Opponents of Raising H-1B Cap Mistakenly Blame H-1Bs for Layoffs

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Technology companies have been pushing Congress to raise the cap on H-1B visas, which provide foreign nationals a three-year stay in the country to work in a specialty occupation. The unified industry support indicates that the major players think they can take advantage of the surge in talent that would accompany the additional visas. Unless these large companies are mistaken, this small reform would give American technology companies an edge over their overseas counterparts. Bipartisan support for this reform had been growing due to the fact that no one was challenging it, until now. Southern California Edison (SCE), a large utility provider in its region, recently laid off a significant amount of tech staff and instead brought in the tech solutions company Infosys for staffing. One of the laid off employees, J. Palmer, recently went before Congress to argue against raising the H-1B cap. Most of the Infosys employees that have been assigned to SCE are apparently H-1B workers.

Palmer argued that not only was SCE mistreating its loyal employees, the situation also constituted an abuse of the H-1B visa program. Specifically, he says tech companies are using it to get cheap labor, and in doing so, are displacing American workers. The program has minimum salary and qualification requirements to prevent a “race to the bottom” in American labor circumstances. Palmer says that these requirements, which are manifest in the H-1B Labor Certification process, are failing American workers–or at least the SCE employees that were laid off. The process’ immediate purpose is ensuring that the presence of H-1B workers doesn’t lower the average wage paid to Americans–or prevent equally-or-better qualified Americans from getting jobs (that H-1Bs are seeking). By making these claims, Palmer is implying that what happened at SCE goes against what the H-1B program is meant for–and is in general a bad thing for the country.

Being laid off is a sad situation, but it is a fact of life in a free market. SCE came to the opinion that its decision to use Infosys for IT staffing instead of retaining its current staff would allow it to cut costs, increase efficiency, or both. This will allow it to offer lower rates to its customers and/or return dividends to its investors. But, this is precisely the problem, according to Ron Hira, public policy professor at Howard University. “[T]he average [salary] for an H-1B employee at Infosys in FY13 was $70,882” but “the average [salary] of a Computer Systems Analyst in Rosemead, CA (where SCE is located), [was] $91,990 (according to the U.S. Department of Labor).” These numbers, along with the fact that Infosys doesn’t sponsor very many of its employees for permanent immigration, led Hira to conclude that “the H-1B workers Infosys [hires] are being used as temporary, cheaper, disposable labor, not as a way to permanently introduce talent and innovation into the American labor market.” The tech news site ComputerWorld calls this situation an “injustice.”

Hira takes this a step further, saying that because “SCE’s IT specialists were earning an average annual base pay of $110,446, Infosys [gets] a 36 to 41 percent savings on labor costs.” However, this means the SCE IT specialists’ base pay was $18,000 a year more than the average “Computer Systems Analyst” in their own town. Even ignoring this, however, the data provided is nowhere near enough to justify the claim that the H-1B program is to blame for the layoffs. To begin with, one cannot deduce how much the Infosys employees assigned to SCE are making based only on the average salary of Infosys employees in general. But this is somewhat irrelevant, because the Infosys employees are not even in the same occupations as the laid off workers.

The laid off workers were permanent IT staff, whereas Infosys is supplying SCE with IT solutions in the form of a cohesive temporary staff that emphasizes efficiency in order to cut costs. Working at a staffing agency does often result in lower wages, but it also results in more work opportunities, which is why it is an increasingly attractive option for managers and workers alike. The SCE case isn’t one about foreign labor resulting in layoffs. It is instead an example of how the rise of tech staffing companies (that H-1Bs want to work for) is leading many to erroneously believe that the H-1B program causes tech layoffs. (We cover this issue as a whole in a separate article.) Thus, this case should not be seen as any reason to not raise the H-1B visa cap.