Hiring and the H-1B Visa

U.S. employers, including domestic divisions of India-based outsourcers, are curtailing their use of the controversial H-1B visa, which allows organizations to bring highly skilled foreigners into the United States to work. Simultaneously, other businesses are bulking up overseas offices or sending employees who are foreign nationals to work out of offices in their home countries.

Employers that have used the visas have been scrambling to revise policies ever since President Donald Trump’s victory in the 2016 presidential election when the controversial program was targeted for overhaul. Whatever workplace policies are being implemented, a sharp dip in 2018 fiscal year applications for H-1B visas makes it clear that employers aren’t waiting on legislation or federal edicts from new officials before they take action.

Applications filed by the April deadline declined for the first time since 2013, to 199,000 from 236,000 for fiscal year 2017. The 16 percent decrease is a sharp reversal from the previous five years, during which time applications for the visa rose a cumulative 90 percent.

U.S. Citizenship and Immigration Services, the Homeland Security department that administers H-1Bs, grants 65,000 of the temporary work visas annually to foreign workers with specialized skills, plus another 20,000 to foreigners with advanced degrees. The visas are good for three years and can be extended for another three.

In mid-July, the USCIS said it had returned all applications not selected in the annual April lottery the agency holds to award the visas. The USCIS has not released names of employers whose applications were accepted or signaled when that data would be made public.

To bypass potential H-1B problems, U.S. companies are increasing hiring in their overseas offices. Nicole Sahin runs a PEO, or professional employer organization, that helps major U.S. companies and fast-growth startups hire salespeople in 150 countries. Since late 2016, Sahin has seen a 30 percent jump in clients sending foreign nationals back to their home countries or hiring locally, all direct responses to coming changes to the H-1B.

“There’s a lot of fear around it,” said Sahin, co-founder and chief executive at Globalization Partners in Boston. “Some employees want to leave the U.S. because they don’t feel like they’d have the security they had under the previous administration.”

Outsourcers Respond by Increasing American Workforce

Indian outsourcers, which accounted for 69 percent of all H-1B workers as of 2015, the latest available data, are taking some of the most drastic measures to deal with changing policies. After the Justice Department and USCIS announced stepped-up H-1B audits earlier this year, a handful of Indian outsourcers said they wouldn’t use the visas to bring as many workers into the country.

Infosys Ltd., which has received thousands of H-1Bs over the years, plans to hire 10,000 U.S. workers in the next two years and open four technology centers here. In June, Infosys paid $1 million to settle a lawsuit brought by the state of New York that claimed the outsourcer routinely abused the H-1B visa program, and in doing so, failed to compensate workers fairly or pay required taxes.

In late June, Wipro Ltd., another India-based outsourcer, said it had hired more than 1,600 U.S. employees over the previous six months, and that U.S. citizens represent more than half of its workforce here. That’s a substantial change from recent years, when the company was among the top five H-1B visa users in order to staff its U.S. offices with Indian workers.

Indian outsourcers’ new labor model will no doubt be welcomed by H-1B critics, who claim the foreign companies haven’t adhered to requirements of the visa program to attempt to fill jobs with Americans before handing them to immigrants. Critics also fault the program for allowing H-1B employers to pay local prevailing wages that generally are less than what most U.S. workers with similar jobs earn.

The same critics maintain loopholes and lax oversight have allowed companies such as The Walt Disney Corp. and Southern California Edison to lay off highly paid U.S. employees and replace them with lower-paid foreign workers, many of whom are outsourcer employees. In several highly publicized cases, the laid-off workers were required to train their replacements. Such practices have led to a number of lawsuits, including one filed by a group of former Disney World IT employees who maintain they were discriminated against for being American.

Big Boosts for Gig Economy, STEM Workers?

