H-1B Class Action

H-1B Program Congressional Testimony

One of the purposes of today's hearing is to evaluate why, contrary to expectations, so many H–1B petitions were submitted since the passage of this bill. A related question is whether established users of the H–1B Program have increased the number of aliens they petition for, or whether there is a new universe of users.

Some say that the increased demand is caused by an ongoing and worsening shortage of information technology workers and that in fact the high demand for H–1B visas is proof in itself of a shortage. Others respond that there is no such shortage and that the high demand is merely reflective of a preference for foreign workers and their perceived advantages over American workers.

I am disappointed, I have to say in passing, that none of five information technology companies asked to provide witnesses for today's hearing was willing to do so, especially since they are so outspoken on the subject. [fear of perjury? - dar]
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William R. Yates, Acting Deputy Associate INS Commissioner for Services, reported that through the first 5 months of this fiscal year, service-wide presentations of fraud cases for prosecution had ''already exceeded mid-year levels.''

A deputy assistant secretary of State for Visa Services, spoke of the vulnerability of the H–1B process to fraud and the need to target anti-fraud efforts ''up front before the petition is approved.''

This strategy was employed by INS and State when they undertook a review of more than 3,000 pending petitions at the U.S. Consulate in India. India, by the way, is the country that provides the most information technology foreign workers. The results were astounding. India's anti-fraud unit was able to verify the authenticity of only 45 percent of the petitions—21 percent were found to be outright fraudulent.

On May 26, I wrote to INS Commissioner Doris Meissner and specified steps that she should take to reduce the loss of H–1B numbers to fraud. I have yet to receive a reply.

We should remember, though, that H1–b is just the tip of the workforce iceberg. We're talking about approximately 100,000 visas per year, while ignoring the fact that we admit almost one million legal immigrants every year with no regard to skill or education level.

STATEMENT OF AUSTIN FRAGOMEN, CHAIRMAN, AMERICAN COUNCIL ON INTERNATIONAL PERSONNEL [American Council on International Personnel (ACIP) members are: Bechtel, EDS, Ford Motor Company, Fujitsu Network Communications, Grant Thornton, IBM, Intel, Keane, Motorola, Partners Healthcare Systems, PriceWaterhouseCoopers, Sun Microsystems and The Walt Disney Company - foxes in chickenhouse.]

H–1 professionals currently comprise less than one-tenth of 1 percent of the workforce but are vital to multinational corporations building a global workforce. The H–1B is just not just the high-tech worker shortage visa.

But let us take a look at who is using these visas. One thing we can be sure of is that we cannot derive much help from recent releases by the Immigration and Naturalization Service. Hopefully, the statistical tracking provision of ACWIA will be of help in the future. [American Competitiveness and Workforce Investment Act of 1998/2000]

INS recently released a list of the top 20 corporate users of H–1B visas for Fiscal Year 1998. Part of this widely circulated list was published in the Wall Street Journal. A number of the so-called top 20 users are ACIP members, so we had the opportunity to compare the INS data with the companies' own records in an effort to do a reality check. The results were disturbing.

INS grossly overestimated usage in all cases, by as much as 600 percent in some cases. For example, INS reported that Intel accounted for 2 percent of the visas when, in fact, they had only 297 new H–1Bs last year, which is approximately 0.4 percent. INS reported figures for another company in the information technology consulting field that were greater than its total U.S. workforce.

When we raised these concerns with INS, we were informed the figures were drawn from a different and larger pool than the 65,000 visas approved. It is still not clear what INS was counting, and we have brought this to their attention and asked for them to reexamine the figures. Obviously, ACIP opposes releasing misleading and inaccurate data that can negatively impact on corporations.

As to our efforts, because we felt we could not rely on INS data, we tried to piece together our own usage statistics. ACIP conducted telephone interviews with our members in a variety of industries around the country about H–1B usage. We found most members are using on average only a few more H–1 visas than in previous years.

For example, traditional manufacturing in consumer goods companies use relatively few H–1 visas to begin with. They are using slightly more as they expand research requiring Ph.D.s in sciences and as they expand international marketing efforts requiring employees with global backgrounds. Major technology firms, such as those engaged in semiconductors, biotechnology, and software development are reporting a slight upswing in H–1B usage. Although these firms hire hundreds of H–1s per year, H–1Bs remain a small percentage of their workforce.

