"It's a great program," Davis said. "I hope the government doesn't restrict the program any more than it already has."

But that could happen if Sens. Dick Durbin (D-Ill.) and Chuck Grassley (R-Iowa) have their way. The pair has introduced legislation every congressional cycle since 2006 that would tighten up eligibility for H-1B visas by increasing wage floors, boosting enforcement and requiring companies to search for U.S. workers before submitting an H-1B application.

The H-1B program has operated since 1998 on a four-tier wage structure, with Level 1 jobs considered entry-level and allowed to pay salaries at the 17th percentile of the IT salary bell curve, according to Hira and Costa.

Level 2 jobs are for folks with a little more seasoning and must pay salaries at the 33rd percentile of the bell curve, Level 3 jobs are considered average and need to pay salaries on the middle of the bell curve, while Level 4 jobs are classified as experienced and are required to pay above-average IT salaries.

The issue to Costa, though, is that companies can classify the positions based on the perceived level of difficulty rather than the actual experience of the worker selected, meaning that, for instance, someone with 10 years of IT experience in India could be brought over on a Level 1 classification (and at Level 1 wages).

A report by the Government Accountability Office found that 54 percent of H-1B positions posted are classified at Level 1, according to Hira and Costa, while just 17 percent are classified at Levels 3 or 4. The Durbin-Grassley bill would get rid of Levels 1 and 2 in the H-1B wage structure, meaning that all H-1B visa holders would need to earn at least the median IT salary.

Hira and Costa both support this provision, saying it would reduce the incentive for companies to use H-1B visas as a cost-saving measure. CEO Ahmed wouldn't have a problem with this provision either.

"A company like [Digital Intelligence Systems] who uses H-1B visas according to the spirit of the law would actually benefit from this," Ahmed said. "We want our people to be more robust."

The compliance process for H-1B visas is completely whistleblower-driven, Hira said, meaning the federal government can only initiative an investigation if an employee complains. Durbin-Grassley would make it so that authorities can randomly audit a company's H-1B program, which Hira believes would substantially address the abuses he's seen since employees often fear retaliation if they complain.

The Durbin-Grassley bill would require companies to first search for U.S. workers before turning to the H-1B program, akin to the mandate in the green card program. An easy way to do this, Costa said, would be to create a national database where employers must post a job opening for 30 days before being allowed to file an H-1B application.

The H-1B is the only guest worker program with no requirement to first search for U.S. workers – both the H-2A unskilled agricultural visa and the H-2B unskilled non-agricultural visa require this, Costa said, with a job registry database in place for the H-2B program.

Compete America strenuously opposes this measure, with Corley saying that the additional documentation requirements and longer hiring cycle would strain employer resources and leave them susceptible to additional legal challenges. He also argued that the provision would unfairly punish many companies for the sins of a few.

"If the same dozen firms are subject to the same complaints for over a decade," Corley asked, "then how does it make sense to create a convoluted bureaucratic nightmare for all 27,000 H-1B employers?"

This article originally appeared as an exclusive on the CRN Tech News App for iOS and Windows 8.