New Scandals Revealed by the New York Times: How the H-1B Visa is Used to Ship American Jobs Overseas

The New York Times has a front page story today about three new cases of H-1B abuse as a follow-up to the Disney scandal it reported on in June. This one, too, features household names: Toys R Us and New York Life. It also includes academic publishing powerhouse, Cengage, whose textbooks are used in college campuses across the country. Those companies have been outsourcing work to companies with track records as major H-1B abusers that use the program to ship jobs overseas: Accenture, TCS, and Cognizant.

The Times story, written by Julia Preston, outlines a process I have written quite a bit about over the years: how the H-1B program, which Congress created to help U.S. companies fill jobs here in the United States, is actually used to facilitate the shipping of American jobs overseas to low-cost countries like India. This, in fact, is the most common use of the H-1B program, which India’s Commerce Minister Kamal Nath dubbed the “outsourcing visa” in 2007.

Preston reports that Tata Consultancy Services sent Indian workers to a Toys R Us facility in New Jersey, where they shadowed U.S. accounting employees, learning their jobs and writing up manuals to train employees back in India how to do the same work and replace the U.S. employees. The result was unemployment for middle-class, middle-aged Americans and the loss of 67 jobs in New Jersey. A company spokesperson was unapologetic, telling the Times that the outsourcing “resulted in significant cost savings.”

This kind of abuse of the H-1B visa is not new, but politicians from both parties, including President Obama, look the other way and pretend it isn’t happening. In 2003 I presented a paper in Bangalore, India about how crucial the H-1B and L-1 visa programs are to the offshore outsourcing business model. I’ve also written a number of pieces for the Economic Policy Institute (where I’m a research associate) about how the offshore outsourcing business model works and how firms, some American but mostly Indian, that specialize in replacing American workers (like Accenture, IBM, Cognizant, TCS, Infosys, HCL, and Wipro) have come to dominate the H-1B program. And I’ve testified in Congress, where a majority of senators and representatives, led by Sen. Orrin Hatch of Utah and Sen. Amy Klobuchar of Minnesota, favor expanding the H-1B visa program to accelerate the offshoring of U.S. jobs, rather than reining it in.

A piece I wrote for The American Prospect describes in more detail both why and how the offshore outsourcing firms and U.S. businesses use the H-1B & L-1 visa program to the disadvantage of U.S. workers. Offshore outsourcing firms rely on the H-1B and related L-1 programs for three principal reasons.

First, it facilitates the foreign firms’ knowledge-transfer operations, where they rotate in foreign workers to learn U.S. workers’ jobs. Far too often, U.S. workers are “transferring knowledge” under duress, threatened with the loss of severance pay if they don’t comply or if they talk to the media about what is happening. A recent BusinessWeek story described Wipro’s use of the H-1B program this way: “Wipro has more than 4,000 employees in the United States, and roughly 2,500 are on H-1B visas. About 1,000 new temporary workers come to the country each year, while 1,000 rotate back to India, with improved skills to serve clients.”

Second, the H-1B and L-1 programs provide the foreign firms an inexpensive, on-site presence that enables them to coordinate offshore functions. Many functions that are done remotely still require a significant amount of physical presence at the customer site. For example, according to its own financial reporting, Infosys’ on-site workers, almost all of whom are foreign guestworkers, directly accounted for 49.2 percent of its revenue in its most recent quarter.

Third, the driver of these programs is wage cutting. Tech jobs, legal jobs, accounting jobs that can be done for a fraction of the U.S. cost by workers in India are being shipped overseas to raise profits, stock prices, and managers’ bonuses to the detriment of U.S. workers who invested in an education, got college degrees, learned skills, and did everything right.

The H-1B program has been thoroughly corrupted. Rather than providing firms with workers who possess unique skills that can’t be found in the United States, the program is dominated by low wage guestworkers with ordinary rank-and-file skills, like the accounting employees sent to Toys R Us and New York Life. Rather than preventing work from going overseas, these visa programs are speeding it up. Congress and the president have been derelict in their duty to protect the jobs and living standards of the American workers who are being targeted by these offshoring visas.