Date: Sat, 9 Sep 2006 14:49:25 -0700
From: Norm Matloff <matloff@cs.ucdavis.edu>
To: Norm Matloff <matloff@cs.ucdavis.edu>
Subject: generally excellent IEEE-USA press release

To: H-1B/L-1/offshoring e-newsletter

This is definitely one of the better actions taken by IEEE-USA.  The
document states the problems (mostly) clearly, complete with references.
I do have a few comments, though.

#  WASHINGTON (6 September 2006) — U.S. industry spokespeople say repeatedly
#  that H-1B visa holders are paid the same wages as similarly qualified
#  American citizens. Numerous studies and reports, however, have found this to
#  be untrue.

There is a problem with the phrase, "similarly qualified" here.  That
is what I call the Type I category of labor cost reduction via hiring
H-1Bs.  I also define Type II salary savings, in which employers hire
younger (thus cheaper) H-1Bs instead of older (thus more expensive)
Americans.  The latter are presumably better qualified, since they are
more experienced, but employers tend not to look at it that way.  They
simply want to hire cheaper workers.  The result is the same, of
course--employers hire the H-1Bs instead of the Americans--but to me
it's crucial to state (and understand) everything precisely.  

Yes, I know, the press and Congress don't care about subtleties, but I
do, and my problem is that this document does not distinguish between
Types I and II.  Furthermore, it's really not a subtlety, as there are
important implications.  For example, the Intels and Microsofts rely
heavily on Type II, and lack of awareness of that distinction leads to
the false conclusion that the only employers who are shunning Americans
and hiring H-1Bs as cheap labor are the Indian "body shops" such as TCS.

IEEE-USA is to be commended for focusing on the loopholes in H-1B law,
rather than presenting it as an enforcement issue.  However, its list of
sample loopholes is not quite accurate:

#  Despite the law's intent, Hira enumerated a few ways companies circumvent
#  the law's prevailing wage requirements when hiring H-1B workers:
  
#   1. By selecting a survey source with the lowest salaries
  
#   2. By misclassifying an experienced worker as entry level
  
#   3. By giving the person a lower-paying job title than one reflective of the
#      work to be performed
  
#   4. By citing wages for a low-cost area of the country, then sending an
#      employee to a higher-cost area

Item 2 is inaccurately stated.  The actual loophole is that prevailing
wage is defined according to the JOB, not the WORKER.  If one hires an
experienced worker for an entry level job, the law says that prevailing
wage will be entry level.  It's not "misclassification."  Similarly, if
an employer hires an H-1B worker with a Master's degree for a job that
only requires a Bachelor's, the law says that the employer can legally
pay the H-1B only Bachelor's-level wages--something that the free market
would not allow the employer to do with a worker who is a U.S. citizen
or permanent resident.

And Items 3 and 4 are not loopholes at all.  These are indeed violations
of the law.

#  One reason it is so easy for employers to underpay H-1B holders is because
#  they know how to exploit the loopholes and have almost no chance of ever
#  being investigated. Even if they were investigated, the loopholes are so
#  large most of the employers would likely be found following the letter of
#  the law. First, DOL's automated review of LCAs is limited to looking for
#  missing information or obvious inaccuracies; no human looks at the
#  applications. Second, if a Department of Homeland Security (DHS) review
#  finds that an H-1B worker's income on the W-2 form is less than the wage on
#  the original LCA, DHS does not have a way to report the discrepancy to DOL.

Unfortunately, this jumbled and self-contradictory paragraph gives the
reader the impression that it is an enforcement issue after all.  The
second sentence actually says that it isn't, but the rest of the
paragraph says the opposite.

Norm

www.ieeeusa.org/communications/releases/2006/090606.asp

News Release

         Reports, Studies Shatter Myth that H-1B Visa Holders
                 are Paid Same Wages as U.S. Citizens

WASHINGTON (6 September 2006) — U.S. industry spokespeople say repeatedly
that H-1B visa holders are paid the same wages as similarly qualified
American citizens. Numerous studies and reports, however, have found this to
be untrue.

Tata Consultancy Services (TCS) Vice President Phiroz Vandrevala even
admitted that his company enjoys a competitive advantage because of its
extensive use of foreign workers in the United States on H-1B and L-1 visas.

"Our wage per employee is 20-25 percent lesser than US wage for a similar
employee," Vandrevala said. "Typically, for a TCS employee with five years
experience, the annual cost to the company is $60,000-70,000, while a local
American employee might cost $80,000-100,000. This (labour arbitrage) is a
fact of doing work onsite. It's a fact that Indian IT companies have an
advantage here and there's nothing wrong in that. … The issue is that of
getting workers in the U.S. on wages far lower than local wage rate." ("U.S.
visas are not a TCS-specific issue," Businessworld (India) magazine, June
2003)

IEEE-USA President Ralph W. Wyndrum, Jr. said proposals now before Congress
to raise the H-1B visa cap should be scrapped until significant workforce
protections for U.S. and H-1B employees are instituted.

