How tech giants beat H-1B visa cap: They call ’em students

With tech companies like Facebook paying its interns more than most American workers earn and average IT salaries climbing to more than $87,000 a year, it’s no surprise that the industry is looking for ways to cut labor costs. It’s been obvious for some time that foreign workers coming to the United States on H-1B visas are sometimes paid less than the prevailing wage. Though often denied, this tactic has been used by tech companies to lower their labor costs. But there are only so many of those H-1B visas to go around: 85,000 each year, to be exact.

So the always-creative tech industry has quietly found a way to bypass the H-1B cap and import even cheaper labor. It’s called the Optional Practical Training program (OPT). Last year, the United States approved 123,000 applications from companies to bring in students who were allowed to work here for as long as 29 months.

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That sneaky workaround was revealed in a report by the federal Government Accountability Office, which was prompted by Sen. Chuck Grassley (R-Iowa), who said the study “reveals extensive and alarming DHS [Dept. of Homeland Security, which manages visas] mismanagement of the OPT program.” Talk about mismanagement — in nearly 40 percent of the cases examined by the GAO, the government didn’t even know the name of the student’s employer.

As the report points out, students coming in under the OPT program are exempt from rules requiring they be paid a prevailing wage, and they don’t need to get an H-1B visa to fill a tech job. In other words, they are an easy source of cheap labor that flies under the radar.

It’s great to add foreign students to the mix in American universities, and it’s certainly reasonable for them to gain real-world experience and training while they’re here. But OPT is a fig leaf that covers the ongoing desire of the tech industry to keep the lid on the salaries of U.S. workers.

More applicants, less oversight In 2008, the U.S. government changed the rules on student visas and allowed foreign science, technology, engineering, and math (STEM) students to work in the United States for up to 29 months without an H-1B visa. The program quickly grew in popularity, with applications multiplying from 28,500 that year to 90,900 the next. More than 560,000 OPT applications have been approved in the last six years, according to Grassley’s office.

You’d think that a program that attracts so many students would be selective and some of the students would mess up and be told to leave. But that’s not the case: 2.6 percent of those who applied in 2013 were rejected, and only 0.06 percent of those approved in the last six years have had their OPT revoked.

John Miano, founder of the Programmers Guild, which was among the parties that unsuccessfully challenged a 2008 expansion of the OPT in court, told our colleagues at Computerworld that the lack of H-1B-like rules “makes OPT workers much more valuable” for an employer. They can work for a long period, and they “are cheaper because the employer does not have to pay Social Security and Medicare taxes,” he said.

OPT was introduced by the George W. Bush administration and expanded by the Barack Obama administration in 2012. The Obama administration maintained the 29-month limit on a student’s stay, but expanded the number of eligible fields of study by about 90, bringing the total to 400.

Daniel Costa, an immigration policy analyst at the Economic Policy Institute, says he is concerned about “the fact that none of [the eligible fields] were determined based on demonstrated labor market shortages, and that there are no wage protections for OPT workers, which allows employers to undercut wages paid to U.S. workers. … In a few of these fields, there may be shortages. But in many others, it’s unlikely that we’re anywhere near full employment,” said Costa. “But the government hasn’t taken the time to check.”

More H-1B visas may be coming Meanwhile, the demand for H-1B visas is very strong, and there are predictions that the quota will be filled in just a week after the filing period that opens on April 1.

Last year, the DHS’s Citizenship and Immigration Services agency received 124,000 H-1B petitions in the first week. The agency used a lottery to determine who would get the visas. It was the first time the CIS had used such a lottery since 2008, which is why the tech industry is pushing hard to double the cap. It argues that there is a severe labor shortage, not to mention a shortage of qualified STEM graduates, and they need more foreign labor to fill the gap. (Despite what the tech industry claims, there is no shortage of STEM grads.)

Even worse is H-1B’s dirty secret: The largest single users of H-1B visas are offshore outsourcers, many of which are based in India or, if U.S.-based, have most of their employees located overseas. According to a Computerworld analysis of U.S. CIS data, the top seven H-1B users are Cognizant, Tata, Infosys, Wipro, Accenture, HCL America, and Mahindra Group. Of these, Accenture is an Irish company and Cognizant is an American company; the rest are Indian companies.

These outsourcers’ H-1B use is not benefiting American companies the program is supposed to be for. If the U.S. tech industry really has a labor shortage, as opposed to a cheap-labor shortage, it should be lobbying to get existing H-1B visas assigned to American companies before asking for more.

“This is just affirmation that H-1B has become the outsourcing visa,” says Ron Hira, a public policy professor at the Rochester Institute of Technology and researcher of tech immigration issues.

It’s not clear if Congress will raise the cap on H-1Bs — the visa issue has become entangled with overall immigration reform, which remains stalled. But whether or not the cap is raised, you can bet that the OPT will remain a sleazy end run around the law.

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This article, “How tech giants beat H-1B visa cap: They call ’em students,” was originally published by InfoWorld.com. Read more of Bill Snyder’s Tech’s Bottom Line blog and follow the latest technology business developments at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.