Photographer: David Paul Morris/Bloomberg

The Secret Way Silicon Valley Uses the H-1B Program

Indian companies are applying for a lot of visas for workers to fill jobs at the headquarters of American tech companies

Cisco Systems Inc. applied for about 3,000 H-1B visas in fiscal 2016, intending to hire people to work at its sprawling, utilitarian campus in suburban San Jose. These were good jobs — many of them for management-level logisticians and operations research analysts — and they paid well. The average annual salary was about $120,000. At the upper end, the company planned to pay a “senior corporate strategy director” $197,000 a year.

But these applications don’t tell the whole story of how Cisco planned to use the controversial visa program to supplement its workforce. The visa requests it submitted accounted for only 40 percent of the applications from 2016 for temporary visas for jobs to be located at its headquarters. The rest were submitted by IT firms, mostly from India, seeking to place workers with the company — about 250 companies in total. The only indications that Cisco had anything to do with these applications were the addresses listed as the place of employment— a piece of data that's not included in the aggregated statistics on H-1B applications released by the Department of Labor. Silicon Valley companies don’t mention workers employed by contractors, also known as the contingent workforce, when discussing how they use the program, meaning the picture they give is incomplete.

Cisco’s use of the visa program has been the subject of public attention over the years, as its executives have lobbied for its expansion even while conducting multiple rounds of layoffs. The company eliminated 940 jobs at its headquarters in 2016, and 390 more so far this year.

Not every application resulted in a new job at Cisco -- fewer than a third of the applications for all industries in 2016 were accepted. Still, taken as a whole, the applications show that Cisco is both more reliant on the H-1B program than previously acknowledged, and that the company uses it in a way that has not been fully understood. The contractors were not applying for visas covering the type of senior-level positions that Cisco sought for itself. Instead, almost all of these visa requests were for jobs requiring little or no specialized knowledge. The average salaries for those positions were about 25 percent lower than the jobs Cisco applied for directly.

"Like many large companies, Cisco works with contracting firms to place high skilled workers on a contract basis," Cisco said in a statement. "While we believe that it is critical to ensure that high skilled workers are able to come to the U.S. to work and innovate, the vast majority of our contingent workforce are U.S. citizens and permanent residents. In a highly competitive market for talent, Cisco is committed to fair pay in accordance with the market and without regard to immigration status.”

Contractors are also submitting many applications for foreign visas for work at other large American technology companies, according to a recent analysis of Department of Labor records covering eight major tech businesses between October 2015 and October 2016. Applications submitted by contractors accounted for half of the H-1B visa applications for jobs at PayPal Holdings Inc.’s headquarters, 43 percent of those on Microsoft Corp.'s campus, 29 percent at EBay Inc.’s headquarters, and about a quarter of those at the Googleplex. At Facebook Inc., contracting companies submitted 12 percent of the applications for jobs at its headquarters. According to the analysis, Apple Inc. barely relies on contractors who employ workers through H-1B program to staff its headquarters, and Amazon.com Inc. doesn’t appear to use them at all. The contractors included Infosys and Wipro.

A spokeswoman for Facebook said that the company does not directly control the jobs described in the applications, but that the company works only with reputable partners. In an emailed statement, a spokeswoman for EBay said the company uses contingent workers to increase the flexibility of its operations. "We work with expert agencies to source appropriately qualified, skilled contractors for a variety of technical roles, some of whom may be H-1B visa holders. All workers, whether permanent or contractors, must pass EBay’s background check before starting work," she wrote, adding that the company regularly reviews the staffing companies it works with. Amazon, Apple, Microsoft and Alphabet declined to comment on the data. PayPal didn’t respond to interview requests.

For years, the H-1B visa program has been a key public policy priority for Silicon Valley -- and a source of broad controversy. Each year, the government grants 65,000 of the temporary visas through a random lottery, with another 20,000 set aside for applicants with advanced degrees. The visas are good for three years, and can be extended beyond that. There were about 460,000 people working in the country on H-1B visas in 2013, according to an estimate by the Economic Policy Institute. The American technology industry argues the visa program is a vital way to attract foreign-born workers with rare technical skills. But critics decry the visa program as a way for outsourcing companies to undercut the American labor market by paying low wages to mostly Indian-born workers.

In testimony to Congress in 2013, Brad Smith, then Microsoft's general counsel, referred to the "common misconception" that the H-1B program is a source of cheap labor: "For the overwhelming majority of users of the H-1B system, this criticism simply isn’t true, and our H-1B workers provide a direct rebuttal of this misperception," adding that Microsoft workers typically earn salaries on the upper end of the pay scale laid out by the Department of Labor. In 2016, the vast majority of jobs submitted by staffing companies working on Microsoft campus were for jobs on the lower end of that scale.

