Enlarging–and Enriching–the U.S. Labor Pool

Depending on who you ask, H-1B visas are either a critical tool that the United States technology community must fully exploit or they’re a cheesy way for big companies to hire help at below-market rates.

The number of H-1B visas issued each year is currently restricted. But with both houses of Congress having recently passed a bill that, if signed by the president, will increase the number of skilled workers allowed into the United States, H-1Bs demand to be examined anew.

A temporary-professional or H-1B visa allows qualified foreign candidates to obtain temporary employment in the United States within their chosen field. These candidates often are educated in the U.S. and have completed professional training here. Petitions for H1-B visas must be sponsored by a U.S. company seeking employees for “specialty occupations” and filed with the Immigration and Naturalization Service (INS) in Washington, D.C.

Interviews with IT managers, industry analysts, and partisans from both sides of the quota increase issue yield passionate arguments all around. And while education, training, and better use of U.S.-born workers are the long-term keys to solving the IT personnel shortage, it seems inevitable that the nation will jack up the visa cap once again to fill the jobs that fuel the economy.

Case in point: Brent Ozar, a Web developer at Telman Decision Information, has a problem that would appear to be a perfect fit for an H-1B worker. Houston-based Telman Software Inc., which makes back-office systems for hotels, “uses an obscure database platform called Clarion, and it’s bigger in Europe than it is here,” says Ozar. “As a result, we have a qualified need for people from Europe.” Because of the current cap in H1-B visas, “We can’t get them,” he says.

Status Report

Many people forget that the H-1B program has existed for almost 50 years and that the number of visas granted was uncapped until the Immigration Reform Act of 1990. The act, supported by organized labor, limited the number of temporary workers allowed into the United States to 60,000, but nearly tripled permanent employment-based immigration. Labor’s rationale was that the increase in permanent immigration would lessen the need for temporary workers.

In 1998, the H-1B cap was raised to 115,000, primarily to address the lack of qualified IT workers, but the continuing shortages in IT appear to have rendered that number inadequate. According to the INS, in 2000, it took only until March to hit that quota. As a result, no other temporary workers will be allowed to enter the U.S. for the remainder of this year.

To face this continuing challenge, Congress this month passed a bill–The American Competitiveness in the Twenty-First Century Act–that would once again increase the cap to 195,000 skilled workers in 2000 and in each of the next two years. According to the bill now before President Clinton, workers at higher-education and research organizations would not fall under the cap. And H-1B employees who change employers would be allowed to start working as soon as they filed new petitions.

This elimination of red tape would make a big difference to employers and workers alike. Presently, IT workers often sit idle in the United States for several months while waiting for their transfer petitions to be approved.

The Gap

So is there an IT worker shortage? Of course there is. You can point to the Information Technology Association of America (ITAA) in Arlington, Va., which in a recent report said that in 2000, more than 800,000 IT jobs–that’s 1 out of every 12–will go unfilled. Some opponents have questioned the accuracy of the ITAA’s numbers, but there are plenty more reports echoing the those stats.

In a June 1999 report, the U.S. Department of Commerce’s Office of Technology Policy (OTP) in Washington, D.C., said the country needs almost 150,000 new technology workers a year until 2006 in order to meet anticipated demand. Universities and other programs are not even close to producing that many skilled workers, according to the report, because students aren’t choosing IT-related careers.

A recent study from the Washington, D.C.-based Department of Labor said that in the decade between 1998 and 2008, the five fastest-growing occupations would all be computer related. Programmers are among these jobs.

But let’s face it, people can make statistics walk, talk, jump, and cluck like a chicken. In the case of the IT worker shortage, anecdotal evidence may be the most powerful persuader of all. What do IT managers universally acclaim as their number-one problem? What topic comes up first at industry confabs and conventions? What is seen by venture capitalists and entrepreneurs as a serious limit on the growth of startups? What problem do you face every morning when you set out to assign bodies to various projects?

Nevertheless, there are those who say the IT worker shortage, while not exactly fabricated, is exaggerated and exacerbated by industry mouthpieces who are unwilling to put needed resources into more creative training and hiring, notably, the hiring of older IT workers.

“What we see is a major pickiness by high-tech employers,” says Jack Martin, special projects director at the Federation for American Immigration Reform (FAIR), a Washington, D.C.-based nonprofit organization that seeks to tighten immigration laws and policies. “At the same time, there are significant indications that significant numbers of older high-tech workers are not being hired.”

FAIR believes corporations avoid hiring older U.S. citizens because they tend to demand higher pay. The organization advocates ending this practice to address the IT worker shortage.

Help Wanted

Fair or not, one thing’s for sure: IT managers are clamoring for help. Telman’s Ozar says his company “has found people over there [in England] who’d love to be over here,” but has twice been stymied when the year’s H-1B quota–which is filled on a first-come, first-served basis–was reached while the company was negotiating the bureaucratic maze. As a result, the company currently doesn’t have any H-1B employees on staff.

With few other options, the result for Ozar has been a project manager’s nightmare. “We’ve started using telecommuting contractors from other states,” he says. “They have full-time jobs but are willing to pick up a few hours at night and on weekends.” Ozar would not comment on the cost of this solution.

Offshore outsourcing is the practice of hiring companies outside the United States to do IT work such as code writing. Because of its relatively small size (the IT department is staffed by 15 full-time people) and because much of its development work revolves around business rules (the quantities corporations plug into their programs that vary greatly from company to company) Telman has ruled out offshore outsourcing. But many businesses do respond to the lack of qualified U.S. workers by sending development work overseas. In this scenario, U.S. firms usually contract with companies in countries such as India. This solution is stressed by those seeking an increase in the H-1B cap. Susan Williams Defife, CEO of McLean, VA-based Web site womenCONNECT.com, recently testified before the U.S. Senate that if the H-1B cap is not raised, moving operations offshore will be one of her company’s few options.