Fraud from a practical standpoint takes place in a very small number of consular posts to any significant degree, because there are only a small number of consular posts issue most of the H–1B visas. And I think that the Immigration Service working together with State, has made a very significant change in the way they approach this by essentially investigating cases before they are approved and before they count against the cap. So, I don't think that fraud has a statistically important impact overall. [You wish!]

PREPARED STATEMENT OF HON. SHEILA JACKSON LEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

According to studies by the Information Technology Association of America (''ITAA''), in 1997 and 1998, and a 1997 report from the Commerce Department, we do not have a sufficient number of people skilled in information technology to meet the needs of United States companies. These reports were criticized in March of 1998 by the General Accounting Office (''GAO''). Among other things, GAO pointed out that the reports did not consider (1) the numerical data for degrees and certifications in computer and information sciences other than at the bachelor's level when they quantified the total available supply; (2) college graduates with degrees in other areas; or (3) workers who have been, or will be , retrained for these occupations.

Similarly, in a recently published report, the Commerce Department concluded that while there is no evidence pointing to a tight labor market for highly skilled information technology occupations, due to limitations of available data, there is no way to establish conclusively whether there is, or is not, an overall information technology workers shortage.

Not one Silicon Valley firm recruited during the 1998 conference of the National Council of Black Scientists and Engineers in Oakland, California (only 60 miles from the heart of Silicon Valley). Only two Silicon Valley firms fund scholarships through the National Action Council for Minorities in Engineering, which provides assistance to ten percent of all under represented group students in engineering. And the National Society of Black Engineers of Silicon Valley has only four corporate sponsors.

In addition to the failure to recruiting young people from minority groups, there is a general failure to fully utilize older, more experienced workers. The suspicion is that high tech companies hire young foreign workers instead of recruiting more experienced people because the more experienced people require higher salaries. While many companies do need people with highly specialized skills, these skills can be learned by the older, more experienced people as well as by people just graduating from school.

The American Competitiveness and Workforce Improvement Act of 1998 asked for some very important information to be collected. It asked for information from the INS. It asked the National Academy of Sciences to conduct some studies. Those studies have just barely begun. The INS has been unable to give us a reasonable count, breakdown or description of current H–1B visa entrants; and the work that the Department of Labor was to have done in terms of putting together a system to improve our ability to ensure that there is a truly a need for these workers, that firms seeking to hire them had to meet a series of tests of good faith search and attestation to that search. None of those regulations are in place.

So, I think, not only do we not know enough to answer your questions but we know even less than we did 15 months ago. I wish I could take a stab at answering the questions you raised, Mr. Chairman, but I can't, and it seems to me that is a terribly good reason on its own for your not going ahead.

Let me pick up on something that Ms. Jackson Lee raised. You have, attached to my testimony, a simple chart, and what the chart shows is the rate of growth in employment for math and computer scientists since 1989, and that is the line that is going up. The second line on the chart shows what has happened to wages for men and women with those skills. That line is flat.

Now, many of you have often invoked the market as the most sensible and useful arbiter of how things ought to operate, and you are often right; it is a very powerful mechanism. But if this labor market were operating the way markets ought to operate, these lines would be moving up together. They are not.

Now, that suggests that one of two things are true; I don't know which. Either the availability of H–1B workers is artificially depressing wages in this marketplace, which ought to be rising as demand increases, or the argument that there is scarcity in the market isn't true. One or the other of those things must be true or we would see the bottom line on this chart following the top line up.

It suggests either that the labor market isn't working and therefore isn't inducing young men and women—the young men and women that Congressman Lee talked about—to enter these fields, because wages aren't attractive enough, or that they don't need to be more attractive in order to fill their vacancies.

There are two other things going on in this market that suggest that we ought to have a healthy dose of skepticism about whether or not now is the time to yet again increase the number of visas. One of them is the continuation of industry layoffs. Since January 1 of this year, almost 28,000 people—at IBM, at Compaq, at EDS, Packard Bell, and other high-tech employers—have been laid off. Those 28,000 people remain part of the workforce and perhaps if the industry were more interested in looking in Houston or Dallas to fill its vacancies than in Madras or Bonglore, they would find American men and women qualified, ready to work, and anxious to do so.

