Lost Jobs: Importing foreign workers

Ohio companies seek thousands of work visas under program critics say displaces American workers

By Josh Sweigart
March 20, 2016

A federal program designed to help companies fill posts that require skills lacking in local workforces is being used to import foreign labor at sometimes intern-level pay, often replacing qualified American workers.

An I-Team investigation found that 82 percent of the 33,348 preliminary applications for H-1B visas in Ohio last year were for jobs paying below-average wages. The most frequent applicants for these visas were companies that experts say specialize in outsourcing, raising questions about whether the program is filling jobs here or allowing more jobs to move overseas.

The H-1B temporary work visa program was the subject of recent U.S. Senate hearings — during which a criminal investigation at Wright State University earned a mention — and Republican presidential candidates have sparred over possible reforms as companies here and elsewhere are accused of displacing Americans and exporting jobs overseas.

The largest seeker of H-1Bs in Ohio is Cognizant Technology Solutions, which sought approval to hire 1,043 foreign workers in Warren County last year. Some of the workers may have ended up at Cengage Learning, which laid off 75 workers — most from its Mason facility — in January after the company outsourced part of its workforce to Cognizant.

Cengage officials confirmed in an interview reports that workers spent their final months training their foreign replacements. Another 20 workers were offered jobs at Cognizant. The Mason facility has a current staff of about 500.

Cengage Chief Information Officer Bryan Smith said contracting with Cognizant for IT support followed two years of research into how best to keep his business adaptable and maintain growth the company has seen since emerging from Chapter 11 bankruptcy in 2014.

“I’ve been doing this work for a lot of years and I’ve never seen the industry in such a rapid state of transformation,” he said. “It was imperative that we change some of the ways we service customers in order to remain competitive in this marketplace, as well as continue to be a viable and substantial employer in the Mason area.”

But rampant reliance on H-1B visas in the information technology sector has created a self-fulfilling prophecy — dissuading American workers from entering or staying in the field, thus creating a labor shortage, according to Bill Davis, a Dayton-area senior programmer who has experienced numerous layoffs and industry shifts during his decades in IT.

“I know people that told their kids not to get into IT just because of the way the foreigners were being used on H-1B visas,” he said. “They (may) have created their own problem.”

Cognizant responded to emailed questions with a statement saying that for competitive reasons the company does not publicly discuss its business strategies, clients or use of visas in hiring.

“In general, businesses across industries turn to Cognizant consultants, business and technology experts to help them innovate, be more competitive and efficient, and adapt to business and technological change at the unprecedented speed the marketplace now requires,” the statement says.

Debating H-1Bs

The H-1B visa issue took center stage in the March 3 Republican presidential primary debate. GOP frontrunner Donald Trump was accused of flip-flopping on the need for the program, and Texas Sen. Ted Cruz called for a “moratorium” on H-1Bs.

“The abuse of the H-1B program has been rampant,” Cruz said. “I have proposed and promised as president that I will impose a 180-day moratorium on the H-1B program to implement a comprehensive investigation and audit because you got U.S. companies that are firing American workers, bringing in foreign workers, and forcing them to train their replacements.”

Trump’s campaign issued a statement after the debate clarifying his hard line on H-1B visas: “I will end forever the use of the H-1B as a cheap labor program, and institute an absolute requirement to hire American workers first for every visa and immigration program. No exceptions.”

Vermont Sen. Bernie Sanders also has weighed in, saying on his campaign website that the H-1B visa system must be “fundamentally reformed to prevent employers from abusing and exploiting guest workers.”

‘Don’t add up’

H-1B visas are temporary guest worker permits. They allow an employee to stay in the country for up to six years to fill a skilled job typically requiring at least a bachelor’s degree.

The first step in getting an H-1B visa happens when an employer files a Labor Condition Application asking the U.S. Department of Labor for preliminary approval to bring in a foreign worker for a specific job at a specific wage level and location. The LCA includes declarations intended to protect domestic jobs and protect foreign workers from exploitation.

Federal rules cap the number of H-1Bs issued each year at 85,000 nationally, though exemptions for universities and others push the actual number higher. Laws don’t limit the number of LCAs, so there are more applications than visas granted.

U.S. Citizenship and Immigration Services announced last week that it will begin accepting H-1B applications for the 2017 fiscal year on April 1. USCIS expects to reach the cap within five days.

The U.S. Government Accountability Office in 2011 studied the program and found that the government doesn’t know how many workers are in the country on H-1B visas at any point in time.

On the LCA, an employer specifies the wage level it plans to pay the employee. That ranges from entry-level pay at about 40 percent below local median wages, to management-level workers paid about 20 percent more than the median. More than one-third of LCAs for Ohio workers are for the lowest wage level, akin to an internship. In Montgomery, Clark and Warren counties, it’s about half.

Hal Salzman, a professor of public policy at Rutgers University, said Ohio’s numbers mirror national trends, where two-thirds of H-1B visas are for workers at the lower end of the scale.

“The IT industry plans to lay off more people than it will hire under the H-1B program,” he said. “That doesn’t sound like an industry that can’t find workers. The numbers just don’t add up.”

