Top 10 H-1B employers are all IT offshore outsourcing firms, costing U.S. workers tens of thousands of jobs
The top 10 H-1B employers all use the program to send American jobs offshore. All of the firms are leaders in using the offshore outsourcing business model to sell information technology (IT) Services. Contrary to what some have claimed, not all of the top H-1B offshore outsourcing companies are Indian companies or headquartered in India: Five of the firms have their headquarters in India, four are headquartered in the United States, and one is headquartered in Ireland. But all of the top 10 have a common business model with large workforces in India and other low-cost countries.
In 2014, the U.S. government granted these ten firms 25,227 new H-1B workers, nearly 30 percent of the 85,000 annual quota.
And 2014 was not an unusual year. Over the ten-year span from 2005-14 those offshoring firms brought in a staggering 170,535 new H-1B guestworkers (see Table 1). Virtually all of these jobs can, and should, be done by American workers or lawful permanent residents (i.e., permanent immigrants already living in the United States). In fact, in many cases American workers were already doing the job, and they are being directly replaced, often being forced to train their foreign guestworker replacements as a condition of severance agreements. As Craig Diangelo, an American worker who was forced to train his H-1B replacement put it, “The sad part is that my job is still there… It didn’t go away. I went away.”
Top 10 H-1B employers in 2014 and ten year H-1B totals
|All offshoring firms
|New H-1B workers 2014
|New H-1B workers 2005-2014
|Larsen & Toubro
Source: Author's analysis of USCIS I-129 microdata
The importance of the H-1B visa for IT offshore outsourcing firms
Most employers use the H-1B program sparingly, applying for just one visa per year. They target a particular worker for some reason such as a specialized skill. On the other hand, the top ten firms have made the H-1B program the chief way they fill U.S. jobs for key business segments. Top H-1B employer Tata Consultancy Services received 5,650 new H-1B workers in 2014 alone. That is more new workers in one year than many technology companies even employ. For example, at the end of 2015, social media giant Twitter employed just 3,898 workers worldwide.
In its Securities and Exchange Commission filings, U.S. based Cognizant Technology describes its human resources practices this way:
“The majority of our employees are located in India, and the vast majority of our technical professionals in the United States and Europe are Indian nationals who are able to work in the United States and Europe only because they hold current visas and work permits.”
Why do IT offshore outsourcing firms dominate the H-1B program? The answer is simple. It is extraordinarily profitable to replace, or substitute for, American workers with H-1B guestworkers. Thanks to the legal and regulatory framework of the H-1B visa, H-1B workers can legally paid much less than similarly situated Americans. In fact, sometimes H-1B workers are 40 percent cheaper than Americans, and as an additional bonus to employers, H-1B workers are unlikely to complain about substandard wages and working conditions since the work visa is controlled by the employer. That makes H-1B workers vulnerable—if they speak out they might be terminated—which means they’ll have to immediately depart from the United States or else become undocumented.
The offshore outsourcing business model emerged in the early 2000s, completely disrupting the IT services sector. And the exploitation of H-1B guestworker program is at the core of the model. More than thirteen years ago I presented a paper in Bangalore, India describing the offshore outsourcing model. It was obvious then that the H-1B was offshore outsourcing’s fuel source. As the business model has grown to take up a larger and larger share of the market, the firms’ appetite for H-1B guestworkers has only grown with it. As then Indian Commerce Minister Kamal Nath told the New York Times in 2007:
it [the H-1B] has become the outsourcing visa. … If at one point you had X amount of outsourcing and now you have a much higher quantum of outsourcing, you need that many more visas.
The goal of the firms is to ship as much of the IT work and tasks as possible to offshore workers in low-cost countries like India, and the H-1B program plays the critical role in the transfer and maintenance of those contracts.