And a third labor market phenomena that we ought to pay attention to—and I think Mr. Nelson will talk more about it later—so I will just mention it briefly—is the unemployment rate for information technology workers who are 40 or more. Today it is almost 5 times the unemployment rate for information technology workers who are younger. That suggests both discrimination, and the desire to use the H–1B Program in order to hold wages down.

I talk, in my prepared testimony, about fraud. We know a lot that makes us suspicious. We don't know what is going on at some of the consulates where large numbers of visas have been issued, but we do know that the Inspector General of the State Department thinks it is serious enough to take a look. We do know that the Department of Labor is beginning to examine these questions. Again, we ought to be cautious before we expand this program.

And let me conclude with my fourth point and, again, echoing all of you. The answer is at home. The answer is making the investments in education, in training, in skill upgrading, and making sure that we link those who lose their jobs at EDS and elsewhere to IT firms that are expanding. It is making those linkages, making this labor market work, so these very exciting and important future jobs find their way to Americans who can't do them.

And, again, I can't help but ending where Congressman Jackson Lee did. If the industry looked as hard for tomorrow's employees in Oakland and the rest of the East Bay as we look in central India, I doubt very much that we would be here today.

We know little more about the H–1B program, its effect on U.S. workers or the alleged IT skills shortage than we knew in 1998.

The American Competitiveness and Workforce Improvement Act of 1998 required that the Immigration and Naturalization Service (INS) take steps to maintain an accurate count of H–1B workers, their countries of origin, educational background, occupations, and compensation . The law also required INS to track H–1B employers and the number of foreign workers they employ. Less than a year after enactment of the law, we know nothing more about the employers who bring these workers into the country, the positions they fill, how long the workers remain in the country, their wages and benefits, and most importantly, a thorough understanding of their effect on the U.S. workforce. It is irresponsible to even discuss the possibility of another expansion of the H–1B program with an incomplete frame of reference regarding the short-term and long-term effects of the H–1B program. The Department of Labor (DOL) is unable to give current information on the employers who have filed Labor Condition Applications (LCAs). Even if this information were available, it would be somewhat misleading because an LCA can be used to bring in multiple workers for up to two years. There is no information about the identity or percentage of employers who are ''H–1B dependent'' and to whom the new good faith recruitment and nondisplacement attestations apply. Likewise, INS has not made available any of the information Congress mandated the agency to track in last year's bill, and there appears to be no sense of urgency from the agency that this information be made available prior to the deadline imposed by the legislation. The National Academy of Science has only recently convened its committees to research, analyze and report its finding to Congress as required by under the law.

Available information offers conflicting conclusions on IT workers, wages and their employers.

IT wages—Proponents of an expanded H–1B program claim that there is a dangerous shortage of labor. If so, IT wages should have escalated as desperate employers offered higher and higher wages to attract and maintain scarce workers. However, this is simply not the case. Despite fast growth in employment, indicating an expanding labor market, real median weekly wages for IT workers have barely increased, as shown in chart 1. Real salaries for IT workers were, in fact, less in 1998 than in 1995. Moreover, young college graduates entering the IT labor market have not seen their wages bid up either, as should be expected to happen in an industry with a labor shortage. This leads to a conclusion that either the IT labor supply is adequate, or that the prevalence of H–1B workers in the IT labor workforce has resulted in depression of wages. Wage information does not support allegations of a labor shortage, or the need for an increase in H–1B visas.

Finally, even minimal IT wage increases may merely reflect a general trend that the earnings of workers with college degrees have increased faster than those without. H–1B workers certainly are not garnering high wages. According to DOL, in FY 97, 80% of the LCAs certified by the agency were for jobs paying less than $60,000. These irregularities in the IT labor market strongly suggest that either the presence of H–1B workers and/or the behavior of the IT industry has contributed to the anomaly of a tight labor market with sluggish wage growth.

