Senators Target Visa 'Loopholes'

With U.S. tech companies calling to raise the entry cap, Durbin and Grassley seek proof H-1B-type permits won't hurt Americans

Companies flooded the U.S. government with applications for more high skilled H-1B visas on Apr. 1, the first day of the annual application period. At the same time, U.S. tech companies are calling on Congress to raise the annual cap on visas issued (, 3/31/08). But two longstanding critics of the program are pushing in the other direction. On Apr. 1, Senators Dick Durbin (D-Ill.) and Chuck Grassley (R-Iowa) sent letters to 25 Indian outsourcing firms—which are responsible for 20,000 new H-1B visas in 2007, or about a third of the annual cap—asking them to explain how they use the H-1B visa program.

"We'll hear arguments all day as to why the cap on H-1B visas should be raised, but nobody should be fooled," said Grassley in a prepared statement. "There are highly skilled American workers being left behind, searching for jobs that are being filled by H-1B visa holders. It's time to close the loopholes and enact real reform."

With U.S. unemployment on the rise, scrutiny of visa worker programs is growing. Critics of H-1B say outsourcers such as Infosys Technologies (INFY) and Wipro (WIT) are abusing the program, replacing U.S. employees with cheaper foreign workers whom they ultimately cycle into new jobs in their home countries. They argue that the L-1 visa, allowing for intra-company transfers, is being similarly abused.

Outsourcers Deny Abuse

U.S. government data reveal that in the past several years, the list of top 10 companies receiving both H-1B and L-1 visas has been dominated not by U.S. tech firms such as Microsoft (MSFT) and Google (GOOG), but instead by Indian outsourcing firms. For the past two years Wipro and Infosys have been the top two recipients of the visas. Indian outsourcers accounted for nearly 80% of the visa petitions (, 3/6/08) approved last year for the top 10 recipients.

Offshore outsourcers deny they're abusing the program. They argue they are in fact helping U.S. companies in industries such as insurance and financial services stay competitive by reducing costs for work such as computer programming, and allowing them to focus on core competencies. "The Indian IT industry has helped improve the competitiveness of our customers in the U.S.," wrote Som Mittal, president of Nasscom, the trade group that represents the Indian companies, in an e-mail. He added that Nasscom's members are "strong upholders" of regulations in client countries.

The annual H-1B cap currently stands at 65,000, but the real number is much higher. An additional 20,000 visas are available each year for workers with higher degrees from U.S. universities, as are unlimited visas for exemptions such as employees of U.S. universities. Including renewals, 154,051 H-1Bs were issued by the State Dept. in 2007.

Bill Gates Defends the Program

Last May, Durbin and Grassley sent a preliminary list of questions to Indian outsourcers (, 5/13/07). The Apr. 1 letter represents an attempt to probe deeper. It digs into the implications of using H-1B as an outsourcing tool, asking how outsourcers may cause "secondary displacement" through their practices. It asks outsourcers to list the companies for whom they have provided contract workers on H-1B visas during the past five fiscal years. It then asks, "Have any employees of companies to whom you have contracted your H-1B or L-1 employees been displaced by these employees?"

Despite the controversy over outsourcers, U.S. tech companies continue to press Congress to raise the cap on H-1B visas. On Mar. 13, Microsoft chairman Bill Gates testified before Congress for the second consecutive year, urging the U.S. government to allow in more visa workers, which he said will help keep U.S. companies in the country. Senator Grassley responded with a letter to Bill Gates, asking him to explain how much a program used so extensively by Indian outsourcers can truly benefit U.S. tech companies, which are competing for the visas.

Calling for Tripling the Cap

A Microsoft spokeswoman said Gates will respond to Grassley in the coming weeks. A key question is whether firms like Microsoft will call for restrictions on outsourcers (, 5/25/07) to secure more visas for themselves. But for now, Microsoft and other tech companies are supporting bills to double and triple the H-1B cap, without limits on outsourcing firms.

Durbin and Grassley argue the H-1B program must be reformed before it is expanded. As an alternative to raising the cap, Durbin and Grassley are advocating S.1035, or the H-1B and L-1 Visa Fraud and Abuse Prevention Act, introduced in 2007. The bill would reform the H-1B and L-1 visa programs by requiring that all employers seeking to hire an H-1B visa holder prove they have made an effort to first hire a U.S. worker. "The H-1B program can't be allowed to become a job-killer in America," said Durbin in a statement. "We need to ensure that firms are not misusing these visas, causing American workers to be unfairly deprived of good high-skill jobs here at home."

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE