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Curbs On H-1B Visas And Outsourcing By The US Government!

by Hasan on March 2, 2009 · 16 comments

in Economy, Finance, General Business, Legal

American Passport

The US government, as part of its stimulus plan to revive the depression in the US economy, recently decided on including an amendment that imposes a ban on firms receiving government bailouts, from hiring workers from other countries. Microsoft has recently been asked to remove foreign workers that are employed under the H-1B Visa program, resulting in the software giant announcing that 5,000 jobs will be cut in the next six months; including 1,400 immediately.

H-1B visas are offered by the US government to enable international students and highly skilled international workers, from all over the world, or who are already living in the USA, the opportunity to live and work in America legally.

From the beginning, there has been criticism from various quarters, over the role of the H-1B program in replacing US workers. There were several instances of US staff being replaced with H-1B workers. The ploy employers used is to hire these H-1B replacements from contract job shops. This way the companies could claim that they had not applied for H-1B visas, making it possible for them to legally replace their US staff.

Another complaint was that US Employers hired H-1B workers because they pay significantly less than they would have to for US workers. This cheap labor causes depression in the overall wage structure.

Currently, 65,000 H-1B visas are granted by the US annually to Hi-technology workers from countries like China, India and Philippines.

The US government states that they are not against the H-1B program, but it has to be used in the actual spirit of why it was started in the first place – to have alternatives for specialized workers when there is no availability in the US. It was also clarified that since the 900 billion dollars for the stimulus plan is being paid by the American taxpayer, it is only fair that American workers are hired.

This decision for foreign countries could mean hundreds of thousands of foreign students studying in the US universities will not get employment and millions will be made jobless.

The US government is also planning on controlling outsourcing. American firms that move their jobs to other countries will not be eligible for any tax breaks. Obama, in his address said, “We will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas.”

This will affect more than 1,000 American firms that have over the years moved their jobs outside the country. The government is doing away with a particular provision of the tax code where US companies pay lower taxes for profits earned from foreign countries. There has been opposition for this tax code for a long time, as it was seen as an encouragement for companies to send their jobs abroad, when they rightfully belong to the American workers. The government’s aim through this move is to make outsourcing unattractive to companies in the US.

However, many believe that tax breaks when compared to savings through outsourcing do not stand a chance. While the idea of tax breaks would certainly appeal to the US businesses, it would require a huge tax break to change the established trend of global outsourcing. It would be highly unlikely for companies involved in significant outsourcing to take their businesses, and the related infrastructure and human-resource costs back onshore. So, the impact of this move may be very little.

People who oppose this move say that this move will only hurt the US as outsourcing makes a lot of sense; both economic and logical. It is left to be seen what actually happens. However, with Obama focusing on the revival of the US economy, this is the kind of positive reaction that Americans expect from their new President.

{ 15 comments… read them below or add one }

Donna Conroy March 2, 2009 at 4:34 pm

Right on, Hasan. But the corporate visa programs – federal government laws – do allow companies to layoff local, highly skilled speciality workers and then recruit abroad to replace these workers.

Sanders did the American public a favor – the TARP bank fight revealed this secret inadvertently. Now we need to make all US employers H-1b dependent!

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sammy March 3, 2009 at 2:53 am

Why Obama can’t stop outsourcing

The Indian information technology industry has reacted with a mix of hope and caution after President Barack Obama said last week that he will not allow US companies that send jobs away to enjoy his tax breaks.

Obama is presumably talking about industry-specific tax breaks, though the details are not clear yet. But it is clear to me that he cannot go very far.

For instance, the US plan can affect General Motors, which is getting government help. I know from experience that GM is doing advanced design for its next generation of automobiles using aviation-standard materials in Bangalore. Does Obama’s budget mean that GM will stop using India as a base for innovation? How will GM keep a global edge?

Now, take Accenture, which many think is a US company. It is actually incorporated in Bermuda. Will a US-based retail company (like J.C. Penney, for instance), handing over IT work to Accenture suffer from Obama’s moves? If it does, and rival IBM gets a deal that Accenture might have had, remember that IBM has tens of thousands of employees in India, doing work for US clients. The simple point is that US has itself led efforts in making the world economy in an inter-connected web. The nitty-gritty of crunching IT spending is going to be painful.

US firms have already lost the game of efficiency in automobiles to the Japanese and in overall manufacturing to the Chinese. In pharmaceuticals and services, Indian firms can shake the US in everything but blockbuster product development. If you take new products, IT and distributed global research and development are at the heart of whatever remains of Ameri-can capital efficiency, innovation and competitiveness.

In other words, US firms are no longer US firms, but effectively global firms. By doing harm to what Americans call outsourcing, Obama may be axing a branch he is sitting on. Which is why I see his speech as little more than symbolic post-election posturing. If the benefits of tax breaks are outweighed by the gains of outsourcing, US firms will do what makes more sense to them.

