IT job cuts appear to be in progress at Northeast Utilities in Connecticut, thanks to a move to offshore a significant number of jobs. You may wonder how this happens. Why is it so easy for U.S. companies, even a utility with a captive customer base, to move jobs overseas?
Northeast Utilities, which is now part of Boston-based NStar, is transferring jobs to Infosys and Tata Consultancy. Offshore firms need H-1B workers to complete these job transfers. Infosys brought in H-1B workers to NU in preparation.
Employers are under no obligation, whatsoever, to hire a U.S. worker over an H-1B worker. But there is an exception: Employers with more than 15% of their workforce on a visa are required to try to hire U.S. workers. These employers are labeled “H-1B dependent” by the government. Infosys falls under that category, but there are exceptions to the dependency rule.
H-1B dependent firms that pay at least $60,000 per year in salary, or bring in workers that have a master’s degree in an area related to employment, aren’t obligated to first try to hire a U.S. worker.
A problem may be the $60,000 threshold. It is fixed in stone, and doesn’t reflect IT market wages, especially in coastal cities.
Infosys is paying its workers at NU above $60,000, according Labor Dept. records. The savings for offshore firms comes in part from its offshore/onshore ratio. Offshore firms work to keep the number of its U.S.-based employees as small as possible while having most of the work done overseas.
In sum, there are no protections for U.S. workers at risk of being replaced by temporary foreign labor.
Connecticut set the stage for NU’s IT workforce reductions when it signed-off on a merger last year between NU and NStar.
The motivation for Connecticut to support this merger was a promise that it will lead to utility rate cuts. Connecticut officials late last month, after the layoffs began, said they “will work to ensure that anticipated cost savings arising from outsourcing and consolidation are reflected in lower rates to consumers in the 2014 rate case,” according to a report by WFSB.
NU/NStar, no doubt, has factored in an angry response from lawmakers and increased regulatory scrutiny. But why should Connecticut lawmakers be angry? They allowed this merger knowing the workforce reductions were planned. Their only defense is that they thought the labor reductions would come through attrition. Did they get that in writing?
Will utility consumers benefit from the IT layoffs? What may happen is that NU will return with a devil’s bargain, saying that if they don’t get a rate increase, or at least can hold rates at current levels, even more layoffs are possible.
For those who want to know how this all turns out, see “All is Lost,” Robert Redford’s new film about a man lost at sea. You can always count on a metaphor.