A question for the next U.S. President
By Vasyl Soloshchuk
The opinions expressed in this article are the author’s own and do not reflect the view of SmallBizDaily or GrowBiz Media.
As the presidential elections in the USA come closer, debates on hot topics are igniting. For the U.S.— a nation of immigrants — immigration issues are always prominent. Nowadays, the H-1B visa, which is for highly skilled and talented foreigners, is the most controversial. Being a CEO of an IT company, I look at the problem from the viewpoint of my own domain. Software development companies often relocate IT specialists to the U.S., but why? Is it a way to get cheaper workers? Is there a shortage of highly skilled professionals in the U.S.? Does an H-1B developer work better than an offshore developer-outsourcer does? Does the H-1B visa really help the US economy or, on the contrary, does it impede it?
I want to look at this visa in detail, and present my own opinion on the matter. What are the pluses and minuses of the H-1B visa for America and the rest of the world? Should America get rid of this visa, toughen up its requirements, leave it without changes, or, conversely, simplify the procedure and increase the number of visas granted? What is the stance of the candidates running for president?
Actions and Proclamations
With respect to the presidential elections, I’ve conducted some research into the main candidates in terms of their declared intentions and real attitudes.
In terms of immigration reform, Donald Trump advocates raising the minimum wage paid to H-1B workers to force companies to give these coveted entry-level jobs to the existing domestic pool of unemployed native and immigrant workers in the U.S., instead of flying in cheaper workers from overseas.
Trump says: “The H-1B program is neither high-skilled nor immigration: these are temporary foreign workers, imported from abroad, for the explicit purpose of substituting for American workers at lower pay. I remain totally committed to eliminating rampant, widespread H-1B abuse and ending outrageous practices … I will end forever the use of the H-1B as a cheap labor program, and institute an absolute requirement to hire American workers first for every visa and immigration program. No exceptions.”
At the same time, Business Insider writes that, according to U.S. Department of Labor data, Trump owns companies that have sought to import at least 1,100 foreign workers on temporary visas since 2000.
Hillary Clinton prefers not to talk about H-1B visas. In 2003, she aligned herself with the Indian giant Tata Consultancy Services. According to the Tata deal, opportunities for training, recruitment and job creation in Buffalo should have appeared; instead, Tata became the leader of companies obtaining H-1B visas: in 2012–2015 Tata had certified 45,800 H1B workers for jobs in the IT sector such as computer programmer, web developer, computer system engineer, etc.
In 2007, Clinton said: “I also want to reaffirm my commitment to the H-1B visa program and to increase the current cap. Foreign skilled workers contribute greatly to our U.S. technological development.” Today, however, there’s no mention of the problem in Clinton’s immigration reform manifesto.
So, what is the issue with this visa? Why is it so controversial? Let’s take a detailed look at its history and at the present situation.
Expectations vs. Realities
Created in 1990, the H-1B visa was intended to overcome shortages of highly educated and specialized foreign workers, especially scientists and engineers. The maximum annual cap was set at 65,000 visas. Later, this was increased twice: to 115,000 for 1999–2000 and to 195,000 for 2001–2003. In 2004, the H-1B cap was reverted to 65,000 visas and 20,000 were added for applicants with U.S. postgraduate degrees (source RedBus2us.com).
The goal was to help the economy expand and, ultimately, create more jobs for Americans. A U.S. employer, who could not otherwise obtain the necessary business skills and abilities from the US workforce, could thereby employ foreign specialists. The law established protection for both the U.S. workforce and H-1B workers; according to H1B Visa Support, the employer cannot displace the employed U.S. worker within 90 days before or after applying an H-1B for a worker, and should have taken good faith steps to recruit U.S. workers for the job for which the alien worker would be sought. In addition, according to the Department of Labor, the employer must attest that the wage paid to the H-1B worker will be at least equal to the actual wage paid to other workers with similar experience and qualifications for the job in question, or the prevailing wage for the occupation — whichever is greater.
By law, H-1B workers must be paid at least $60,000 per year. According to The New York Times, H-1B workers at outsourcing companies often receive wages at or slightly above $60,000, which is below what skilled American technology professionals tend to earn. At the same time, more experienced and qualified developers can be hired offshore for the same wages.
Thus, such companies are able to offer products and services at lower costs. However, hiring IT specialists abroad without relocation will allow companies to offer software products and services of higher quality for even lower prices. I will discuss the advantages of outsourcing software development further below. For now, here are some additional facts I’ve learned from my research.
According to The New York Times, a small number of giant global outsourcing companies flood the system with H-1B applications each year. Once the combined 85,000 cap has been reached, the applications are put into a computerized lottery, so that their fate is completely out of the applicants’ hands. However, having submitted thousands of applications, the giant outsourcing companies significantly increase their chances of success and therefore squeeze out small companies. In 2014, the top 20 top outsourcing companies received about 40% of the available H-1B visas, while 10,000 companies applied.
Let’s have a look at H-1B workers: who they are, what their skills are, and how useful they can be for the U.S. economy. The New York Times writes about cases when the H-1B visa is used to replace American workers with younger technicians, mainly from India, who have limited skills, do not speak English fluently, and have to be instructed in the basics of the work.