Since January 1, 1999, IT companies have been responsible for the layoff of over 28,000 U.S. workers. Examples of these layoffs include 5,180 workers who lost their jobs at Electronic Data Systems, 2,150 at Compaq, 3,000 laid off at NEC-Packard Bell and 1,100 at IBM. We fully expect mass layoffs to occur within the first few months of 2000, as Y2K problems are resolved. These numbers indicate either that the IT skills shortage is not of the magnitude alleged by the industry, or that IT employers prefer to hire a new worker with the hot ''skill of the minute'' rather than invest in training current workers who are easily and readily qualifiable for the same job. Either conclusion in untenable and results in a reckless disregard for the potential of U.S. workers.

According to February 8, 1999 edition of Computerworld magazine, U.S. Census Bureau data reveals that the unemployment rate for IT workers over age 40 is more than 5 times that of other workers in the same age group. The older the IT worker, more likely that worker is to be unemployed. These statistics support allegations of older IT workers that they lose jobs to younger, cheaper H–1B workers, and that once they have lost their jobs, older IT workers face a seemingly insurmountable task of finding another job in the IT industry. This behavior on the part of the IT industry may violate federal law and does not conform to that of an industry in the midst of a skills shortage.

A few months ago this subcommittee undertook examination of the extensive fraud and abuse of the H–1B visa program, along with other temporary foreign worker programs. The testimony revealed that inconsistent and lax monitoring and application of criteria by U.S. consulate offices, manipulation of the system by employers who seek to gain entrance for a family member, friend or cheap, low-skilled foreign worker, and at times, the H–1B worker themselves, have thwarted the goal of the specialty worker program. The initial evidence shows that much of the fraud involves employers seeking workers from China and India. These two countries supply the most H–1B workers. The level of scrutiny applied to the academic and employment background are of a foreign worker depends on the U.S. Consulate office where they present themselves for processing. Follow-up inspections of H–1B employers once workers enter the country are prohibited by law. The H–1B program allows anyone with a bachelor's degree, or claiming to have such a degree, admission to the U.S. if an employer describes the position for which the individual will be hired on the LCA in a manner that satisfies DOL's cursory, face of the document scrutiny.

The H–1B program and its expansions have proven to be the worst possible scenario for U.S. workers. As employers voraciously consumed 115,000 visas by the end of June of this year, no regulations enforcing labor protections for both U.S. and foreign workers, either interim or final, have been promulgated by the Department of Labor (DOL). Not one U.S. worker has been afforded the minimal labor protections of the additional employer attestations imposed by The American Competitiveness and Workforce Improvement Act of 1998 because DOL has yet to publish regulations governing their implementation, in either interim or final form. Attention and resources are diverted from the true solutions to a shortage skills, training programs, better educational programs, fair recruitment and diligent enforcement of strong labor laws, to a sham debate for a phony solution to an alleged shortage that is perpetuated by the behavior of an industry.

Another problem is way the INS tracks H–1B applications. The INS never seems to know exactly what its numbers are. I find it unacceptable that it took them one and one half months to inform their constituents that the H–1B numbers for 1999 had been exhausted. [and this woman favors, and is employed for, H-1Bs.]

STATEMENT OF GENE NELSON
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I would like to dedicate this testimony to the memory of Ed Curry, a programmer who came with me last year to testify here in Congress. He died of a stroke in March of this year, leaving a widow and three children. His stroke, from what I have learned from talking with his wife, was related to the extreme stress that he was under trying to find work. And Mr. Curry was all of 40 years old.

I am 47; earned my bachelor's degree from Harvey Mudd College in 1973 after winning a prize in high school at the International Science Fair in 1969. I earned my Ph.D. in biophysics in 1984 from SUNY-Buffalo. I have worked at NASA-JPL among other places. For 3 years, I have worked to obtain start-up capital to try to start up a software business with this new technology of pen-based computers. That was not successful.

Since 1980, I have been active in the areas of science and public policy with a focus on career issues. As I approached age 40, I was informed by prospective employers that I was ''overqualified.'' An article from the Wall Street Journal is included in my written testimony in this regard.

Since being in a JTPA Title III retraining program in 1995, which taught me to lower my professional expectations in order to be employed, I have held four telephone technical support positions. Since earning my doctorate, my position has been eliminated at eight different employers. I have just started a 1-year client-server technology training program with a risk sharing component, namely I have a potential $15,000 liability.

