Wednesday, August 25, 2010

Myths about H1B Visa

H1B visa is in news again after US government increased the filing fees for H1B visa by $2000. The Senators, the congressman, the media all claim that H1B visa is “cheap visa” and all those holding H1B visa as “cheap labor”. Is the H1B visa really a “cheap visa” and those holding H1B visa “cheap labor”? Aren’t the media and the people in US and India confusing outsourcing with H1B visa?

H1B visa is by no means cheap visa. Ask any company that hires people on H1B visa and they will tell you that. There is a real scarcity of skilled people in US and that is the exact reason they hire H1B visa holders. If for a same job a H1B visa holder and an American citizen turn up with identical skill set, the company will only hire American citizen as they don’t have to go through the hassles of paperwork and other formalities of H1B visa.
The salary that needs to be paid by law to a H1B visa holder sometimes turns out to be more than that of an American worker with the same job description. Most people who proclaim H1B visa as “cheap visa” never know that there is a concept of Prevailing Minimum Wage on each job description and H1B visa holder should be paid at least the minimum wage for that particular job in that state. There are so many instances when this turns out to be more than the salary given to the American worker. I personally know of two instances.
A company of about 50 employees – never had H1B visa­ holder in the payroll. Few years back they were forced to hire H1B visa holders as they could not find anyone that suits the job profile. They applied for the Prevailing Wage as part of the H1B visa application process and it turns out that the minimum wage the company has to pay was higher than the pay company was giving to the other employees. The Manager who is a very good friend of mine was telling me that they had to increase the salary of all the employees to accommodate the new H1B visa holder. He was telling me that hiring someone in H1B visa is much more expensive than hiring an American for the job.
Another case that comes to my mind that again proves that H1B visa is not cheap was narrated to me by my friend few days back - as part of H-1B visa filing process the LCA (Labor Condition Application) has to be applied and should be posted conspicuously in offices which apparently has a column for salary range so that all employees have a chance to look at this. For a co-worker who is on a visa, they had to post the LCA in their office. On seeing the salary paid to the Visa holder, one of the American colleagues of the H1B visa holder came to know that he was paid less than the Visa holder and he quit shortly after that.
Now the US government is making stricter laws for companies to hire H1B visa holders. Who is going to be hurt in the process? It is going to be US only. Companies in US hire H1B visa holders because they cannot find an American with right skill set. Again these H1B visa holders pump in most of the money they earn back in US economy. Now when the visa rules become stricter what will the companies do? Since they cannot get a person with right skills in US they just “outsource” the work to India or other countries. Now that is cheap labor.
US Companies that run after profit, will like that as they need to pay only like one third of the amount for the same work to be done in outsourced country than in US and the employee who does that work do not have to pay any US tax. So it is a win-win situation for the company and employee and a complete disaster for US.
In a nutshell making H1B visa rules stricter is only going to hurt US till they revamp their education system and produce more skilled Americans. Also it is time for the lawmakers and media in US to realize that giving more H1B visa is good for US especially during the time of recession.
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Blogger Shankz said...

Interesting observation!! Nice article Cheta

August 25, 2010 9:11 PM  
Anonymous Anonymous said...

Good Article, Nair!!


August 25, 2010 9:29 PM  
Anonymous Anonymous said...

Despite being on H1-B myself, for once I feel they've done the right thing. I looked through the entire post a couple of times but couldn't find the most important point that only those companies with more than 50% employees on H1-B will have to pay these excess fees. Thus, the biggest H1-B consumers - Microsoft, Oracle, Intel, etc. won't be affected at all. This will only impact Indian companies like Satyam, Patni, TCS, Infosys, etc. who maintain a US presence but hire very few Americans. Most of their US staff are H1/L1 visa holders. Because of the relatively more "mature" form of democracy in the US, these companies are at least being allowed to do business here. Kerala, West Bengal (and Maharashtra in future, if the SS/MNS come to power) and a few other Indian states don't even allow 'outsiders' to enter.

However, I do agree that the education system in the US has a long way to go. But a big hurdle there is administrative overheads - like healthcare - and a separate topic of discussion..


August 26, 2010 12:32 AM  
Anonymous Anonymous said...

Brijesh, just like the Indian politicians, their American counterparts are playing theirs. It is an easy way to get attention and political mileage and they are taking advantage of it.

August 26, 2010 3:37 AM  
Blogger AJ said...

@Anand :).. can u clarify what u wrote?. So with the new law only those companies with more than 50% foriegn workforce needs to pay the increased fees or what.

August 26, 2010 1:12 PM  
Anonymous Anonymous said...

@AJ - companies whose workforce *within the US* is over 50% H1-B pay the additional fee.

@Cheta, I couldn't make it past the first few paragraphs. I don't know what industry you speak of but the software industry that this bill (ineffectively) targets has been abusing the (blank) out of this bill.

The fee IS cheap--perhaps not to a college student but in the grand scheme of an H1B, it is little more than a rounding error.

The skills DO exist. Companies can very easily change job descriptions, etc. to manipulate the system.

In the industry this targets this has always been about cheap labor. After a decade of stagnation and destruction of the US IT industry, yes it's now having ripple effects that drive down interest. So perhaps your premise is becoming true, but any upcoming shortages have been far more CAUSED by this program than alleviated by it.

August 27, 2010 2:33 PM  
Blogger Karthikeyan said...

Brijesh - While what you say is correct in many cases which need to be rationally analyzed, i don't think in this environment of high unemployment and general discontentment among the public any politician would dare to come out and say some counter-intuitive logic on why foreigners are good. I would say he/she is stupid if he/she even tried. It ain't going to work.

@AJ - What Anand told is correct. Only companies with more than 50% H1B holders would pay this fees.

This would be another blow to all the body shop consultancies.

August 30, 2010 9:28 PM  

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