Alleged misuse

Alleged misuse of the H-1B visa program has spurred several local controversies. Federal agents have been investigating Wright State for nearly a year, probing whether university administrators violated immigration law. WSU’s provost and a researcher have been suspended since May, the top university attorney was forced to retire and a top administrator was fired.

An investigation by this newspaper found that WSU was sponsoring H-1B visas for workers placed at for-profit companies including the IT staffing company Web Yoga and a defense firm owned by a then-university trustee. Experts said this appears to have been a violation of program rules.

Wright State filed 18 Labor Condition Applications last year. That made the university the top LCA applicant in Greene County in 2015. Half of the LCAs asked to bring in foreign workers to fill intern-level positions.

Dayton Public Schools in 2005 was declared a willful violator of the H-1B program after the district improperly brought in teachers from the Philippines for jobs that didn’t exist. The school district was found at least partially responsible and had to pay $89,480 in back wages.

And the Horizon Science Academy chain of charter schools in Dayton and elsewhere has been criticized for hiring teachers on H-1B visas, mostly from Turkey. Teachers unions and others argue there are plenty of qualified teachers in the area, but Horizon officials say they simply try to hire the best teachers.

The seven LCAs filed for Horizon in Montgomery County last year were for entry-level positions.

Loopholes, explained

Across the country, H-1B employers large and small have broken the rules, sometimes resulting in fines and rarely leading to criminal charges. But critics of the program say loopholes allow companies to exploit the program without breaking the rules.

The program allows companies to hire experienced IT workers from other countries, but pay them internship-level wages that are still more than they’d make in their home country.

“The worker could be experienced, but because the company has defined the position as entry level, you can pay those entry-level wages,” said Ron Hira, the Howard University professor who analyzed the LCA data used in this story.

If the foreign workers don’t like it, they can’t quit the job without risking their visas.

Other rules meant to prevent replacing American workers with H-1B visas are similarly circumvented, Hira said. Those rules specifically apply to companies such as Cognizant, InfoSys and Web Yoga, whose workforces are more than 15 percent on H-1B visas. The program requires companies to make a good-faith effort to hire Americans, and to not displace U.S. workers.

But those limits are waived if a worker is paid more than $60,000 — which is below prevailing wage for many IT trades — and it’s only considered “displacement” if the native worker leaves within 90 days of the foreign worker coming on board. That’s another reason to keep on a U.S. worker for 90 days to train his or her replacement, critics say.

Also, the outsourcing structure allows companies to avoid displacement rules. When Cengage laid off workers, for example, it didn’t replace them with H-1B workers. It replaced them with Cognizant, which uses H-1Bs but hadn’t laid off any workers.

Cognizant responds

New Jersey-based Cognizant has more than 221,000 employees, many of whom are in India.

“As a U.S. based company, Cognizant actively hires experienced U.S. workers and recruits qualified students from undergraduate and MBA schools across the country,” the company's statement says. “We employ many thousands of U.S. citizens and residents. Each year, as we develop our business plan based on our assessment of our clients’ needs, we apply for H-1B visas to supplement our U.S. hiring in order to fill talent gaps in the market.”

The statement said Cognizant abides by all immigration laws and provides competitive compensation to its workers, who “are lawful U.S. employees and pay the same federal, state and local taxes as any other employee in the state and spend money in the communities where they live and work.”

Ohio’s third-largest applicant of LCAs last year was Tata Consultancy Services. It also is an H-1B-dependent company.

Tata built a Clermont County worksite in 2007, aided by a multi-million dollar tax break package in exchange for pledging to create 1,000 jobs. The company hired more than 500 workers and received $746,163 in tax credits, which apply to both American and H-1B workers, since they both pay income tax.

(Background photo from Tata Consultancy Services offices in Mumbai, India. Credit New York Times)

‘Skills shortages’

Ann Gallaher, executive director of the Miami Valley IT trade group Technology First, said surveys routinely find a skills gap among the local workforce that H-1B visas can help fill.

Technology First surveyed more than three dozen local public and private sector firms about planned job openings in 2016. About 23 percent of the new jobs were for programmers, while 27 percent of surveyed employers identified certain software specialties in high demand.

“If there are specific skill shortages here, data scientists or a highly sought-after networking skill set that can be imported, that would be important,” Gallaher said. “Information technology skill shortages can impact the growth of a company.”

Most local companies directly hire under the H-1B visa program sparingly, Gallaher said, largely because of the complicated process.

LexisNexis applied for 12 LCAs last year, mostly at or above market wages, federal data shows. But the staffing and outsourcing firm Infosys — which does contract work with LexisNexis — applied for 278 LCAs, of which 244 were below median wages.

Gallaher said most of the identified skills gaps are for more seasoned employees. Her group is working with local colleges, universities and employers to train the local IT workforce to meet that gap.

“People want people with five-to-eight years of experience. It takes time to grow employees,” she said. “You can hire students out of Sinclair, Wright State or University of Dayton, but it takes years in the industry to learn a specialized skill.”

Gallaher was surprised that so many LCA applications were for entry-level jobs.

She said H-1B becomes a problem “if you bring somebody over from India that’s being paid a third of the wage for Americans … and American workers can’t find jobs because they are making an honest living.

“I think the government polices that,” she said. “But maybe not.”