Uncertainty about the visa program could push employers to embrace the gig economy and hire independent contractors, said Yvette Cameron, senior vice president for strategy and corporate development for SAP SuccessFactors. If employers were using H-1Bs to lower costs, using gig workers who aren’t eligible for benefits or pensions is another way to keep labor costs low, said Cameron, whose job puts her in touch with thousands of SAP SuccessFactors customers.

Historically, U.S. companies relied on H-1B visas to hire foreign graduate students with science, technology, engineering and math degrees from American universities. However, H-1B reform and Trump administration immigrant policies have already put a damper on applications to U.S. colleges and universities from India, China and the Middle East. As a result, total applications from foreign students dropped 38 percent for fall 2017, according to the American Association of Collegiate Registrars and Admissions Officers.

Stepping up domestic STEM studies could help fill the gap left by fewer foreign grad student coming here. Companies have gotten accustomed to hiring employees who can hit the ground running, said Ron Hira, an H-1B expert and political science professor at Howard University in  Washington, D.C. Having government agencies subsidize on-the-job training “might be a way to fill genuine gaps,” Hira said.

Employees also need to step up their training, said Katherine Jones, a partner and director of talent research at consultancy Mercer. Starting STEM education in elementary or high school could help, Jones said, as could projects such as the charter public high school Oracle is paying for that opens this fall on its Redwood City, California, campus in the heart of Silicon Valley. Coding schools and other types of short-term bootcamps that teach STEM skills are other options, Jones said.

Reforms Pending in Congress, White House

Ultimate responsibility for rewriting immigration laws lies with Congress. Since the start of the current session, supporters and opponents of the current H-1B system have introduced bills that would expand or curtail it respectively. A bill re-introduced by Rep. Darrell Issa, R-California, in January would raise minimum salaries for H-1B visa worker to $100,000. A competing bill sponsored by Sens. Chuck Grassley, R-Iowa, and Dick Durbin, D-Illinois, would kill the H-1B lottery and award the visas first to holders of advanced degrees from U.S. universities, then to high-salary workers, then to people with valuable skills. The H-1B and L-1 Visa Reform Act, also introduced in January, would bar companies from having more than half their employees on H-1B or L-1 visas, and prohibit companies from replacing U.S. workers with visa holders, among other things. Both bills have been referred to committee but no other action has been taken.

Other recent attempts to pass H-1B reform laws have gone nowhere, and it’s a toss-up whether a Congress that’s been preoccupied with repealing and replacing the Affordable Care Act and other issues will get to it this term, said Leon Rodriguez, who ran the USCIS under the Obama administration from 2014 until Trump took office.

“There are those who think the number should stay where it is or go backward, along with tighter restrictions,” said Rodriguez, who now practices immigration and health care law at Seyfarth Shaw LLP, in Washington, D.C. “Then there’s the school of thought that says let’s expand the numbers but also put in more safeguards protecting U.S. workers and design the system in a way that favors getting the highest levels of talent we can.”

In a June appearance before a congressional committee, Labor Secretary Alexander Acosta said the administration supports increasing the current $60,000 minimum salary for H-1B workers — which hasn’t changed since 1998 — to at least $80,000 as a way to stop the flow of cheap labor into the country.

Opponents to the administration’s H-1B clampdown say the policy shift is ill-conceived and ultimately could do the country more harm than good, particularly for a U.S. tech sector that’s seriously understaffed. In an address earlier this year, Eric Schmidt, executive chairman at Google parent company Alphabet called it “the stupidest policy in the entire American political system,” according to Fortune.com.

But Trump fans and critics of the program in its current form laud the president’s moves to protect U.S. jobs for U.S. workers. The present H-1B program undercuts American jobs by allowing companies to shift positions to outsourcers who pay substantially less or send the work overseas, argues Sara Blackwell, a Sarasota, Florida, lawyer who’s represented laid-off workers in H-1B lawsuits.

“We have executives who are outsourcing for cheap foreign labor,” Blackwell said.

Michelle V. Rafter is a contributing editor in Portland, Oregon. Comment below or email editors@workforce.com.