It’s a vital point, advocates say, because one of H-1B critics’ major arguments is that the visas supply jobs for foreign nationals at the expense of U.S. citizens. Proponents of a higher cap counter with two points. First, they ask, which is preferable: using foreign nationals with visas to contribute to the U.S. economy on these shores or sending high-tech work overseas? Second, they argue that H-1B workers create satellite jobs. T. J. Rodgers, CEO of San Jose, CA-based Cypress Semiconductor Corp., in 1998 told Congress that for every H-1B employee, Cypress hires five U.S. workers in such areas as marketing, documentation, and sales.

A March 2000 report called “The H-1B Straitjacket” from the libertarian-leaning Cato Institute, headquartered in Washington, D.C., calls H-1B workers “an important source of flexibility in the labor market.” The report says U.S. employers need the agility afforded by H-1B workers; this flexibility allows businesses to respond quickly to market demands.

Is It Cheaper?

Some say H-1B visas are used to hire cheap help, end running the expense of retraining experienced programmers. This experience tends to come with age, which means their salary and benefits plans are relatively steep for employers. Kazim Isfahani, a senior industry analyst at the Boston-based Giga Information Group, says the H-1B program “has become a way to keep costs down.”

While foreigners hired under the program are supposed to be paid market rates, regulations allow for 5% worth of wiggle room. If, for example, the market rate is determined to be $60,000 a year for a given job, you can pay an H-1B worker $57,000. Companies do take advantage of this option. More important, critics charge that H-1B workers, who are desperate to stay in the United States and eager to apply for permanent-immigration status once their six-year H-1B status expires, may be cowed into settling for rock-bottom wages and substandard living conditions. More than half of the temporary workers in the United States seek permanent immigration status.

Code-jockey sweatshops? Indentured servants? Really? Isfahani says, “It’s not rampant, but it does happen.” He says this abuse is possible because visa holders from some nations, such as Pakistan, perhaps, or some Southeast Asian countries, are accustomed to such a low living standard that to them, an overcrowded apartment and long hours in the U.S. may seem like a pretty good deal.

Not so fast, counters Ted Ruthizer, coauthor with Suzette Brooks Masters, of the Cato Institute paper. Ruthizer is a partner and head of the Immigration Law Group at Robinson Silverman Pearce Aronsohn & Berman LLP, a New York law firm. He and Brooks Masters write that “reports of systematic underpayment and fraud in the program are false.”

As evidence, they lay out statistics from the U.S. Department of Labor’s Wage and Hour Division showing that from 1991 (the first year H-1B caps were in place) through late 1999, the Labor Department granted almost 525,000 H-1B visas and received only 448 complaints of underpayment and other abuses. The department chose to investigate 304 of those complaints. At the time Ruthizer and Brooks Master wrote the Cato report, violations were found in 134 of the 159 completed investigations.

While that guilty percentage is high–so far, 84% of the investigations are yielding violations–even if all 304 complaints caught employers red-handed it would mean 99.99943% of the 525,000 H-1B visas were squeaky clean. Not bad.

H-1Bs in the Real World

Asked if his organization uses H-1B visas to hire cheap help, John Oster just laughs. Oster is vice president of development at payroll giant ADP Inc.’s Rockville, Md.-based dealer services unit, which caters to auto dealerships. “We’ve got full-time legal counsel working on this,” he says, of his firm’s efforts to get H-1B workers into the United States. “Does that sound cheap? This is very much commercial-rate work, driven by recruiting needs. It’s not cheap at all.”

In Oster’s group of about 20 developers, who work primarily in Oracle, C and C++, about half are H-1B employees from Russia, Ghana, India, and China. He knows the system and says, “It’s been frustrating, having the politics of the government work against you.” Oster has experienced the same problem a number of times.

Moreover, he says the visas’ “effect on [foreign-born] associates is pretty damning. These folks spend a lot of time tracking [their visa status] because it’s their lives. That hurts a cohesive organization.” It’s hard to keep a team focused when half its members are worried about getting booted out of the country. “I’d like to see the process much more predictable,” Oster adds.

Asked if his U.S.-born developers see the visa holders as depriving natives of jobs, Oster says, “No, there’s no resentment at all.” In fact, he’s observed that a “mixed” group complements each other’s programming approach: “U.S. [engineers] are quick on their feet but less rigorous; the foreigners tend to be more rigorous.”

The Outlook

Experts expect Clinton to sign the bill, which spent months hung up in a congressional game of pat-a-cake, as various politicians attached unrelated and semirelated measures such as illegal-immigrant forgiveness measures.

For the first time, Washington, D.C.-based special-interest behemoth American Federation of Labor (AFL) has agreed that the numbers need to rise. The AFL is the most powerful organized labor group in the country, and one of its top goals has always been to keep as many jobs as possible in the hands of U.S. citizens. Its acquiescence on this measure is a sign that the momentum is strong. This leads even FAIR’s Martin to concede that “Nobody [powerful] on either side is expressing real reservations. The opposition is all coming from grass-roots organizations.”

In the end, the most powerful argument in favor of a higher H-1B cap may revolve around philosophy rather than hard numbers. With its roots in academia, the technology world wants to be a pure meritocracy. Your nationality, your gender, and the thickness of your dissertation don’t count for much: Ideas rule. Can an arbitrary number dreamed up by a Washington pencil-pusher stand up against such a powerful ideal? //

Steve Ulfelder, a freelance writer, lives in Southboro, Mass. His Internet address is sulfelder@charter.net.