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peterfedrick March 4, 2009 at 6:13 am

The tax code currently accomplishes this redistribution of income in many ways, including progressiveness, phase-outs, and the granting of the child tax credits to non-taxed ‘taxpayers’. I don’t know if you will get this, but isn’t the ‘Earned Income Tax Credit’ a funny oxymoron? Anyway, efforts by Steven Forbes et al. in the past have fallen ‘flat’ in part because of their failure to adequately address this second function.

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Wordweave March 7, 2009 at 4:54 am

Well, looks like Obama is going far…

As it is commonly known America like most of the other western countries is faced with acute shortage of nurses and the past few years have seen medical personnel from countries like India, Philippines and China immigrate to work in US hospitals.

It is a fact that rhere are more vacant nursing positions that there are qualified registered nurses in the US. A legislation was introduced in the US congress last week for the creation of a special category for nursing visas, which would make it easer to bring trained nurses from these countries.

However, Obama feels otherwise. He is strongly proposing training nurses within US and avoid getting them from other countries.

Nursing training is not something that can be completed in a few months, will take years. Wonder what Obama has in mind to fill these vacancies in the short-term.

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Roxan March 13, 2009 at 8:15 am

It is high time that ALL U.S. corporations who: Offshore, outsource, use all manner of visa workers and illegal aliens receive NO tax breaks. Their loyalty is obviously NOT to this nation! Furthermore, our education here needs to step up to the plate and focus on educating our own (and also NOT saddle us with enormous costs that are out of control). Finally, let the job of educating foreigners belong to their prospective nations. It’s not our job to educate everyone else but our own.

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wordweave March 16, 2009 at 4:54 pm

Why do you think United States provides education to these international students? Because international education makes a significant contribution to the U.S. economy. It was estimated that in the academic year 2007-2008, foreign students contributed approximately $15.54 billion to the U.S. economy.

The amount of money these foreign students spend in the U.S. for their tution fee and to support themselves is astounding.

Education to international students is certainly not being provided to help their countries.

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Jingles April 1, 2009 at 1:44 pm

Sorry outsourcing from the start was always shortsighted and has put the US in this spot. Growth of the US was once about the industrial revolution. Now you’d be hardpressed to find products – actual tangible goods that are made here.

It’s import now for those companies that have received gov’t funds to stay afloat invest in US employees until their funds have been repaid. It’s that simple. Companies like Citigroup who are agressively seeking outsourcing of jobs most be halted ASAP until they get their yard in order.

Instead of spending on infrastructure they are looking to turn a quick profit in 2009 to stay afloat. This after taking 3 bailouts.

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StopUSAGiveaway August 25, 2009 at 2:23 am

The reason the USA has a shortage of nurses:
isn’t because we have not produced our own: it is
because of the hemoraging of our USA BORDERS and
the heathen breeders via sperm donor exponentials
crossing to drop a NUMBERS USA just in time to be
handed auto-welfare citizenship from womb to tomb
on the backs of diminishing working USA Citizens
of generations as working taxpayers now EIGHT
GENERGATIONS of breeders and future breeders with
no contributions to our nation…they bleed us as
a plague upon our lifes choices..send them back ASAP

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StopUSAGiveaway August 25, 2009 at 2:26 am

Who or which IT companies are the recipients of the
$l.5 BILLION for:
the databasing of yours and mine
our medical records
How about that: a Kenyan born USA Prez’s priorities
supported and guided by a dual citizen-Rahm Emanuel’s brother a COMMUNIST-PRIORITIES to have each of our personal medical records databased for
GLOBAL SHOPPING CATALOGUE of B O D Y P A R T S.
Ain’t life grreattt.
Electronic MEDICAL RECORDS of USA citizens:via India, the top TEN IT FIRMS in the USA!
And you thought ID theft was a non-stop bureaucratic sell out–

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StopUSAGiveaway August 25, 2009 at 2:30 am

PS Since we have I M P O R T E D
nurses and physicans and other medical personnel
from other nations….of which their primary language is not E NGLISH…
see the MEDICAL ERRORs double, and beyond….
and the majority are not even reported.
RECENTLY Veterans have been experimented upon
How could any pathetic person call themselves MEDICAL anything when they used any instrutment or machine on l00′s of individuals without sterilization? That is the VA’s routine on US TROOPS
SICK and SICKER…it isn’t bad enough when we send US TROOPS each generation to die or be systematically sacrific ed on foreign soil: they come home in body bags, or without arms and legs; wait for med care while whores from US Border receive auto-welfare for birthing against l2 AMEND but our US soldiers wait l0-12 months for care OR have to pay for their own; or die when in the filthy care of the VA or USA gov run institutions via foreigners and US incompetent et all.

