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International Business, Update 2003 Cases
H-1B Visas: A High-Tech Dilemma
Images of immigration typically include border crossings and refugees trying to
enter a country illegally. Jobs filled by immigrants are perceived to be low-paying
menial ones that cannot find takers among the residents. However, the most heated
debate on immigration is being waged in the world of high tech, where industry
argues for more freedom to bring in people with “a body of highly specialized
knowledge” and where opponents characterize the situation as the present-day version
of indentured servitude.
The H-1B is a high-tech visa that allows foreign engineers, computer scientists,
and other highly trained technical workers from a variety of countries to work in
the United States on a temporary basis for a maximum of six years. The program began
in the 1950s to attract individuals with mathematics, engineering, and technical
backgrounds during the Cold War. However, the boom of the information-technology
sector, which demands 1.6 million workers yearly, has made the H-1B visa a major
subject
of
discussion.
In
1999,
the
full
allotment
of
115,000
H-1B
visas
was
exhausted by June, and in 2000, by April.
On October 3, 2000, the U.S. Congress overwhelmingly approved legislation in a
vote of 96 to 1 that would increase the number of H-1B visas issued from 115,000 to
195,000 each year for the next three years, with the possibility for renewal for
another three years. In 2001, despite the severe downturn in the economy, 163,200
applications
were
approved.
The
bill
passed
because
high-tech
lobbyists
were
successful in positioning the visas as protection for the U.S. competitive edge in
technology.
In
the
short
term,
the
United
States
needs
to
fill
key
positions
immediately so opportunities are not lost to foreign competitors. The supporters’
argued that the survival of U.S. companies is at stake without foreign workers. This
view was also taken by Federal Reserve Chief Alan Greenspan, who warned that labor
shortages threatened the national economy and who proposed increased immigration as
a way to ease labor shortages and reduce inflationary pressure.
Greenspan’s comments were only one indication of dramatic changes taking place.
Two
years
earlier,
the
same
legislation
had
been
opposed
by
anti-immigration
Republicans and the labor unions. In 1996, the U.S. Congress focused on deportation,
and the U.S. Commission on Immigration Reform (the Jordan Commission) proposed to
cut legal immigration by at least a third and eliminate illegal immigration.
Labor’s Position
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International Business, Update 2003 Cases
Organized
labor
has
also
started
to
change
its
traditional
stance.
While
historically opposing immigration on the grounds that it displaces American workers
and lowers wages, organized labor abandoned its opposition to the October bill—
although
they
did
support
the
stipulation
that
U.S.
employers
must
pay
the
prevailing wage—and announced it would no longer oppose illegal immigration. Union
leaders increasingly see immigrants as potential recruits.
While organized labor supported the provision to pay prevailing wages of what a
recent college graduate entering the computer science field would typically command,
the high-tech industry opposed that provision on the grounds of increased paperwork
and administrative costs involved to maintain these statistics. The industry point
of view won and the provision that required employers to present tax forms showing
how
much
H-1B
holders
were
paid
was
dropped
from
the
final
version
of
the
legislation.
There is opposition also from non-traditional workers’ groups on the issues of
wages. According to critics, foreign workers in Silicon Valley earn substantially
less than a U.S. citizen with comparable education and experience. For example,
newly graduated immigrants with H-1B visas are paid $35,000, while the national
average for new computer science graduates is $45,000. Groups of technical workers,
such as the Programmers Guild and the American Engineering Association, banded
together to fight the bill. Their argument is that U.S. technology businesses rely
too heavily on cheaper foreign labor at the expense of older and more expensive U.S.
workers.
The higher numbers create a market in which employers do not have to
cultivate “home grown” talent because there is a constant flow of new people. While
some employers may not save on the salaries of programmers of the same age and
background, they still save on salaries of employees with H-1B visas whose median
age is 28 and who may replace a U.S. citizen over the age of 40.
Other groups, such as the Urban League, have demanded that corporations train more
U.S. citizens for the jobs that are going to foreign engineers, computer scientists,
and other highly trained technicians. Colin Powell stressed the need for increased
training of U.S. students at the Republican Convention in 2000. The H-1B visa’s
filing fee of $1,000 is supposed to go to programs to increase U.S. student and
worker training in science and technology. Since establishing such a program in
1997, the Virginia High Tech Partnership program has placed 140 minority students at
75
firms,
including
AOL,
IBM,
and
start-ups.
However,
it
is
clear
that
these
initiatives will not have any immediate effect on the demand for H-1B visas.
