- Most of the biggest users of the H-1B visas—the U.S.’s largest temporary work visa program—are companies that have an outsourcing business model.
- These companies exploit the H-1B program’s weaknesses to facilitate the transfer of U.S. jobs offshore as a lower cost alternative to hiring U.S. workers, and sometimes to replace incumbent U.S. workers with H-1B workers who are paid wages that are far below market wage rates.
- The latest data show that over 33,000 new H-1Bs were issued to the top 30 H-1B employers, accounting for nearly 40% of all new H-1Bs in 2020 that are subject to the annual limit of 85,000.
- Of the top 30 H-1B employers, 17 of them were outsourcing firms. Those 17 outsourcing firms alone were issued 20,000 H-1B visas, nearly one-quarter of the total 85,000 annual limit.
- President Joe Biden can and should implement regulations so that outsourcing companies can no longer exploit the program and to prevent them from underpaying skilled migrant workers.
The U.S.’s largest temporary work visa program is the H-1B—an important program that allows U.S. employers to hire college-educated migrant workers. However, the H-1B program is not operating as intended and needs to be fixed: Instead of being used to fill genuine labor shortages in skilled occupations without negatively impacting U.S. labor standards, the latest data show that the H-1B’s biggest users are companies that have an outsourcing business model. President Joe Biden can and should implement regulations so that outsourcing companies can no longer exploit the program and to prevent them from underpaying skilled migrant workers.
Outsourcing companies exploit the H-1B program’s weaknesses to build and expand a business model based on outsourcing jobs from other companies. In this arrangement, rather than being employed directly by the outsourcing company that hired them, the outsourcer sends its H-1B workers to work for third-party clients, either on- or off-site. The aim of the outsourcing company is ultimately to move as much work as possible abroad to countries where labor costs are lower and profit margins are higher. The H-1B workers serve three purposes in this business model: to facilitate the transfer of jobs and tasks offshore; to coordinate offshore teams; and to serve as a lower cost alternative to hiring U.S. workers for on-site jobs. H-1B outsourcing companies also replace incumbent U.S. workers with H-1B workers and typically pay their H-1B workers the lowest wages permitted by law, far below market wage rates.
For at least a decade and a half, Senators Durbin (D—IL) and Grassley (R—IA) have worked in a bipartisan way to expose the failings of the H-1B visa. In fact, one of the first moments the public discovered the flaws in the H-1B program was 14 years ago when Senators Durbin and Grassley released a list of the employers that received the largest number of H-1B visas in 2006. The companies on the list were a startling revelation, because, contrary to what most expected, it was dominated by firms that pioneered the outsourcing and offshoring business model—rather than blue chip tech firms that are household names.
Contemporaneously, in a report on H-1B, The New York Times quoted India’s then-Commerce Minister, Kamal Nath, in perhaps a moment of unintended honesty and transparency, noting that the H-1B “has become the outsourcing visa,” since it had become critical to the country’s emerging business model of offshore outsourcing.
The public was rightly shocked by the senators’ revelation since using the H-1B program to facilitate the offshoring of U.S. jobs and to replace U.S. workers is the antithesis to the program’s raison d’etre of helping employers fill labor shortages with skilled workers. The program is supposed to bring in skilled workers to complement the U.S. labor force, not substitute for U.S. workers.
Over the ensuing years, we have used government data to show how outsourcing companies have continued to be the biggest beneficiaries of the H-1B visa, time and time and time again. The most recent data, for fiscal year 2020, show that once again, outsourcing firms continue to dominate the H-1B visa program.
Table 1 below shows the top 30 H-1B employers by number of approved petitions for initial employment (i.e., for new H-1B visas, not visa extensions) for fiscal year 2020. It shows that these 30 companies were issued over 33,000 new H-1Bs, accounting for nearly 40% of all new H-1Bs in 2020, which are subject to an annual numerical limit of 85,000 for for-profit companies. (Universities and nonprofit research organizations are exempt from any limit.) Of those top 30 H-1B employers, 17 of them were outsourcing firms. Those 17 outsourcing firms alone were issued close to 20,000 visas, nearly one-quarter of the total 85,000 annual limit. Many of the outsourcing firms on this list have been reported to use the H-1B program to replace U.S. workers in cases that garnered national attention.
