The Problem With H1-B Reform

There are plenty of Visas, but the program designed to spur innovation is used to bring in lower cost programmers by consulting companies

I’ve been lucky enough to recruit non-U.S. based talent and watch some of my friends to see the process upfront. It was an education to see how perverted the system is, and how it’s being worked by a few consulting firms while discouraging technology companies that drive innovation. 

Most of the information below is anecdotal, but illustrates the struggles Bill Gates and Mark Zuckerberg see in the current system, and the perceived shortages seen in the technlogy sector.

  • At my previous company, I recruited a designer from Canada, and as part of the team we were able to redesign that product that eventually went on to receive a Webby. He qualified through his professional experience with months to spare because he didn’t have a college degree. 
  • Another designer was refused initially because the immigration officer didn’t see her talent and she was working at a startup that didn’t meet funding requirements. That talent was featured prominently in TechCrunch and designed an iPhone application that was featured in the Apple App Store, and she will be part of the an exciting new startup next week.
  • Several talented people I know would love to come to the United States have years of experience, but don’t meet the requirements of our system.They have experience at the top agencies in the world, some that have driven real innovation. Their work includes designing large scale systems, and their knowledge is highly respected in the User Experience space.

In many of the situations I’ve seen, the H1-B Visa was used not to lower cost but to attract a talented engineer or designer. They were very talented in their field,bringing value where it was hard to fill. That’s the intention — bring the best and brightest to innovate and fill crucial roles in organizations.

So where are all the H1-B’s going? Mainly consulting companies providing outsource services for corporations — over 40 percent of the visas are going to eight companies. There’s a shortage because consulting firms are playing the system. 

But before you even talk about the H1-B, there’s a few assumptions you have to make about technology:

  • Like manufacturing, many jobs in technology will never return. There are cost advantages for certain tasks to be sourced elsewhere because they aren’t high value jobs. Servers can be monitored anywhere in the world, and there are a lot of programming tasks that are closer to assembly line tasks that high value architecture. Offshoring technology jobs is here to stay.
  • The cost of building applications will continue to drop. This will happen as programming frameworks evolve and lessen the time to market. Hardware technology advancement will also cut the cost of building large scale applications.
  • The biggest expense of most technology companies is people. Servers are getting cheaper. Office space is cheap. People are expensive, and that’s the one area where companies are trying to save. If a company like Microsoft can save $10,000 per employee (they have 57,500 of them here, and these are full time employees, not contractors), that’s $575 million in the U.S. alone. 

Who Taking Advantage of the H1-B

For the most part, it’s not American technology companies., a database of H1-B Visa counts and average salaries supplied by the U.S. Government shows that many American technology companies are playing by the rules, according to the data from 2013:

  • Google: $126k — 1.7k permits
  • Apple: $122k — 1k permits
  • Microsoft: $109k — 4k permits
  • Amazon: $107k — 900 permits
  • JP Morgan Chase: $106k — 900 permits
  • Oracle: $104k — 1.6k permits
  • Intel: $101k — 1.7k permits
  • Qualcomm: $101k — 1.6k permits

And these are the wages from primarily Indian (and some American) consulting firms — they are taking up the majority of visas and paying below market rates:

At a 2011 House hearing on H-1B visa issues, U.S. Rep. Zoe Lofgren (D-Calif.) said she had asked the Labor Dept. for a report the average wage for computer system analysts in her district. The result: $92,000 overall for entry level workers, but department also reported that the entry level rate prevailing wage rate for an H-1B worker was $52,000.

The Effects of the H1-B

It’s used to squeeze costs, not encourage innovation. Over 40 percent of H1-B Visas are being used for projects that aren’t innovative, filling what are essentially assembly line development jobs by consulting companies. Companies like Facebook, Microsoft and Apple employ between 3 to 8 percent of their workforce with immigrant hires, which is well within I consider to be acceptable limits. They aren’t able hire talent because a few companies are owning the game — consulting firms with primarily offshore work forces like Tata, Infosys and Wipro take up the majority of Visas. The current reform package is actually putting them at odds with American technology companies.