Critics have also argued that, contrary to claims of programmer shortage, U.S.
companies such as Cisco, Microsoft, and Qualcomm hire only a small percentage of
applicants and reject most without even interviewing them. Cisco, for example,
receives 20,000 applications per month but hires only 5 percent of them.
Industry View
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International Business, Update 2003 Cases
The positive vote to increase H-1B visas is seen as further evidence of the clout
the high-tech industry has in the United States. In 1999, the U.S. Congress passed a
bill that protected Silicon Valley against Y2K litigation. Recent legislation has
also eased restrictions on export encryption rules, and high-tech companies are not
required to maintain separate tax records on foreign workers. U.S. Congressman Tom
Davis, a Republican from Virginia, stated, “This is not a popular bill with the
public, it is popular with the CEOs. This is a very important issue for the hightech executives who give the money.”
The
industry’s
dramatically
argument
changed
the
is
straightforward:
composition
of
the
information
U.S.
workforce
technology
by
has
producing
an
incredible demand for workers. In many sectors, the positions have high complexity
and a scarcity of qualified applicants. U.S. companies have been forced to slow
their
expansion
individuals.
As
or
a
cancel
result,
projects
some
have
due
to
the
argued
for
lack
the
of
technically
elimination
of
qualified
H-1B
caps
altogether.
According to a 2000 report by the General Accounting Office, the average H-1B
worker is an Indian male between the ages of 25 and 29 who earns a salary of
$45,000. As shown in Figure 1, Indians account for the majority of the new arrivals,
with China and Canada as distant followers. In Silicon Valley, immigrants make up
one-third of IT workers, and more than 25 percent of them hold senior executive
positions. More than 750 Silicon Valley companies worth US$3.5 billion and employing
16,000 workers are owned by Indians.
View from India
The IT industry is growing rapidly in India. The area around Bangalore is known as
the Silicon Valley of India. In the past decade, Indian software exports to the
United States have grown from $150 million to $3.9 billion. The Indian software
industry is expected to grow to $80 billion by 2008. India exports software to 91
countries, with 64 percent going to the United States. In 1998, Microsoft opened a
research and development center in Hyderabad. Indian laws were recently liberalized
for direct foreign investment and joint ventures. The passage of the visa bill is
seen in some parts of Asia — but not all—as having the potential to inspire trading
interest in India’s frontline software industry.
Exactly one week after passage of the bill, the Indian press (The Statesman)
issued a broadside that criticized the H-1B program as subsidizing Bill Gates. The
argument was that the high-tech industries in Western countries are being fueled
with
workers
trained
at
Indian
institutions
at
Indian
taxpayer
expense.
The
replacement of Indian subsidies with grants and student loans as a way to stem
“useless degrees in comparative literature” was urged. However, no mention was made
of requiring Indian graduates to work at home, possibly because there are not enough
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International Business, Update 2003 Cases
employers in India. Interestingly enough, there is a sector-specific problem. So
many technical professionals are leaving for foreign jobs in the United Kingdom,
Germany,
and
Japan
software
industry,
that
there
are
with
projections
already
for
a
pockets
of
widening
shortages
and
in
deepening
the
Indian
shortage
to
continue for the foreseeable future.
Why is the Indian high-tech worker so prevalent or so sought after? The fact that
there are not enough employers in India to employ qualified workers is only a part
of
the
picture.
computer
training
Their
far
government’s
longer
than
educational
many
other
system
has
developing
given
priority
countries.
The
to
India
Institute of Technology (IIT) was founded in the 1950s by Prime Minister Jawaharlal
Nehru to train an elite that could build and manage massive industrial development
projects.
percent
of
Today the government runs six institute campuses and accepts only 2
more
than
100,000
applicants
annually.
IIT
graduates
Vinod
Khosla,
cofounder of Sun Microsystems, Inc., and Rakesh Gangwal, president of USAirways,
have parlayed H-IB visas into lucrative careers. The value added for U.S. companies
is three-fold: (1) the pick of the top tier of an educated elite from (2) the
largest pool of skilled English-speaking workers second only to the United States,
who (3) possess the ability to more easily adapt products for foreign markets.
The Indian Visa Holder’s Perspective
The
young
Indian male between the ages of 25 and 29 who is highly educated,
ambitious, and eager to work but unable to find a job in India that will pay enough
to attract a wife is happy to go to the United States and earn $45,000 a year,
roughly four times what he would earn in India. The October bill offers longer-term
attractions, having lifted restrictions that previously hampered career progression.
