U.S.

high-tech workers cry foul over H-1B visas Sherri Cruz Star Tribune Published 08/27/01 "Buy American!" The blue-collar call to patriotism has been revived. This time it's from computer programmers -- white-collar workers who say their jobs are being outsourced to foreign contractors. The Minnesota chapter of the Programmers Guild, made up primarily of people who work as independent contractors for companies, say they can't compete against cheaper foreign labor. The programmers say they've had to cut their rates as much as 50 percent. "We're up against foreign markets," said Steve Millman during a recent Programmers Guild meeting. Undeniably angry, the group of about 17 contractors who attended say the federal H-1B visa program has flooded the market with inexpensive programmers. The program lets foreign workers in specialty and high-skilled occupations work in the United States for up to six years. That foreign worker glut, combined with layoffs and declining technology spending, has left U.S. programmers with limited job opportunities. Now the group is hoping to raise public awareness in Minnesota, joining a national effort to stop the influx of H-1B workers or abolish the program altogether. Other groups calling for an end to the H-1B program include the national Programmers Guild and the Federation for American Immigration Reform, which wants a moratorium on all immigration.

Why now? This comes while the proliferation of offshore consultants -companies that are based overseas or use foreign labor -- has changed the technology landscape by providing an easy and inexpensive alternative for U.S. businesses with reduced information technology budgets. Tata Consultancy Services and Wipro Limited, both based in India with Twin Cities offices, are two of the nation's largest H-1B employers, according to the Immigration and Naturalization Service. Tata alone has about 820 people dedicated to Minnesota-based projects -- 520 consultants here and 300 in India. Computer programming jobs are just the tip of the iceberg, Millman said. Soon, other professional jobs will be outsourced overseas. The group also warns of a brain drain -- shipping jobs overseas will discourage students from entering computer technology fields. Some of the local companies using foreign labor for tasks such as computer systems maintenance include Target, American Express Financial Advisors, 3M, Northwest Airlines, Supervalu, ADC Telecommunications, Stellent (formerly IntraNet Solutions), Best Buy and Fingerhut. The problem began a few years ago, said Program Guild member Linda Nesheim, when U.S. companies began complaining about a high-tech labor shortage, and it culminated last year when businesses succeeded in persuading Congress to raise the number of H-1B visa holders allowed to enter the United States. But in reality, Nesheim said, companies didn't need more

bodies -- they wanted cheaper ones. H-1B visa holders are to be paid the higher of either the prevailing wage in the industry for that job or a wage comparable to a similar position within the company, according to the program's terms. However, as the programmers have discovered, determining the prevailing wage can be a complex issue. The Department of Labor, which oversees the prevailing-wage question, doesn't require employers to use a specific method to figure what the going wage is or should be. In addition, wages have been driven down by companies routinely paying less. The median hourly wage for computer programmers in Minnesota in 1999 was $35, according to the Bureau of Labor Statistics. Although the data are two years old, $35 an hour is significantly less than the wages of $70 an hour and higher that many of the Programmers Guild members traditionally have been paid and grown to expect. Wage differences But companies that employ offshore contractors get around the prevailing-wage issue for the most part. That's because the consultant company is the employer -- responsible for hiring the foreign workers and handling the related wage and immigration paperwork. Pat MacCormick, a member of the Programmers Guild, blames the H-1B program for undercutting her wages. She has lowered her rates from $70 an hour, but she won't go any lower than $35 an hour, or about $72,000 annually. During a recent guild meeting, all of the 17 contractors who attended said they have had to cut their rates.

MacCormick, who has 26 years of experience, was a project leader for the Y2K team at Minnetonka-based Fingerhut Companies Inc. When her contract expired in January, it wasn't renewed. (She recently landed a contract.) She said she could have performed some other job at Fingerhut. But she said she was replaced by a foreign worker whom she had trained. Fingerhut contracts with IMRGlobal, a company that uses offshore programmers. MacCormick and her fellow contractors point out that U.S. workers can't be replaced by H-1B workers under H-1B regulations, but like the issue of the prevailing wage, issues of replacement are complex. In this case, there are a few reasons why Fingerhut's action was permissible under the H-1B program -- namely, MacCormick's contract expired and the Labor Department generally doesn't consider that a layoff, and therefore a replacement. Fingerhut officials declined to comment for this report. The most likely reason that programmers are having difficulty getting jobs is because business has slackened, said Todd Graham, an economist with the Minnesota Department of Economic Security. There are about half as many programming jobs open as a year ago. Since companies need fewer programmers, they eliminate the workers who are easiest to get rid of -- independent consultants and H-1B workers, Graham said. In Silicon Valley, many H-1B workers have been laid off since the Internet industry crashed. H-1B visa holders in Minnesota haven't been affected as much because the industry is smaller here. How it works Aside from the question of whether using foreign labor is ethical or patriotic, one thing is certain -- programmers face

an uphill battle to change the practice. The H-1B program, originally designed to import the "best and the brightest," has expanded somewhat, affording companies significant savings on what traditionally has taken a big bite out of their budgets. The reason it works is that by using a mix of offshore and onshore workers, the consultancy can pay less in total wages and pass those savings on to its clients. The majority of the work usually is done by offshore workers who are paid as much as 50 percent less, and the consultant company pays the prevailing wage only to the on-site H-1B workers., When Tata is retained for a project, for example, it works with a client company to assemble a team composed of 70 percent offshore personnel and 30 percent onshore. If you have 10 people on a project, seven will work in India and three will work temporarily on-site in the United States, explained Arup Gupta, president of Tata Consulting Services America. With the money saved on low-level programming work -often associated with old-line skills such as the once-dominant programming language COBOL -- companies have shifted their U.S. resources -- money and people -- to software development projects that require newer computer language skills such as C++ and Java. Best Buy, for example, hasn't laid off any employees as a result of its contract with Tata, said Laurie Bauer, spokeswoman for Best Buy. On the contrary, Best Buy has made a substantial investment in training for other development areas more pertinent to the company's business, she said. "Best Buy is meeting short-term demand for specific skills that are either not available within our associates, or those

associates are already assigned to other projects," Bauer said. Offshore consultants gained a foothold in the U.S. market during the all-out efforts to prepare computer systems for the turn of the millennium, or the so-called Y2K bug. Much of the work was done by information technology workers in other countries electronically linked to U.S. operations. While working on Y2K, offshore consultants offered U.S. companies fixed, long-term contracts to handle future programming tasks, such as mainframe system maintenance. Now the offshore consultants are marketing higher-level software development projects to U.S. companies, with little success so far. But that may change as more companies get comfortable with the offshore scenario, and U.S. programmers who can't afford to lower their wages may have more to worry about. "It's a pretty sad state of affairs when people with high-tech experience can't get jobs," Millman said.