Since Senators Durbin and Grassley published that first H-1B data set, there have been countless shocking revelations in the press, including companies like Disney, Southern California Edison, and even the University of California, laying off hundreds of their well-paid employees and contracting with major outsourcing firms like Tata and Infosys to replace those employees with H-1B workers who were paid salaries that were tens of thousands of dollars less. And to add insult to injury, to qualify for their severance packages, the laid-off workers were forced to train their H-1B replacements to do their former jobs. In many cases this involved the H-1B worker shadowing the U.S. worker to be trained in every aspect of the job. Many of these cases were investigated by federal agencies, litigated in the federal courts, and put in the spotlight in Congressional hearings, yet the practice is lawful and persists today.
It’s important to note that when it comes to the problems in the H-1B program, none were fixed during the Trump presidency, despite the histrionics against these fixes by tech firms and corporate-funded think tanks and analysts. In his first public address after being elected, then-President-elect Trump promised to fix abuses in visa programs in the first 100 days of his administration, but it never happened. As a result, and as the 2020 H-1B data in Table 1 show, the H-1B remained “the outsourcing visa” during the Trump years.
Members of Congress and Presidents from both parties over the past 14 years—who have been well-informed that the H-1B program has morphed into a corporate scam to offshore U.S. tech jobs and underpay migrant workers—have turned a blind eye to fixing it.
Before winning the presidency, candidate Biden was explicit about his support for reforming work visa programs. If President Biden is committed to fixing the U.S.’s largest work visa program—to ensure that the program is used to fill labor shortages instead of offshore jobs, and that 600,000 skilled migrant workers are treated and paid fairly—there are a number of actions his administration can take without Congress. These actions include:
- Implementing the Labor Department’s recently delayed H-1B prevailing wage methodology rule, so that H-1B workers are paid a fair wage and to prevent employers from undercutting U.S. wage standards. Outsourcing firms legally pay wages that are far below the local median wage for skilled jobs. But they’re not the only ones; last year we published an analysis showing how a number of major U.S. tech firms also pay their H-1B workers less than the local median wage. The rule would require all H-1B employers to begin paying fair wages.
- Begin enforcing the requirement in the H-1B labor condition application that requires employers to pay the “actual wage” rate paid by the employer to other employees with similar experience and qualifications. To date, this key provision of the H-1B wage rule has never been enforced.
- Immediately implementing the Department of Homeland Security’s visa allocation rule, which has also been delayed, that would distribute H-1Bs by wage level rather than random lottery. This rule would ensure that the highest skilled H-1B workers are awarded visas and has bipartisan support. Under the current H-1B random lottery, outsourcing companies game the system to receive a large share of visas every year, and the results are clear: DHS data show that in 2019 and 2020, 85% of visas were awarded to entry-level and junior workers who are paid 20-40% below market wage rates.
- Issuing policy guidance so that secondary employers to which H-1B workers are outsourced will be required to file labor condition applications with the Labor Department. Such guidance, which was recently considered but never enacted, would close the loophole that allows firms like Disney to replace its U.S. employees with H-1B workers by employing them through an outsourcing firm. Implementing this rule would require firms like Disney that benefit and profit from hiring outsourcers to acknowledge their existing employment relationship with H-1B workers by filing a labor condition application—even when hiring H-1B workers through an outsourcing firm instead of directly—and attest to the Labor Department that they are not adversely impacting their U.S. workforce by using the H-1B program.
President Biden has described himself as pro-worker, voicing support for unions and framing his forthcoming multi-trillion dollar recovery plan as a critical path to “providing really good jobs for people.” Fixing the H-1B program through these simple measures would be consistent with those goals—by preserving and creating good, decent-paying middle class jobs, and increasing productivity by attracting skilled workers who complement the U.S. labor force—and it wouldn’t cost taxpayers a dime.