Priority Issues – H-1B, L-1 & Offshore Outsourcing

Ron Hira, Ph.D., P.E., ChairCareer & Workforce Policy

Committee

IEEE-USA Leadership Workshop19 March 2004

Guest-Worker Visas – H-1Bs & L-1s

• What is the issue? – Programs are being used outside intent of law

and they need to be reformed– Lobbyists (Immigration Lawyers & Industry)

do not want reform, in fact they want to expand the programs exposing them to more misuse

• What IEEE-USA would like:– Reform the H-1B & L-1

Guest-Worker Visas – H-1B Problems

• H-1Bs– Intent of Law:

• When an American worker cannot be found for a particular position, companies can petition to hire a foreign national on a temporary non-immigrant visa

• Protection of American workers through ‘prevailing wages’ and other safeguards

• Cap on maximum number of H-1Bs in a particular year

– Problem With Law• Companies can and do prefer foreign workers over US

workers• Protections don’t protect• Sneaking in expansion in Free Trade Agreements

Guest-Worker Visas – L-1 Problems

• L-1s – ‘Intra-company’ Transfer– Intent of Law:

• Multinational Companies can bring their foreign workers to the US for up to 5 years

• Only workers with ‘specialized’ knowledge can come– knowledge specific to the company, – not generic skills like a common programming language

– Problems With Law• Companies, such as Tata, bring rank-and-file workers in to

work at a customer’s site essentially as a contract workers• NO Protections for US Workers – e.g., no prevailing wage• NO Cap• Sneaking in expansion in Free Trade Agreements

H-1B Examples That Meet Intent of Law

Company Sample Position

Sample Location

Sample Annual Wage

#Jobs FY01-03 /Median Wage

Rockwell Scientific Company, LLC

Senior Scientist

Thousand Oaks, CA

$120,000 54 / $72,500

Rochester Institute of Technology

Assistant Prof of Economics

Rochester, NY

$60,000 57 / $50,000

Johns Hopkins University

Postdoc Fellow

Baltimore, MD

$30,500 1,052 / $38,590

Source: R. Hira Analysis US Dept of Labor LCA Database: www.flcdatacenter.com

H-1B Examples Stretch Intent of LawOffshore Outsourcing Companies

Use Is Order(s) of Magnitude Greater

Company Sample Position

Sample Location

Sample Annual Wage

#Jobs FY01-03 /Median Wage

Accenture, LLC Chief Programmer

Houston, TX $25,113 12,684 / $53,042

Cognizant Technology Slns

System Analyst

Tampa, FL $32,870 33,148 / $54,578

Tata Consultancy Services

Programmer Analyst 1

Warsaw, IN $21,460 13,237 / $34,541

Source: R. Hira Analysis US Dept of Labor LCA Database: www.flcdatacenter.com

Offshore Outsourcing Companies Pay Low Wages to H-1Bs

Company % Jobs < $40k

$40k < % Jobs < $60k

% Jobs > $60k

#Jobs FY01-03 /Median Wage

Accenture, LLC 15.3% 40% 44.7% 12,684 / $53,042

Cognizant Technology Slns

2.5% 74.1% 23.4% 33,148 / $54,578

Tata Consultancy Services

81.9% 17.8% 0.3% 13,237 / $34,541

Source: R. Hira Analysis US Dept of Labor LCA Database: www.flcdatacenter.com

Offshoring Definitions

• Outsourcing – Classic Make or Buy Decision– Procter & Gamble contracts with HP for IT services

• Offshore Outsourcing– Sending work to outsourcers who operate overseas

• Offshore Sourcing aka Off-shoring– Daimler Chrysler has an R&D center in Bangalore

• On-site Offshore Outsourcing– Tata Consultancy Services, Infosys, Wipro, Satyam

• Blended Sourcing Near Shore, Best Shore, etc

Why Do Companies Utilize Overseas Technology Talent?

