“Selling-Out” America

Posted on March 17, 2015 by djechelon in America, Business, World // 0 Comments

“One of the biggest trends we’re seeing is a re-balancing of the global economy, the GDP in India per person is around $5,000, while in the US it’s around $53,000. We are going through a process where someday those numbers will be the same.”

– Catherine Austin Fitts (Former Assistant Secretary of Housing and Federal Housing Commissioner at the U.S. Department of Housing and Urban Development, Former President of Hamilton Securities Group, Inc., Former Director of Dillon, Read & Co. Inc.)

Outsourcing in America

By Professor Ron Hira

You’ve spent twenty plus years loyally working in Information Technology (IT) for Southern California Edison, and eighteen months ago your boss tells you that they are going to study outsourcing but not to worry, “your position is safe.” On the one hand you are worried because you know many stories of American IT workers losing their jobs to outsourcing, but on the other you feel comforted that you’ve been loyal to SCE and provide a critical service. Then eight months ago they tell you that they are outsourcing most IT functions and that they want you, get this, to train your guestworker replacement. If you say no, SCE will terminate you with cause and you would lose not only a severance package but also eligibility for unemployment insurance. This is the common story I heard from many workers at SCE.

The work that the 400 SCE IT employees do isn’t disappearing, instead it and their jobs are being taken over by foreign guestworkers here on H-1B visas. Those guestworkers are employed by the two leading India-based outsourcing firms, Tata Consultancy Services and Infosys.

The SCE workers are wondering: “Why should I lose my job when the work still needs to be done? Why is the government doing this to me and my family?”

Adding to the injustice of losing their jobs, the SCE workers are being forced to do something that is so common in the industry it is a term of art: “knowledge transfer,” an ugly euphemism that means being forced to train your own foreign replacement. The SCE workers are, “demoralized; in disbelief; beyond furious; down in the dumps; feeling anguish; depressed; feeling dehumanized; feeling humiliated; worrying about the future; worrying about paying the bills.”

The SCE workers rightly place the culpability squarely on SCE executives, the president, and Congress. One worker simply said, “Shame on Edison for doing this and shame on our politicians for enabling it.”

H-1B visas are temporary work permits issued by the U.S. government that are good for up to six years. The intent is for these visas to be used only when an American worker cannot be found. In fact, the U.S. Department of Labor states, “The Immigration and Nationality Act (INA) requires that the hiring of a foreign worker will not adversely affect the wages and working conditions of U.S. workers comparably employed.”

In practice, the H-1B visa has been used for years to undercut American workers with lower-wage, and often lesser-skilled, workers brought in from overseas. How does this happen? Congress sets the wage floors for H-1Bs, and it has set it far below market wages. And the Department of Labor has chosen not to investigate the rampant abuse of the program. As a result, over the past decade, outsourcers like Tata Consultancy Services and Infosys have become the dominant users. Just over the past four years, Tata and Infosys received more than 33,000 new H-1B visas. That’s 33,000 jobs lost due to those two companies alone. They use the program to replace American workers domestically while using their H-1B workforce stationed in America to facilitate the transfer of work and jobs to India. These are not immigrants in waiting, the firms sponsor virtually none of their H-1B workers for permanent residence (greencards). Instead of a way to fill skills gaps, the H-1B program has become a way to suppress wages and pad profits.

The practice of replacing American workers with cheaper H-1B guestworkers is widespread. It is so endemic in the H-1B program that last year the majority of the visas went to outsourcing companies. Indian Government officials have dubbed the H-1B as the “Outsourcing Visa.”

Why do companies replace Americans with foreign guestworkers? The SCE workers rightly believe the motivation is “pure greed.” According to a recent consulting report commissioned by SCE, the typical SCE IT worker is earning $110,000 while government records show Tata pays its H-1B workers $66,000 and Infosys pays $71,000. The savings go beyond just wages. H-1B workers have very limited bargaining power since the employers control their work permit. It should come as no surprise that H-1B workers are easily exploited. Those significant cost savings far outweigh the one-time H-1B legal and administrative fees of about $5,000 per worker.

The SCE workers I spoke to have a message for Secretary of Labor Thomas Perez: use your statutory authority to investigate and stop the H-1B abuse. If you find abuse debar those employers from using the program.

And their message to Congress is: close the loopholes that allow employers to use H-1Bs for cheap labor. Given all of these facts, you would think that Congress would be hard at work fixing the H-1B program. Instead, many are moving in the other direction, writing legislation to triple the number of H-1Bs while doing nothing to close the loopholes. The Skills Visa Act, introduced by Reps. Darrell Issa (R-Calif.) and Bob Goodlatte (R-Va.), in the last Congress, and the bipartisan I-Squared Act recently introduced by the Sens. Orrin Hatch (R-Utah) and Amy Klobuchar (D-Minn.) would threaten tens of thousands more middle class jobs. However, Sens. Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.) have been working for a decade to fix the program. They propose: raising the H-1B wage floors to the average wage; ensuring that American workers have a first and legitimate shot at jobs; and, ensuring that American workers aren’t being replaced by H-1Bs. This would mean the H-1B program is being used for truly skilled workers and not simply cheap labor.

Ron Hira is an associate professor of public policy at Howard University, a research associate with the Economic Policy Institute, and co-author of the book Outsourcing America