(BN) Immigration Reform Splits Tech Industry Afflicted by Outsou rcing
2013-04-29 04:00:15.0 GMT
By David J. Lynch
April 29 (Bloomberg) -- As both worker and boss, Neeraj Gupta has
profited from the H-1B U.S. immigration program.
The visa, intended for skilled workers, allowed him to stay in the U.S.
after earning a master’s degree in electrical engineering from the
University of Alabama in 1991. Later, the H-1B provided a steady supply of
foreign-born employees for a technology-services company where he worked as
an executive.
Today, Gupta is an outspoken critic of the program that helped start
his career and that technology moguls, including Microsoft Corp.’s Bill
Gates and Facebook Inc.’s Mark Zuckerberg, want Congress to expand.
“Somewhere along the way, the program’s been hijacked,”says Gupta,
45, chief executive officer of Systems in Motion, a closely held company
based in Newark, California.
As lawmakers consider the first major overhaul of U.S. immigration law
since 1986, the high-technology industry is divided over the H-1B program.
While both industry leaders and startups seek the world’s most innovative
thinkers, outsourcing firms, hired by corporate clients to help cut costs,
got more than half the 85,000 visas available last year.
Gupta, a native of India who’s now a U.S. citizen, says the H-1B is
leading to “economic abuse.” Outsourcing companies -- such as Cognizant
Technology Solutions Corp. and Infosys Ltd. -- use the program to import
thousands of lower-paid information- technology workers instead of employing
Americans, even as the program fails to meet the talent demand at firms
such as Google Inc. and Facebook, he says.
His company -- using American workers based in Ann Arbor, Michigan --
competes against the outsourcing companies.
Surging Demand
The demand for the visas was underscored this month, when companies
exceeded the annual H-1B cap within five days of the start of the annual
application process, meaning a government lottery will be held later this
year to determine visa winners.
The outsourcing companies’ dominance of the H-1B visa pool is “
creating a big squeeze,” says Luis Arbulu, managing director of Hattery, a
San Francisco-based venture capital and product-development firm. “It’s
putting pressure on everyone, from the Googles and Intels of the world to
startups.”
The inflow of H-1Bs -- more than enough workers each year to staff a
new Apple or Google -- also is hurting American workers, some studies show.
Skilled immigrants using H-1Bs and other visas take one-third to one-half of
new IT jobs each year, and their presence is keeping inflation-adjusted
industry wages at late-1990s levels, according to a study by the labor union
- funded Economic Policy Institute in Washington.
Raising Cap
Congress created the H-1B program in 1990 to help U.S. companies fill
job vacancies with skilled foreign workers. Proposed legislation drafted by
a bipartisan group of eight senators would raise the annual visa cap to 135,
000 and allow for further expansion to 180,000 depending upon economic
conditions.
The draft bill also aims to discourage companies from outsourcing
computer jobs via the H-1B route by barring the program’s heaviest users
from obtaining additional visas and raising fees for “H-1B-dependent”
employers. And it would require companies to advertise the jobs first before
hiring foreign workers.
“More home-grown American talent is something we all should applaud,”
Senator Richard Durbin of Illinois said at a Judiciary Committee hearing on
April 22.
Two Populations
From its inception, the H-1B program has included two different
populations: global all-stars who command salaries well in excess of $100,
000 to develop products, and journeymen engineers working for outsourcing
firms that take over computer operations for clients, including JPMorgan
Chase & Co., Citigroup Inc. and Commerzbank AG.
“We’re very, very different companies,” says Damien Patton, chief
executive of social media startup Banjo, which employs several H-1B holders.
“We’re your innovators. They’re your -- I don’t know -- your labor
pools.”
Cognizant, of Teaneck, New Jersey, the largest single user of H-1B
visas in fiscal 2012, says its use of employees based in both the U.S. and
India allows its more than 820 clients to benefit from “intellectual
arbitrage” -- the ability to tap technology specialists in both countries.
The company’s share price has doubled over the past five years while the
Standard & Poor’s 500 Stock Index has risen less than 14%.
More H-1Bs are needed because the tech industry can’t find enough top
American computer experts, industry executives say. The jobless rate in
March for workers in computer and mathematical occupations was 3.5%,
according to the Bureau of Labor Statistics, compared with the national
figure of 7.6%.
10,000 Openings
Four companies -- International Business Machines Corp., Intel Corp.,
Microsoft and Oracle Corp. -- have 10,000 U.S. job openings, according to
the Silicon Valley Leadership Group, an industry lobby.