For the past 5 years or so, I have lived a precarious economic existence. Presently, I have no health insurance; I drive a 1983 car with 220,000 miles on it, and my retirement fund is all of $200. [Sound familiar?]

Immigrant Harvard economist George Borjas was profiled in an article in the Wall Street Journal on April 26, 1996. Quoting from the article, ''In another study, Borjas calculates that native workers lose $133 billion a year in lower salaries because of immigrant competition. Employers pocket the money and then some, as reduced expenses. According to the Borjas view, immigration's akin to busing—a grand social experiment whose costs are borne by working class families who don't find the experiment so grand.''

Contrast Borjas' empirical studies with a June 1 press release from Senator Phil Gramm, Ph.D. of Texas. Gramm's New Workers for Economic Growth Act would increase the number of special temporary visas, known as H–1B visas. And what we find out is, first of all, we look at high-tech job cutbacks last year, just in the first half of the year, at 155,000. We look at ITAA member AT&T. They announced a job cutback in 1998 of 18,000. We notice that ITAA member America Online announced a job cutback on March of this year of 1,000. And EDS in Texas had announced job cutbacks of over 8,000, and that was, again, another ITAA member. That just happened. And then we had Compaq Computer 8,000 cut. Now, these are organizations that belong to the ITAA, which is claiming there are such shortages.

The Conference Board reports that help wanted ads are down after the H–1B cap was raised in 1998. Again, the ITAA came to you and told you that they would be creating all of these new jobs, and the Conference Board reports quite the contrary.

Many firms underreport the H–1B usage by using bodyshops to actually employ the foreign national. We note that the total H–1B visas approved is about 534,000 to date. That is approximately one-sixth of the U.S. high-tech I.T. workforce.

A large portion of the approximately 50 pages in testimony in two parts (including a section on my due diligence to obtain employment), documents the profound U.S. science and engineer glut. All science and engineering degree holders have an in-depth, information technology background since it is an integral foundation for those disciplines. For example, there are about 13 million Americans who work in science or engineering or who have earned at least a bachelor's degree in science or engineering since 1960.

According to the 1995 National Science Foundation's SESTAT surveys, only about one-quarter of these, or 3.83 million, have science or engineering jobs. These gluts exist at all degree levels and have existed since at least the late sixties. Observers note that the employer age discrimination has reenergized unionization drives.

Not everyone is willing to work for reform within the system like me. The Nation is weakening the science and engineering infrastructure, hence the national defense, by discouraging entry into the field via employer's strong tampering with free market mechanisms. The H–1B Program contravenes two constitutional amendments: The 13th amendment—the foreign national has a 6-year period of indentured servitude—and the 14th amendment—the citizen scientist or engineer suffers an uncompensated taking of their livelihood.

Mr. Chairman and members of the committee, I would like to express my thanks for having the opportunity to speak with you today, a rare honor for an average citizen like myself.

I am here to discuss how the H–1B Visa Program affects the programming profession. While H–1B extends beyond programming, programmers make up the largest number of H–1B workers.

My first education on the H–1B Program came while working as a consultant at an American company that had fired hundreds of employees and replaced them with H–1B workers. This is legal, because employers who hire H–1B workers through a third party, known in the business as a bodyshop, are immune under the program.

While this company had fired employees in the hopes of saving money, that is not what happened. Rather than being highly skilled, collectively, these H–1B workers were incompetent. They made such a mess that the company had to discard them and bring in an army of consultants, including myself to do the best we could to patch things up so they could continue to run their business.

In the end, the company saved no money, but hundreds of Americans unnecessarily lost their jobs in the process. H–1B is not about skills; it is about cheap labor, and there are no effective protections for Americans against abuse.

Eighty percent of H–1B workers make less than $50,000 a year, significantly less than the average salary in the programming profession and certainly not what one would expect for people whose skills are claimed to be essential to the health of the Nation's economy. Because of their skill level, H–1B workers are not taking jobs from highly skilled Americans; they are taking away opportunities. Each H–1B visa is a lost opportunity for an older American who can't find work. Each H–1B visa is a lost opportunity for a laid-off American to move into programming. Each H–1B visa is a lost opportunity for some American to become a programmer. Because the industry refuses to train the value of an opportunity in the software industry cannot be overstated.