Called the “portability provision,” it is now easier for H-1B visa-holders to change
jobs without having to wait for the Immigration and Naturalization Service to
formally approve the immigrant’s application with a new company. This provision
facilitates movement up the career ladder, possibly to the level of an officer at an
IT firm and the growing of equity in the company and accumulating wealth. In the
past, foreign-born workers were often dissuaded from switching jobs because of the
fear that they would run into problems in processing of their visa paperwork.
Problems could mean that they would have to return home.
Immigrants who have been in the United States for three years on the H-1B visa may
have a different perspective. In many cases, the renewal for another three years may
come, but not without a lot of work and worry. The initial exhilaration to come to
the United States is often followed by homesickness. The spouse, who may also be
highly educated, is not necessarily permitted to work in the United States.
With approximately 90,000 Indians arriving every year, and with the strict quota
imposed by the Immigration and Naturalization Service of 15,000 green cards per year
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International Business, Update 2003 Cases
per country, there is an additional dilemma. The October bill acknowledges this
problem; the language in the bill directs the INS to make the unused green card
allocations of other countries available to applicants from oversubscribed countries
and to extend the amount of time H-1B workers can remain in the United States while
waiting for green cards. However, many workers feel discarded at the end of the six
years, leaving full of disappointment and delusion and holding much bitterness
towards the United States.
The Balance
Many of the young workers who do head abroad will return home and ploy their new
wealth into ventures at home. In one well-publicized story, an IIT graduate founded
Internet browser Junglee.com with three other Indians, and sold it to Amazon.com in
1998 for US$180 million. He gave $1 million to his alma mater and started another
company in Mountain View, California, and Bangalore, India, as well as investing a
25 percent stake in a dot.com startup in India. The “brain drain” may reveal its
silver lining as more and more successful Indian entrepreneurs are seeding ventures
at home. The dot.com boom in India is seen as one of the mega markets of the future.
Instead of sending workers to foreign markets, the Indian IT companies are sending
their work to foreign markets via the Internet; “offshore development” is now a
viable alternative to onsite workers.
The nascent IT industry in India is becoming more and more attractive to foreign
investment. While Indian firms will lobby for more visas and investment, their U.S.
counterparts
interested
are
in
likely
to
establishing
seek
a
reciprocal
business
in
concessions.
India
want
U.S.
some
multinationals
improvements
in
infrastucture, reduction in bureaucratic interference, and quicker responses from
the government. New Delhi has taken the first steps aimed at accelerating telecom
reform to free long-distance telephone service from their government monopoly and
allowing 100 foreign direct investments in Internet service providers.
In
the
United
States,
the
issue
of
equitable
wages
needs
to
be
addressed;
currently no reporting and auditing controls are in place to protect both foreign
and U.S. workers. The lack of these controls both undercuts the domestic worker and
takes advantage of the foreign worker. Many programs have been very successful in
training new groups of workers and could work well as a regional model in the
industry corridors in the United States. In the long term, the country needs to
determine what can be done to make certain that there are sufficiently trained U.S
citizens to fill the demand for high-tech jobs. Perhaps not enough time has passed
to judge what effect the retraining of U.S. workers, often older or displaced, has
had on the new technologies. Little published data are available at this time, and
anecdotal data suggest the retraining may be too little, too late.
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International Business, Update 2003 Cases
Questions for Discussion
1. Comment on the following statement: “The firms of the New Economy seem to be
awfully fond of the Old Economy—of 200 years ago, when indentured servitude was in
vogue.”
2. Will a visa program like the H-1B result in an escalation of brain drain from
developing or emerging countries?
3. Should the cap for H-1B visas be eliminated altogether?
Sources: This case was written by Beverly Reusser and Ilkka Ronkainen. It is based on publicly available
materials such as “Overseas Workers Filling High-Tech Spots,”: The Chicago Tribune, February 10, 2002; “A
Special News Report about Life on the Job—And Trends Takihg Shape There,” The Wall Street Journal,
February 19, 2001; “Visas Bring Labor, But Not for Long,” Fortune, December 18, 2000, 64–68, “Visas Bill
Brings Tech a Manpower Win,” The Washington Post, October 7, 2000, E2; “Teaching Lessons: Why Should You
Subsidise Bill Gates?” The Statesman, October 10, 2000, 14; “American Competitiveness in the Twenty-first
Century Act of 2000,” Congressional Record–Senate, Volume 146, No. 117, September 27, 2000; and “HighTech Cheap Labor,” The Washington Post, September 12, 2000, A35.
FIGURE 1
Percentages of U.S. Immigrants with H-1B Visas from Various Nations
Source: “Alliance Fights Boost in Visas for Tech Workers,” Los Angeles Times, August 5, 2000, A14.
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