Outsourcing by the thousands

The outsourcing companies involved in the Southern California Edison (SCE) scandal I wrote about last week—where U.S. workers were replaced with H-1B guestworkers—are Infosys and Tata Consultancy Services. These two India-based IT firms specialize in outsourcing and offshoring, are major publicly traded companies with a combined market value of about $115 billion, and are the top two H-1B employers in the United States. In Fiscal Year (FY) 2013, Infosys ranked first with 6,269 H-1B petitions approved by the government, and Tata ranked second with 6,193. As with the SCE scandal, these leading offshore outsourcing firms use the H-1B program to replace American workers and to facilitate the offshoring of American jobs. Because of this, it’s likely that Americans lost more than 12,000 jobs to H-1B workers in just one year. FY13 H-1B data I’ve analyzed, acquired through a Freedom of Information Act request, reveals new details about how firms like Infosys and Tata are using the H-1B nonimmigrant visa program. Spoiler alert: they don’t use the H-1B visa as a way to alleviate a shortage of STEM-educated U.S. workers; they use it primarily to cut labor costs. But the other main arguments proffered to support an expansion of the H-1B program are easily debunked with even a cursory look at the H-1B data.

Lower wages

The principal reason that firms use H-1Bs to replace American workers is because H-1B nonimmigrant workers are much cheaper than locally recruited and hired U.S. workers. As Table 1 shows, Infosys and Tata pay very low wages to their H-1B workers. The average wage for an H-1B employee at Infosys in FY13 was $70,882 and for Tata it was $65,565. Compare this to the average wage of a Computer Systems Analyst in Rosemead, CA (where SCE is located), which is $91,990 (according to the U.S. Department of Labor). That means Infosys and Tata save well over $20,000 per worker per year, by hiring an H-1B instead of a local U.S. worker earning the average wage. But at SCE specifically, the wage savings are much greater. SCE recently commissioned a consulting firm, Aon-Hewitt, to conduct a compensation study, which showed that SCE’s IT specialists were earning an average annual base pay of $110,446. That means Tata and Infosys are getting a 36 to 41 percent savings on labor costs—or saving about $40,000 to $45,000 per worker per year.

Adding insult to injury, Infosys and Tata have a history of getting in trouble for paying even lower wages than they are already legally allowed to pay. In 2013 Tata paid $30 million to settle a wage theft dispute involving 13,000 foreign workers, and Infosys paid a record $34 million to settle a visa fraud case after it committed “systemic visa fraud and abuse of immigration processes.” As a general principle, companies that behave like this should not be allowed to benefit from the U.S. temporary foreign worker programs, much less be the top two beneficiaries of them.

H-1B is not a bridge to permanent immigration

The proponents for H-1B expansion claim that the H-1B program is a stepping-stone to permanent immigration. But the vast majority of H-1B workers at Infosys and Tata never get on path to legal permanent residence (often referred to as getting a “green card”) and citizenship: In FY13, Infosys only sponsored seven H-1B workers for permanent residence, and Tata sponsored ZERO H-1B workers, while the U.S. government approved 12,432 H-1B visa petitions for these two companies alone. (See Table 2) In other words, the H-1B workers Infosys and Tata hire are being used as temporary, cheaper, disposable labor, not as a way to permanently introduce talent and innovation into the American labor market.

H-1B is not about skills or skills gap

Proponents of the H-1B repeatedly argue that the program injects much needed skills into the labor market, which are presently lacking in the U.S. workforce. They claim the H-1B is used: 1) to recruit and hire the “best and brightest” workers from around the world; 2) to fill skills gaps in the U.S. workforce; and 3) as a way to retain talented foreign students with advanced degrees who received their education and training in the United States. H-1B data and the SCE case show that none of these arguments are even remotely true.

If American workers are training their foreign replacements before they get laid off, then it is quite obvious that it’s the American trainers—not the H-1B trainees—who have the superior skills. Are H-1B workers being brought in because they have extensive formal training, like an advanced degree? The answer to that is a definitive no. The vast majority of Infosys and Tata’s imported H-1B workers hold no more than a Bachelor’s degree. During the FY10-12 period, 78 percent of Tata’s and 85 percent of Infosys’s H-1B employees held only a Bachelor’s degree or less. Finally, there’s also no evidence that Tata and Infosys are using the H-1B to retain foreign students who studied and earned an advanced degree in the United States: Only 1-in-206 of Infosys’ H-1B workers held an advanced degree from a U.S. university, and even less of Tata’s H-1B workers did, just 1-in-222. (See Table 3)

All of the evidence makes it abundantly clear that the H-1B visa is being used to displace U.S. workers employed in decent-paying middle class STEM jobs. U.S. immigration laws are supposed to protect U.S. workers from being displaced, and they grant the Secretary of Labor ample authority to investigate egregious abuses of the H-1B program like the one at SCE, which is why EPI Vice President Ross Eisenbrey has called on Sec. Perez to investigate. Thanks to the reporting by Computerworld and the L.A. Times, there is now clear and credible evidence to justify the Secretary’s attention in this case. If the investigation finds willful violations of the H-1B program, Tata and Infosys should be debarred from using the program. Ultimately, a major substantive reform of the H-1B is required—but as the L.A. Times has editorialized in light of the SCE scandal—“Congress needs to fix it.”