Last year, during the H–1B debate, industry told the country that they needed a temporary increase in the H–1B quota. One little increase to get them going after which they would start training Americans and do something about underrepresented groups in the engineering professions. A year later, they are back asking for me.

The reason the H–1B quota is being used up is the huge supply of people who want to come to work in the United States and the establishment of a pipeline to bring them here. Each year, this pipeline gets bigger. Because H–1B workers are already here, brought over by the pipeline, getting H–1B workers is simple in the programming field.

The essential step Congress needs to take to clean up the H–1B mess is to ban the practice of using bodyshops to supply H–1B workers to other companies. H–1B workers should only be allowed to work in facilities run by the company that actually employs them. The widespread abuse in the H–1B Program will remain as long as Congress allows an H–1B worker to work for one company while technically being employed by another. If it were not for bodyshops consuming thousands of H–1B visas, there would be plenty of visas to go around for companies who need them to bring in foreign workers who actually have unique skills.

Last year, this body made a step in this direction. Unfortunately, the provisions of the bill that might have had some effect in curbing H–1B visa abuse were stripped out of the final law. Stop the foreign bodyshops from using the H–1B Program to turn the United States into a training ground, and there will be plenty of visas to go around.

There has been talk of removing the limit on H–1B visas for holders of graduate degrees. This would make no sense because graduate degrees have no added value in the programming job market, and if such a provision were to become law, you can expect quickie graduate programs to spring up in the United States and around the world. Removing the limit on H–1B visas for holders of graduate degrees is tantamount to removing the H–1B limit altogether.

I urge Congress to make no expansion of the H–1B Program and to start cleaning up the abuse and to put an end to bodyshop usage of H–1B visas.

I thank you very much for your attention.

[Ms. Cleveland bases her praise of the H-1B Program on the low numbers of H-1Bs actually employed BY a few major US corporations. She makes no mention of the use of thousands of H-1Bs by these companies through consulting companies.]

PricewaterhouseCoopers uses the H–1B program in order to hire technical IT professionals who are ready to hit the ground running and who have the language skills they need to service their international clients. PricewaterhouseCoopers' total workforce is 150,000 worldwide. In FY98 they had 10,400 new hires and petitioned for 600 H–1Bs. After the merger with Coopers & Lybrand, LLP the numbers increased for FY99 to 13,000 additional new hires and 800 petitions for H–1B nonimmigrants. Of those hired in FY99, 8,000 were experienced professionals. The H–1B nonimmigrants only make up 2% of their entire workforce. In order to train workers and keep up with demand, PricewaterhouseCoopers has training facilities in Tampa, FL and Philadelphia, PA.

Ingersoll-Rand is a Fortune 200 company that employs 47,000 worldwide, with 28,000 employed domestically. The company is a diversified manufacturer of industrial equipment and components that serve the construction and industrial markets worldwide. Ingersoll-Rand and its subsidiaries employ relatively few H–1B workers; in fact, less than 100 foreign nationals are employed in their domestic workforce. However, these highly-skilled research and design engineers, information systems experts, and multinational marketing experts have made significant contributions to technical and innovative product development, streamlined development of business systems, and possess cultural business acumen regarding emerging markets which has resulted in increased sales throughout the world for our products.

Ford Motor Company and all wholly-owned U.S. subsidiaries' use of the H–1B is NOT a big volume number: 62 out of 155,000 U.S. workers. However, it is a CRITICAL piece of Ford's research into: cleaner engines, optimal fuels, fuel cell and electric storage vehicles, and safer vehicles—whether by structural integrity or use of passive restraints (air bags/curtains).

Of the 62 H–1B employees of Ford, 60 have a Ph.D. Many participated in Ford and (U.S. Government grants funded research in numerous fields. Ford needs the best and brightest minds to stay competitive against all competitors; not just the usual stereotyped Big Three. There is actually a ''cost penalty'' of hiring foreign nationals of at least 10% owing to the immigration costs associated with maintaining work authorization, ensuring the ability to travel to research facilities and conferences outside the U.S)