• Cost• Exceptional Talent?

– Shortage of U.S. workers? Ph.D.’s?

• Politics & Access to the Local Market– Trade, e.g., China & Russia – Boeing engineers

• Developing Countries’ Strategy– Tax Holidays & Incentives

• 24/7 Capabilities• Collaborative Engineering Technology

• Companies Aware Of Possibility & Believe It Helps Their Performance

Overseas Engineers Can Afford To Be Paid Less

Country Purchasing Power Parity

(PPP)

Salary

U.S. 1.0 * $70k $70,000

Hungary 0.367 * $70k $25,690

China 0.216 * $70k $15,120

Russia 0.206 * $70k $14,420

India 0.194 * $70k $13,580

How Much Engineering Work Has Moved Offshore?

• No One Knows– No one in government is collecting data

• Commerce Department has pilot study underway - $300k– Companies are reluctant to reveal their plans

• US workers unwittingly training their replacements– Many believe it is only ‘low-level’ work

• No data to support or refute this claim

• Estimates Abound from Self-Interested Research Firms– The Forrester Report is most-cited but also dated

• Completed in November, 2002

Domestic IT Labor Market Record Unemployment

(source: IEEE-USA from BLS)

OccupationEmployed

(000’s)2003

Unemployment

All Managers 14,468 2.9%

Computer & Information Systems Mgrs 347 5.0%

Engineering Managers 77 3.6%

Computer Scientists & Sys Analysts 722 5.2%

Computer Software Engineers 758 5.2%

Computer Programmers 563 6.4%

Computer Support Specialists 330 5.4%

Computer Hardware Engineers 99 7.0%

Electrical & Electronics Engineers 363 6.2%

Unemployment Rates for Selected Occupations: 1983 - Present

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

All Workers Managers & Profs Electrical Engineers Computer Scientists

1983-03 Tech Unemployment Rates

Jobs Moving OverseasPredicted Impacts

• Job Dislocation– Creates immediate problems for US engineers who

are displaced– Job market is still soft so displacement generally

leads to un(der)employment– Not creating jobs

• No one knows why

• Change in Mix of Domestic Occupations– Longer term questions on whether we will have a

healthy technology workforce in the US

Job Dislocation During Low Job CreationTotal Nonfarm Payroll Employment (Seasonally Adjusted), BLS

90,000

95,000

100,000

105,000

110,000

115,000

120,000

125,000

130,000

135,000

Jan-84 Mar-86 May-88 Jul-90 Oct-92 Dec-94 Feb-97 May-99 Jul-01 Sep-03

Em

plo

ym

en

t (0

00

s)

Offshoring Policies

• Need to get an objective count of nature and scale of jobs moving offshore

• Reform H-1B & L-1 visa programs– accelerating off-shore outsourcing

• No coincidence major offshore outsourcers are heavy users of H-1B & L-1

– Cognizant, Tata, Wipro, Infosys, Satyam, IGate, etc.

• Help displaced workers• Ensure healthy US technology workforce• Begin open & sober dialogue about implications

of off-shoring– Dialogue has been rife with misinformation

What IEEE-USA Can Do

• Continue to engage congressional staff by providing them objective information– formally (hearing testimonies) and informally

(staffer to staffer)

• Engage the press and provide objective information

• Facilitate IEEE members’ engagement in the policy process

What You Can Do

1. Meet with your Congressperson in the district office

2. Go to IEEE-USA’s Legislative Action Center website and write to your legislators • Respond to ‘Action Alerts’• Russ Harrison, IEEE-USA staffer, can help

3. Write to state legislators

What You Can Do

4. Enlist members of Regions/Sections/ Chapters/PACE

• To be effective, we need large numbers

5. Spread the word amongst colleagues, family and friends

6. Provide IEEE-USA with individual stories• We want to better understand the situation of

members• Back up the statistics with individualized

stories to get an effective message out