Potential workers with the best credentials enjoy a seller’s market.
On the Palo Alto campus of Stanford University, recruiters line up outside
the Gates Computer Science Building -- named for Microsoft co-founder Bill
Gates -- to hand out pamphlets advertising job openings.
“I got one,” said Mehran Sahami, an associate professor of computer
science. “I said, ‘I already have a job!’ But, our students come out with
multiple job offers.”
H-1Bs provide significant numbers of skilled workers for some of the
country’s top technology firms. About 5% of Intel’s 53,000 U.S. employees
hold such visas, according to Peter Muller, government-relations director
for the computer chip maker. “We depend on it,” he said in a phone
interview.
Constant Search
Skilled workers from overseas can be especially critical for startups,
which have less of a margin for error in filling out their small staffs.
At Banjo, Patton employs 16 corporate recruiters and a team of
immigration attorneys in a constant search for employees. The company, which
makes a location-based social media application, competes with Google,
Netflix Inc. and PayPal Inc. for talent and often can’t find American
workers with the skills it needs.
Banjo requires computer specialists conversant in state-of- the-art
programming languages. Many American workers have outdated skills or are
older and thus unlikely to adapt to the demands of a startup, he says.
“We won’t hire someone who’s marginal,” Patton says. “We don’t
hire 6s or 7s. We hire 9s and 10s.”
About one-quarter of the 20-month old startup’s 25-person staff holds
an H-1B visa.
Dying Languages
Hattery’s Arbulu, 39, a veteran of six years at Google, says he can’t
use middle-aged computer scientists who cut their teeth on dead or dying
programming languages such as Cobol or Fortran.
“Now, it’s Python, HTML 5, Ruby-on-Rails,” he says, referring to
three cutting-edge programming tools. “They didn’t exist 10 years ago.”
The startups’ argument is echoed by a 2012 Microsoft strategy paper
that identifies “the best and the brightest innovators in the world” as
the intended recipients of the additional H-1B visas.
Yet Microsoft and other major companies only get a minority of the
annual H-1B allotment. The biggest users of the program are tech-outsourcing
companies, such as Cognizant, Tata Consultancy Services and Infosys.
Cognizant has streamlined IT operations for six of the top 10 U.S.
banks, including JPMorgan, which named the company one of its top suppliers
for 2005. Four of the 10 largest European Union institutions also rely on
Cognizant.
Indian Nationals
“The vast majority” of the business and technology relying on visas
and work permits, the company said in its 2012 10-K filing.
Alan Alper, a Cognizant spokesman, declined to answer questions about H
-1Bs beyond a prepared statement saying the proposed legislation would “do
more harm than good to our economic recovery, global competitiveness and
customer service.”
Spokesmen for Tata and Infosys weren’t immediately available for
comment.
Critics of the H-1B program, such as Ron Hira, a professor at the
Rochester Institute of Technology in New York, say those companies
capitalize on immigration-law loopholes to undercut American workers.
They do so by employing computer specialists from India who earn 15%to
20%less than comparable U.S. workers, according to Norman Matloff, a
computer science professor at the University of California, Davis. A 2011
Government Accountability Office report found that 54%of H-1Bs went to
workers who were paid “entry-level wages.”
Wage Pressure
For American workers, the availability of foreign labor puts pressure
on wages and working conditions.
Lee Cook, 58, of Durham, North Carolina, has felt the effects firsthand
. Since taking early retirement from IBM in 2009, Cook has worked on
contract jobs performing IT assignments for employers such as Bank of
America Corp. and the U.S.
Department of Homeland Security.
The availability of H-1B visa holders allows employers to offer less
and demand more, he says. If Cook balks at relocating or working without
benefits, foreign competitors will be happy to accept.
“They’ll be in the North Pole on Monday if there’s a job,” Cook
says.
Almost four years ago, Gupta opted to put his knowledge of outsourcing
to work building a business model based on domestic labor. Instead of using
foreign workers, he hires a mix of new college graduates and laid-off
automotive engineers to handle IT projects.
The Systems in Motion website advertised 25 separate job openings one
day this month, including positions for entry-level and senior quality-
assurance positions. Many of the openings shared a single admonishment: “We
do not sponsor H-1B visas.”
--Editors: Mark McQuillan, Robin Meszoly
To contact the reporter on this story:
David J. Lynch in Washington at +1-202-624-1844 or [email protected]
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To contact the editor responsible for this story:
Jeanne Cummings at +1-202-654-7390 or
[email protected]
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