Many Indian IT vendors have anywhere upwards of 70% of their US-based staff on H1B visas and these changes would make it unattractive (if not impossible) for them to bring large number of employees to the US. 

Cognizant, the largest H1B holder, had over 9,000 applications approved, and over 60 percent of the applications approved are for workers formerly based in India. A Forrester research report commented that the primary concern for this reform was not innovation, but changing the low-cost proposition of these consulting firms. This is such a concern to companies in India that it’s generated a fair amount of coverage in that country.

Wages have stagnated for many technology workers. A study by ComputerWorld that showed that last year, wages dropped in the software services sector by two percent. For many of the mid to senior level design positions, outside of cost of living wages haven’t increased much since the dot com boom. Even many in software would be surprised to find they are getting paid less than they would be in 2001. The number of H1-B Visas available actually outnumber the number of technology jobs that are added to economy, will do so by larger numbers in the limits are raised.

Companies aren’t giving American workers a chance to learn new technologies on the job. For example, a highly educated friend of mine was unemployed for a significant amount of time because she didn’t have mobile experience, yet has over 15 years designing applications. She could easily make the transition. Many college graduates are also having problems getting hired because they aren’t trained in what is an easily learnable skill.

College-educated immigrants that aren’t “the best and the brightest” are displacing college-educated Americans. For every immigrant that makes their way to Harvard or Stanford, there are many that are attending lesser colleges and have lesser skills and upside. The Visa programs do not make any kind of distinction about this, yet studies support this assertion.

Real innovators are being kept out because they can’t satisfy an easily marked checkbox. Many of the talented developers and designers that want to come to the United States aren’t able to satisfy the requirements that are ridiculous. To qualify, 12 years of professional experience in the field is required in lieu of a four year degree. These are the best and the brightest, yet they’re also the workers that are discriminated against the most by the current H1-B. Less than 1,500 of H1-B applications a year fall into this category.

The solution

Place limits on the percentage H1-B’s can make up a company, but make it regressive. Consulting firms shouldn’t have of up to 40 percent of the workforce under H1-B. Regressive limits depending on the size of the company, the number of years the company has been in business, and how many H1-B’s they have employed in the past would limit a lot of the abuse. Most technology workers would be comfortable with a 10 to 20 percent cap on larger companies like Microsoft; the restriction would make them value what is the best and brightest. Smaller companies don’t have the resources to train, but larger companies do.

Discourage employment by consulting firms because it’s essentially short term need filling. Companies that are building products and making investments into their employees should have an express lane to H1-B approval. There should be a greater emphasis placed on looking at how the applicant is being employed. The current bill proposed by Congress places significant limits in this area, and attempts to fix the problem.

Place greater emphasis on professional experience. Education is important, but what’s even more important is finding talent that could fill an innovation need with experience in particular sectors is even more important. The current policy creates a gap that if you’re under 33, it’s almost impossible to prove you have what it takes. A mix of both education and experience should be in the mix.

Place greater emphasis on specialized skillsets. A software engineer that knows Java at a competent level is not a specialized skill, however a data scientist with specialized skills in predictive algorithms is. This could be put in place by having peer groups review prospective candidates. The H1-B program needs to adapt quicker to understand the needs of companies and see innovation shortages. You may be able to teach someone how to use Photoshop, but you can’t teach someone how to build products that are innovative, and that’s where the H1-B should be used.

The money shot

There are plenty of Visas available to bring talent into the United States — it’s just the system is being worked by companies that are most interested in outsourcing America. Companies that build products like Facebook, Microsoft and Google and the Silicon Valley innovation machine need to be given preference in bringing talent over that isn’t going employed to the lowest bidder.

We do need to bring the best and brightest here, but we need to do so in a way to builds value for innovation that benefits the American economy and doesn’t sell us out. We need to create opportunities for workers both here and abroad that makes sense in increasing America’s technology knowledge base as a whole, not just for a few.