How IT offshore outsourcing firms use the H-1B visa to ship jobs overseas
In practice the firms use H-1B workers in one or more of the following ways:
1. Employers hire H-1B workers and use them to directly replace American workers. In many cases the H-1B worker literally takes over the American’s work and sits at his desk. Employers prefer to hire H-1B workers because H-1B workers are much cheaper and compliant because of their visa status. I recently spoke to an H-1B worker at Tata Consultancy Services (the top H-1B employer) who described to me a never-ending workday. While he was paid for eight hours of work, he regularly put in twelve hour days and when he complained about the long hours, he was threatened with termination.
2. The H-1B worker acts as a liaison to the offshore team. Language and cultural commonalities help with the transfer of work to the offshore team, and the maintenance of that coordination.
3. The H-1B visa enables the foreign worker to come to the U.S. to learn the job. This is cheaper and easier than sending the U.S. worker to India to conduct the knowledge transfer.
4. Then the H-1B workers return to their country of origin, taking the knowledge and jobs and tasks with them.
The upshot is that the government substantially lowers the costs of offshoring through the H-1B program. In essence, the government is heavily subsidizing offshoring through its lax H-1B policies.
Top H-1B employers regularly use the program to replace, or substitute for, American workers. Newspapers have reported some of these cases. Below are just a few examples, but keep in mind that most of the cases go unreported because American workers have to sign gag orders when they’re replaced in order to receive their severance pay, and newspapers don’t want to report the same story over and over again:
- Tata Consultancy has been replacing American workers for many years. In 2003, Tata replaced American IT workers at Siemens, and more recently it replaced workers at Northeast Utilities and Southern California Edison.
- Cognizant replaced workers at Disney.
- Infosys replaced workers at Southern California Edison.
- Wipro replaced workers at Abbott Labs in Chicago.
- Accenture is being sued by a former L-1 worker who accuses the company of systematically paying its guestworkers less than American workers.
- IBM settled a U.S. Department of Justice claim that it discriminated against American workers, “when it placed online job postings for application and software developers that contained citizenship status preferences for F-1 and H-1B temporary visa holders.”
Exploitation of immigration loopholes by offshore outsourcing firms is an international phenomenon. iGate used guestworkers to replace Canadians at the Royal Bank of Canada.
It makes perfect sense that company executives would send jobs offshore, since it can increase their profits. But it makes no sense for the government to facilitate this offshoring. That’s precisely what the H-1B program, as currently constructed, does.
H-1B and the 2016 election
Outsourcing is a flashpoint of the current presidential campaign with both Sec. Hillary Clinton and Mr. Trump accusing the other of doing or promoting it.
In the past, and even this year, Mr. Trump has made use of H-1B guestworkers in several of his companies. But he has proposed to raise H-1B wages and institute a requirement that employers recruit Americans first before hiring an H-1B worker. These are both good ideas that would help.
In the past, Sec. Clinton supported increases in the H-1B program. In a recent interview, however, she expressed pity for the Disney workers who trained their foreign replacements, calling the stories of American workers training their H-1B replacements, “heartbreaking.” She has yet to propose any concrete fixes to the program.
The path forward on H-1B: congressional action
The link between H-1B abuse and offshoring has been well understood for more than a decade. Newspapers with editorial boards that span the ideological spectrum—the New York Times, Tampa Bay Times, Boston Herald, Buffalo News, New York Daily News, New Jersey Star Ledger, Los Angeles Times, and the Washington Times—have called for fixing the H-1B program. There is no good reason that the U.S. government—but especially Congress—can’t act to fix the program.
Shutting off the H-1B offshoring fire hose should be a no-brainer for everyone: President Obama, both presidential candidates, and all members of Congress. The purpose of the H-1B program has been completely subverted. The good news is that we know how to fix the H-1B visa, and there’s already a vehicle to do it. Senators Grassley and Durbin have introduced legislation in the Senate that would fix the program: S.2266, the H-1B and L-1 Visa Reform Act of 2015. And Representatives Pascrell and Rohrbacher have introduced companion legislation in the House: H.R.5657, the H-1B and L-1 Visa Reform Act of 2016.
Enjoyed this post?
Sign up for EPI's newsletter so you never miss our research and insights on ways to make the economy work better for everyone.