How to reduce H1B visa abuse

Jul 9th, 2015
How to reduce H1B visa abuse

Some of the most high profile companies in the US are lobbying for an increase in the 65,000 quota of H1B visas each year. At the same time several reports point to Americans being laid off and asked to train their replacements who are often foreign workers on H1B visas that cost 20-30% less. So what exactly is going on?

Who can file an H1B visa petition to import a worker?
The H1B visas are meant to allow companies to hire 'highly skilled' people that are not available locally. Companies that ask the US Govt for permission to hire foreign workers on these visas are required to prove the following among other things
1. That the person being brought in is high skilled- usually proven by way of a degree in Computer Science
2. That the company is having a hard time finding high skill developers locally- proven through jobs advertised but not filled
3. That the foreign worker is being paid a salary on par with what a US citizen is paid

Taking advantage of the vague requirements
The problem is that these requirements can be easily met through manipulation if the financial benefit is significant.

The HUGE and VISIBLE Disconnect
Looking at the data we collected, highly technical R&D companies including Google, Microsoft, Genentech seem to be applying for a limited number of visas compared to their overall employee strength and current job openings. The salaries they offer are also significantly higher indicating they are probably higher skilled and probably making as much as local engineers.

On the other hand low-tech companies that do IT staffing for support and testing work- like Infosys, Wipro and TCS that are not hiring hard-to-find skills, are using up huge chunks of these precious visas to hire average skilled workers that do software testing, system administration, etc. For many of the IT services companies who are among the biggest users of these visas, the average salaries across thousands of such workers is around $75-80K. Looking at Glassdoor salaries, even a moderately skilled engineer in the US earns $100K+, with the highly skilled engineers making upwards of $130K+ excluding benefits.

Should the US award the highly sought after H1B visa to a brilliant engineer working on cutting edge technologies or a junior developer brought to replace a support analyst through an offshore IT services company for cost savings? There is no debating who the H1b was meant for. Like the tax code, it just goes to show how corporate greed, mis-incentives, loopholes and lawyers can take a well meaning system and corrupt it.

It is quite silly to put both kinds of people in the same H1B lottery bucket. With a 50% chance of either one getting the H1B visa through the lottery, the US is rolling the dice on letting an employer like Disney save $20K/year in maintenance costs vs. bringing in someone with the potential to build the next Google and create thousands of jobs.

What can be done to prevent abuse?
A common sense solution for the US might be to institute a minimum salary requirement of $100K/year for anyone that wishes to sponsor an H1B visa. If someone is really high skilled and valuable let it show in their salary. Another option could be an auction for the visas based on salaries. Among all eligible applicants, higher salaries get a higher priority. The bar of people coming in will automatically be higher, the H1B workers will be happier and abusers that are arbitraging slaries will start changing their behavior.

The below chart shows just how big the discrepancy in salaries is between IT Services (Staffing) companies and High Tech companies. $100K/year seems to be the benchmark separating them.


Year 2014 H1bs applied Average Salary
India-based services  62,847 $70,588
Infosys 32,379 $76,494
Tata Consultancy Services                    8,785 $66,113
Wipro                    6,733 $69,953
Igate Technologies                    2,056 $67,168
Cognizant Technology                     1,704 $67,506
Larsen & Toubro                     4,380 $59,933
Hcl America                    3,012 $81,376
Satyam/Tech Mahindra                    2,249 $73,374
Ust Global 1,549 $73,374
US-based services  22,310 $86,641
Deloitte                     8,028 $85,295
Ibm                    5,839 $87,789
Accenture                    5,099 $70,878
Ernst & Young                    2,188 $88,353
Ntt Data                    1,156 $100,889
US Technology/Finance 16,428 $113,378
Microsoft  3,911 $113,408
Qualcomm   3,086 $105,169
Google 2,163 $126,565
Intel 1,945 $102,883
Oracle  1,773 $113,065
Amazon 1,256 $109,409
Jpmorgan Chase 1,256 $105,837
Apple 1,038 $130,690


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