The H-1B workers’ families are also permitted to live in the U.S. on H4 visas during the term of the H-1B visa. However, spouses and children (under the age of 21) of H-1B holders cannot work unless they obtain their own work visa. This means that besides a lower-paid worker, the US receives several unemployed people.
Being the CEO of a company that provides IT services to companies in the U.S., I can’t understand why many IT companies prefer H-1B workers to outsourcing developers offshore. I see the following pros and cons of each approach:
|H-1B worker||Offshore worker|
|+ The H-1B worker is in the local office and can be easily controlled and managed.||− The offshore worker cannot be controlled if processes in the company-outsourcer are not transparent and the management is not established.|
|+ The H-1B worker is in the company’s local timezone.||− Timezones differ between the customer and the offshore worker.|
|− The H-1B application cannot be submitted until the next April 1st; in May it becomes known whether the candidate’s visa has been granted; the worker can’t start working until after October 1st.||+ The offshore worker starts working according to the contract terms.|
|− Each H-1B application costs up to $4,000. In addition, the employer/employee must meet relocation expenses.||+ The company pays according to the contract. No additional expenses are incurred.|
|− The H-1B worker requires a work space and equipment.||+ The work space and equipment are the responsibility of the company-outsourcer.|
|− Wages are higher comparing to an outsourced worker with the same skills and experience.||+ For the same wage, a more experienced and qualified worker can be hired offshore.|
|− If the H-1B worker is denied a Green Card when the H-1B visa expires, the worker has to leave the USA and the company then loses this expertise.||+ Outsourcers are interested in long-term contracts. Thus, by working with the same outsourcer for years, expertise is gained by core developers and team leaders, who can ramp-up new team members if required.|
|− If the H-1B worker shows unsatisfactory performance or any other reason to get fired, the employer is required to foot the bill for the worker’s transportation back to his/her home country.||+ If the offshore worker shows unsatisfactory performance, the customer informs the company-outsourcer that they require another worker and incurs no additional costs.|
|− If the company undergoes restructuring or downsizing and the H-1B worker has to be laid off, the employer must continue to compensate the worker on a level that is equivalent that of a US worker.||+ If the customer company undergoes restructuring or downsizing, the company-outsourcer should be informed that the workers are going to be laid off and no compensation is required (assuming such compensation is not stipulated in the contract).|
Concerning hiring and firing an H-1B worker, I would like to focus on time and cost issues. Hiring the worker is a rather protracted process: companies may not submit their H-1B application earlier than April 1st and the worker, if granted the visa, may not start working before October 1st. In software development, such a time delay is often unacceptable. If the H-1B employee did not work for the employer before receiving the visa, he/she may appear to be not good enough. In this case, the employer may fire the H-1B worker under the following terms: the employer must pay the employee’s return transportation to his/her home country and pay the employee’s wages until U.S. Citizenship and Immigration Services revokes the H-1B petition. This is a rather costly procedure.
On the contrary, relationships with outsourcers can be built much more easily. At INSART, we have established the following procedure when working with our customers:
We offer the customer a list of candidates for the job, from which the most fitting one or several can be hired. When we sign the contract, all terms are agreed, including the date on which the developer(s) will start working on the project. Because interviewing doesn’t always show the candidate’s real qualifications, we provide opportunities to replace developers if necessary.
Our developers have B1/B2 Business/Tourist visa which is valid for up to 10 years and allows them to provide consultation services, participate in short-term training, develop business relationships, visit U.S. factories and offices, etc.
When starting a new project, the core developers visit the customer’s office for one or several months to establish communications, obtain information on the project, and coordinate activities. Upon return, they share all information gained with the team.
If the project development requires, one or several developers may go to the customer for some time, up to 6 months.
If a developer shows poor performance, the customer may express a desire to replace this developer with more appropriate one. A new list of developers is then offered, and the customer incurs no additional expenses.
If a developer leaves our company, the team leader and core developers retain the expertise gained on the project. They may then teach and ramp-up a new developer. The expertise is not lost.
There are, of course, many situations in which a foreign professional cannot work abroad and relocation is required. With regard to IT specialists, these may be mega-qualified team leaders or engineers. However, 85% of software developers can work offshore.
It’s all on Americans
As far as I can see, the current situation with the H-1B visa is not sufficient. It doesn’t really help the country, but undermines its economy in terms of suppressing American employment and wages and receiving services and software products that are of lower quality. While thousands of foreigners receive H-1B visas every year to work in the fields of Science, Technology, Engineering and Math (STEM), 74% of American STEM college graduates are not employed in STEM occupations.
The system should be changed, that seems obvious. But how? That is a question for American citizens, the future president, and lobbyists. However, rash decisions shouldn’t be made about the future of the visa. All the pros and cons of every change should be weighed up.
If there’s really a shortage of technical specialists in the USA, education reform should be provided first — but that’s outside the scope of our current discussion. The American economy is becoming increasingly globally connected. Outsourcing jobs not only gives American companies access to talent pools around the world, but also allows them to combine local and global expertise, technical and interpersonal skills. The first steps expected from U.S. politicians should be to invite only top-level professionals whose work really cannot be conducted offshore.
I’m sure that a solution can be found that would satisfy all sides: American workers and American employers, as well as workers and employers from all over the world.