"Not paying market wages to H-1B holders is unfair to both foreign and
domestic high-tech workers," Wyndrum said. "H-1B employees are being taken
advantage of, and some U.S. workers' salaries are likely suppressed by the
influx of thousands of additional job competitors. The wage problem is one
symptom of how deeply flawed the H-1B program is."

Findings showing H-1B holders earning less than the market wages paid to
U.S. technology workers include:
 1. "Immigrant engineers with H-1B visas may be earning up to 23 percent
    less on average than American engineers with similar jobs, according to
    documents filed with the U.S. Department of Labor (DOL). Salary data
    from Labor Condition Applications (LCAs) lends credence to arguments
    that lower compensation paid to H-1B workers suppresses the wages of
    other electronics professionals." — EE Times (June 2006), which
    calculated average H-1B salaries from LCAs and compared them to the
    Bureau of Labor Statistics' Occupational Employment Statistics survey of
    employers. See
    www.eetimes.com/news/latest/showArticle.jhtml?articleID=189401976.

 2. "In spite of the requirement that H-1B workers be paid the prevailing
    wage, H-1B workers earn significantly less than their American
    counterparts. On average, applications for H-1B workers in computer
    occupations were for wages $13,000 less than Americans in the same
    occupation and state."
    "Applications for 47 percent of H-1B computer programming workers were
    for wages below even the prevailing wage claimed by their employers."
    — Center for Immigration Studies report (Dec. 2005). See
    www.cis.org/articles/2005/back1305.html (under Key Findings).

 3. "Some [H-1B] employers said that they hired H-1B workers in part because
    these workers would often accept lower salaries than similarly qualified
    U.S. workers; however, these employers said they never paid H-1B workers
    less than the required wage." Government Accountability Office report
    (September 2003). See www.gao.gov/new.items/d03883.pdf (p. 4).

According to IEEE-USA Vice President Ron Hira, the concept of "prevailing
wages" is worthless as a safeguard for U.S. and H-1B workers.

"Proponents of the H-1B program say that by law H-1B workers must receive
prevailing wages, but this is a legal façade so full of loopholes that it is
frequently gamed by employers to pay below-market wages," Hira said. "This
is another myth of the H-1B program, that prevailing wages are the same as
market wages."

A review of the DOL's LCA database for FY 2005 shows some of the
well-below-market wages employers have been certified to pay H-1B workers.
For example, Teja Technologies received permission to pay a software
engineer $10,900. Infosys Technologies was authorized to pay a programmer
analyst $20,030. TCS was certified to pay a computer programmer $20,571, and
Syntel, Inc., was permitted to pay a computer programmer $31,304.

Under law, U.S. employers have three options for determining an H-1B
employee's prevailing wage. According to the DOL, an employer can request a
"prevailing wage determination from the appropriate State Workforce Agency;"
use a "survey conducted by an independent authoritative source;" or use
"another legitimate source of information."

Despite the law's intent, Hira enumerated a few ways companies circumvent
the law's prevailing wage requirements when hiring H-1B workers:

 1. By selecting a survey source with the lowest salaries

 2. By misclassifying an experienced worker as entry level

 3. By giving the person a lower-paying job title than one reflective of the
    work to be performed

 4. By citing wages for a low-cost area of the country, then sending an
    employee to a higher-cost area

One reason it is so easy for employers to underpay H-1B holders is because
they know how to exploit the loopholes and have almost no chance of ever
being investigated. Even if they were investigated, the loopholes are so
large most of the employers would likely be found following the letter of
the law. First, DOL's automated review of LCAs is limited to looking for
missing information or obvious inaccuracies; no human looks at the
applications. Second, if a Department of Homeland Security (DHS) review
finds that an H-1B worker's income on the W-2 form is less than the wage on
the original LCA, DHS does not have a way to report the discrepancy to DOL.

"It's a self-policing system that is never actually checked," Hira said.
"The law itself is written in a way to invite exploitation. It should be no
surprise that firms take advantage of the loopholes."

IEEE-USA advances the public good and promotes the careers and public policy
interests of more than 220,000 engineers, scientists and allied
professionals who are U.S. members of the IEEE. IEEE-USA is part of the
IEEE, the world's largest technical professional society with 360,000
members in 150 countries. For more information, go to www.ieeeusa.org.

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Contact: Chris McManes
IEEE-USA Senior Public Relations Coordinator
Phone: + 1 202 530-8356
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++


                   Last Update:  06 September 2006
        Staff Contact: Pender M. McCarter, p.mccarter@ieee.org