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StopUSAGiveaway August 25, 2009 at 2:35 am

WORD WEAVE…your statement what the foreign students spend….
Did you perhaps work directly as an International Student Advisor: then please correct your statement.
FOREIGN STUDENTS are basically wealthy to begin with…that is why they can afford what they pay if they pay as their nations do not have mandatory education like the USA which steals more tax dollars for teaching English as a 2nd language than teaching USA students whose parent pay for both…and
I might ad: do you know what AID and IMF are? You should they pay for the other foreign students: which is your tax dollars.
THEN we have ILLEGALS who moan and complain: just look in your daily newspaper for PROPAGANDA USA repeated sob stories…
ILLEGALS receive IN – STATE TUITION: while USA student and MILITARY yes both citizens of generations pay OUT-Of-State TUITION/
PUKE–when Americans give out WRONG, ERRONEOUS INFORMATION and even make ignorant comments: no wonder we are failing…and can’t compete….

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Wordweave August 26, 2009 at 5:40 pm

Is there anyone that doesn’t know about IMF? We all know and appreciate that the United States helps international students in many ways. We also know why so many international students seek education in the U.S.

But why does the United States continue encouraging more students to study here?

Some may think that educating international students is not important. But it has always been important for the United States. While the billions of dollars they bring in is a known “fact,” there are several other factors involved. With globalization, domestic issues are now international issues. The dependence on international talent in the fields of technology and science is an important reason the United States educates these students, who are then hired for research and in high-tech industries. Much of the research in science is conducted by people from other countries, who received their education here. Yes, it is important to ensure more Americans are educated in these fields, but it has to be done while retaining foreign talent.

Research also shows that there are fewer international students in U.S. colleges today than a few years ago, which is a matter of worry for the United States. Why do you think so much importance is given to the “International Education Policy?”

An educated American should be able to understand that along with the local talent, international talent is also necessary to respond to the demands today.

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dickson March 9, 2011 at 9:28 pm

most H1b in IT filed do the weekly maintenance on saturdays !!!.If the h1b work is taken over by Americans, who will be doing the saturday night partying? ” like in H&K go to white castle”

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RTG March 9, 2011 at 10:53 pm

There are so many inaccuracies in this article. I don’t think the author knows much about this subject. First of all, Microsoft was not “asked” to terminate 5,000 employees. These workers were laid off to cut cost. Many are not H1-B holders but native US citizens. Secondly, over 70% of H1-B visas are granted to Indian IT workers. The next 11% goes to Canada. Followed by 7% to China, 6% each to Japan and France. In addition, Indian outsourcers like Infosys, Wipro, TCS also use L-1 visas extensively to import their workers from India. This visa should only be used for intra-company transfers, not to be used by consultants to work at clients site. It has been badly abused by Indian outsourcers because it does not require the company to pay taxes on the workers’ behalf, and there’s no limit to how many can be used. Over 300,000(70%) L1 visas a year are estimated to have gone to India. Followed by the UK, Canada, France, Japan.

There’s no doubt that Indian outsourcers are hollowing out the US IT industry wholesale. Companies like Microsoft and Intel are increasingly outsourcing their entire development and testing functions for entire software products to outsourcers like Infosys, who then import their workers from India to work on them. Some of this work also get offshored to their main offices in India. H1-Bs at Microsoft get paid over $100,000 a year. H1-Bs at Infosys would be lucky to get half as much. Many only get $24k a year for testing. Infosys and the other subcontracting companies get to keep most of it.

Many completely ignorant CEOs and people like Tom Brokaw are buying into the notion (pedaled to them relentlessly by NASCOMM shills like Vivek Wadhwa) that these are the “best & brightest”, “highly skilled” from India and should be given a green card instantly, when infact many are completely underqualified. Even Indian IT bosses said only 25% of Indian IT grads are employable. Most are from some unheard of diploma mill in India, downright lie about their qualifications in their resume, received no more than a 3 month crash training course in India before being imported to the US as “experts”. Indians now make up the largest % increase in illegal immigrants in the US in 2010. Many simply overstayed their H1 or L1 visas.

America really needs to wake up to this deceitful game played by Indian outsourcers. If we continue to lose IT jobs to them, fewer and fewer American citizens will want to go into IT, and we will lose our IT edge over other countries. Computer Science and Engineering is still the future, it’s just the future won’t belong to us if we continue to give away these jobs. We need to stop going for the quick buck and hire cheap labor from India and the Phillipines, and start nurturing home grown talent. This “skilled worker shortage” thing being sold to us by CEOs and Indian outsourcers is a self-fullfilling prophecy. We cannot keep importing foreign labor forever. Pretty soon America will become overcrowded and turn into a 3rd world country like India, Mexico and the Phillipines.

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sadiku n o January 20, 2012 at 2:06 pm

my comment is dat d usa govt should not let company dat move from usa to benefit from d tax becos am stii come to usa pls adverse me on how to get usa passport thank god bless america and god bless nigeria send my comment to obama

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