“As the data makes clear, we pay high salaries for all of our skilled employees including those working on visas,” said a Microsoft spokesman in an emailed statement. “The salaries paid by other companies likely reflect the different type of work, skill, and experience level that these other jobs require.”

Ronil Hira, an associate professor at Howard University who studies immigration, says that the tech companies' reliance on contractors for H-1B workers shows how the industry is complicit in practices it has publicly distanced itself from. “It bursts the bubble of these tech firms,” he said. “They can’t claim they didn’t know this is going on. They’re participating in it.”

U.S. President Donald Trump has included the H-1B program in his broader effort to restrict immigration. In April, his administration made a handful of changes to the program, and asked federal agencies to review ways for a broader overhaul. The administration has indicated that its focus is to cut down on the distribution of visas to workers who are not doing highly skilled work.

Concerns about continued access to the U.S. market are leading to a major retrenchment in the Indian IT industry. “Trump’s America First agenda and focus on curbing the immigration, especially H-1B visa policies, will hurt the IT sector,” said Vineet Nayyar, vice chairman of Tech Mahindra, one of India’s largest tech services companies, on a call with investors in May. Along with Infosys and Wipro, Tech Mahindra was among the most prolific applicants for H-1B visas covering jobs taking place at American tech companies. None of the companies responded to interview requests.

Silicon Valley’s official stance about proposed reforms to the H-1B program has been largely sanguine. Tech groups put out statements expressing cautious optimism following the administration’s moves in April, while policy experts floated the idea that anything that was bad for the outsourcing companies would be good for Silicon Valley. "If Indian firms have a harder time getting basic programming jobs approved for the visa process, then the firms truly hiring people with high skills and specialized knowledge will benefit,” said Rod Bourgeois, head of research at DeepDive Equity Research, a research firm that covers the tech industry, in April.

A more complicated story emerges from a novel analysis of public data conducted by Geoffrey Rhodes, general counsel at an IT services company in Columbia, South Carolina. Rhodes began poring over applications for H-1B visas looking for contact information for potential clients. Out of curiosity, he began pulling documents whenever a company showed up in the news for displacing American workers. The information was available on each individual application, but absent from the program-wide data that can be easily downloaded from the website of the Department of Labor. So Rhodes wrote software that scraped thousands of applications and fed them into his own spreadsheets. “It was more a hobby than anything-- there was no benefit to my company,” he said. “I’ve pulled so many records I’m kind of surprised I haven’t gotten IP blocked or something.” Rhodes became so fixated on the data that he changed the banner on his Twitter account to a photograph of one of the Department of Labor disclosures.

Rhodes found that American tech companies are also utilizing large numbers of H-1B workers that are not highly skilled -- they are just doing it through intermediaries. As part of the application process, businesses seeking H-1Bs define the experience level of the position they’re hiring for on a scale of one to four. About 90 percent of the contracting jobs in this analysis were classified either at the lowest wage level (“routine tasks that require limited, if any, exercise of judgment”) or the second-lowest level (“moderately complex tasks that require limited judgment.”) They paid an average of $88,500, which is about two-thirds the average salary for visa applications for jobs the companies submitted directly.

There are limitations to this data. It covers only applications, not visas that are actually granted, so it’s impossible to tell exactly how many workers the contractors have ended up placing at any particular place of employment. The percentage of applications that translate into actual jobs may also vary from company to company based on how aggressively they apply for positions they’re hoping to fill. Contractors are generally more aggressive, say immigration lawyers, meaning this data could overstate their presence at any particular work site. In other ways, these data may be understating the extent of the connections between Silicon Valley and the Indian IT industry. The statistics don’t cover any contract work that happens off-site, for instance. 

For decades, big tech companies have relied on contractors to carry out lower-level programming tasks, saving money while freeing up direct employees for more sophisticated undertakings. The issue has been subject to controversy in the past, centering on companies misclassifying long-term workers as independent contractors. The relationships with Indian outsourcing companies is several decades old, said Pradeep Chauhan, a former procurement manager at Microsoft who now runs OnContracting, a business that provides market information to IT companies.

According to Chauhan, IT companies were initially skeptical about the idea of pursuing contracts where they would place workers on-site, primarily because it was more lucrative to run outsourcing operations abroad. But over time they began to see it as a way to develop deeper relationships with Silicon Valley companies who could also become clients for their outsourcing services as well. Getting that first foot in the door is important, because the market for contracting work is often conducted quietly, according to Chauhan. “Even though those jobs constitute a large portion of the available jobs on the market, they’re not really open or transparent,” he said.
With Reporting by Ian King

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