Issa bill would kill a big H-1B loophole

Proposal would raise minimum wage for H-1B-dependent firms from $60K to $100K, but it faces criticism

Outsourcing crowd moving toward the United States

In 1998, Congress raised the H-1B cap and then set some controversial H-1B visa rules. It prohibited the largest users of H-1B visa -- firms employing 15% or more visa workers -- from displacing U.S. workers. They also are required to make a "good faith" effort to recruit a U.S. worker for a position.

Congress then inserted a massive loophole.

U.S. workers can be displaced by H-1B-dependent employers -- such as IT outsourcing firms -- provided the visa holder has a master's degree or the company pays visa workers at least $60,000. This salary level has not changed in 18 years.

darrell issa

Rep. Darrell Issa, (R-Calif.)

On Wednesday, Rep. Darrell Issa (R-Calif.) introduced a bipartisan bill, the "Protect and Grow American Jobs Act," that makes two key changes to the 1998 law.

It raises the $60,000 salary minimum to $100,000 and, unlike the 1998 law, includes an inflation adjustment. It also eliminates the master's degree exemption.

"The high-skilled visa program is critical to ensuring American companies can attract and retain the world's best talent," said Issa in a statement. "Unfortunately, in recent years, this important program has become abused and exploited as a loophole for companies to replace American workers with cheaper labor from overseas."

Issa's bill has seven co-sponsors, including five California Democrats, U.S. Reps. Scott Peters, Jared Polis, Juan Vargas, Duncan Hunter and Susan Davis. Notably absent is Rep. Zoe Lofgren, who represents Silicon Valley and has been working with Issa on a more expansive H-1B reform bill.

Issa's bill will likely face criticism.

A $100,000 minimum salary is still below what the average IT employee at Southern California Edison (SCE) is paid. SCE cut some 500 IT workers, mostly through layoffs, after it hired two H-1B dependent firms, Infosys and Tata Consultancy Services. Some of the utility's IT employees complained of having to train their visa-holding replacements.

SCE's IT layoffs drew the ire last year of Issa. The H-1B program is "not intended" to be "a program to simply replace American workers en masse with cheap labor from overseas," he said after news of SCE's action broke.

But the average salary of SCE IT employees was $110,466 annually, according to Edison's own compensation study. That information was cited by Ron Hira, an associate professor of public policy at Howard University, during Senate testimony last year. Tata and Infosys pay new H-1B workers on average $65,565 and $70,882, said Hira, in his testimony.

Calvin Moore, a spokesman for Issa, said Thursday that requiring the higher salary, to $100,000 would "have likely prevented these jobs being outsourced."

In response to Issa's bill, Hira said it "will do nothing to eliminate the abuse of the H-1B program. It simply shuffles the deck chairs on the Titanic. Instead of losing their jobs to Tata or Infosys H-1Bs, the Southern California Edison workers would be training their cheaper H-1B replacements employed by IBM or Accenture."

Hira called the bill "a positive first step" for recognizing "that there are problems with the H-1B. But their proposed solution is a swing and a miss."

Peter Eckstein, the president of the IEEE-USA, said the group "appreciates the leadership" Issa is providing on this issue. "While H.R. 5801 does not go nearly as far as we would like, raising the minimum wage paid by outsourcers will discourage, but not end, the outsourcing of American jobs. Still, this bill is a step in the right direction," he said in a statement.

On this one issue, the dependent employer loophole, H-1B visa critics will ask: Why set any minimum salary threshold for displacing U.S. workers? Why not eliminate the ability of IT services firms to displace U.S. workers at third-party sites, something that is now routine in offshore outsourcing?

Issa's bill, if adopted, would create -- to Hira's point -- industry competitiveness issues.

A firm that employs more than 50 people and has 15% or more of its workforce on H-1B visas is categorized by law as H-1B dependent. Most H-1B dependent firms are based in India, so the Indian government will likely argue loudly that all Issa's bill will do is to put their industry at a competitive disadvantage.

IT services firms with large U.S. workforces, IBM and Accenture, in particular, use H-1B workers but aren't subject to H-1B dependent rules because the visa workers make up less than 15% of their workforces. The dependent firms will have to pay the minimum $100,000 salary if they want the exemption. The non-dependent firms will only have to meet the often lower-paying prevailing wage rule.

Issa's bill is very targeted. Critics say the program brings in young, mobile workers who are in competition with older workers. More than half are paid the lowest level of prevailing wage.

Issa's bill is the second H-1B proposal to be introduced this month in the House of Representatives. Rep. Bill Pascrell (D-N.J.), proposed the "H-1B and L-1 Visa Reform Act of 2016," which would require all employers to make a "good faith effort" to recruit U.S. workers, and prohibit firms from hiring H-1B employees if more than 50 people and more than 50% of their employees are H-1B and L-1 visa holders.

Copyright © 2016 IDG Communications, Inc.

Bing’s AI chatbot came to work for me. I had to fire it.
Shop Tech Products at Amazon