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How does low wage H1B’s affect US economy? How low are H1B wages ?

Most of the hate and vile comments towards H1B visa program carry an important message, “Americans are losing jobs to cheap wages of H1B”.

Let’s have a look at some key factors.

Indians occupy upper Middle class of US economy, per US Census Bureau  with a median income twice as of average American.

H1B Salaries

Average H1B employee makes a salary of around $86,000 per annum (source) and most places this average at nearly $40,000 above median income of their locations.

Also consider this US DOL sets a minimum wage of $60,000 per annum for a H1B and add legal fees borne by employer ($5K per year), also add the travel and relocation fees from India of $10K.  To hire a junior programmer with minimal experience in a small town, it will cost an employer at least $75K per annum.

American College Graduate Salaries

American college graduates are feeling the pinch more than ever in the last few years, they come out of college with more loans and struggle to make ends meet. Average college student coming out of a college in US makes less than $50K per annum (source). Then why aren’t US students flocking to get these jobs?

Skills

As a good guideline, kids who enjoy mathematics and reasoning tend to enjoy programming and software development.  While countries like India are  very strong in Mathematics and Science, US is seeing a decline and considered below average by annual exams. (source)

Stress and work-life balance

Software and IT industry is considered high stress due to its ad hoc work schedule, sharp learning curve and critical decision making. Not everyone will enjoy software development and the challenges with it. Most American’s expect a job with flexible work schedule and work-life balance, which sometimes can be tough to come in this industry.

Blaming wages will help pass some laws and get some votes, at the end jobs might go to countries like India when H1B’s go back to their home countries. Unless there is a fundamental shift in education and hardwork, US will struggle to match H1B  employees.

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How is H1B Salary Determined – Hard Truths about H1B VISA abuse.

There is a burning debate going in both American and Indian Technology sectors pertaining to H1B VISA reforms. These debates were started by Donald Trump’s victory and fueled by his “America First” slogan. Additionally some of the new legislation introduced by Darrel Issa and another one by Chuck Grassley & Dick Durbin, has created excitement and confusion within the industry.

Both of these laws focus on setting a minimum Salary for H1B’s and other financial restrictions in obtaining the VISA. The truth is they wouldn’t need a new system to establish this, there is already a well planned and detailed system of wages followed for every H1B VISA.

Prevailing wages for H1B (Labor Condition Application – LCA )

For an employer to apply for a H1B VISA the following process needs to be completed.

  1. Determine the role of an prospective employee defined with Department of Labor. link – Labor Site for wages
  2. Identify the skill level per Department of Labor site –Link to pdf
  3. Determine the location by State and County where the employee will be working.
  4. Find the prevailing wage for the role,skill level and location. Wage Search here.
  5. This wage updates every year (3rd quarter of every year) with Cost of living adjustment.
  6. This wage revision happens every time a H1B employee applies for extension, change of role or change of location.
How is H1B Salary determined

Does the prevailing wage system work ?

  1. If followed legally this system works to the benefit of employee and reduces incentive for hiring H1B vs local hire.
  2. Playing with above data you can clearly see for the same role in Idaho and California , the wage will vary 20K-30K per annum.
  3. Minimum salary in locations like New York, New Jersey and Los Angeles will be already near or above 100K.

What is broken in the prevailing wage system?

  1. Not all employers inform the employees of the role/skill selected for the current job.
  2. Some employers choose the lowest possible role to keep the employee’s salary lower.
  3. While a minimum wage in Chicago is 110K per annum, the same role and skill will be 80K in a suburban location 25 miles from Chicago city. Employers tend to keep these lower cost locations to avoid paying City salaries while still working near a city.

What is the current situation in H1B abuse?

Most of big name companies have already outsourced all their immigration needs to US firms like Fragomen Worldwide. This has reduced  the blame and abuse drastically reduced in these Tier 1 outsourcing companies. These include companies like TCS, Infosys, Wipro & HCL .  Most of these companies have been always under constant audit and added scrutiny has cleaned up some of the rot.

There are still other smaller firms who work as body shops by keeping employees in payroll and contracting them to other firms for commissions. These firms typically have 10-50 employees and will not have actual contracts or orders for projects, instead they will supply employees for Time & Material pricing model. These firms will not raise any flags due to exemptions for small companies and will not have resources for hiring larger firms and are known to indulge in false resumes and W2 forms.

Despite all this the availability of employees for new technologies is very thin. More than anything these firms provide training for the employees in the newer skills and guide them in placements.

In most cases employers who hire for newer skills expect future employees with experience in newer technologies and Local employees who are displaced due to Mainframe or COBOL struggle to gain newer technology expertise due to lack of opportunities or better trained competition.

Will discuss possible solutions in subsequent articles, please add your comments and will reply/update if any corrections.

 

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Indian Companies and abuse of B1 Visa

Last week Infosys founder was crying out loud in public about how US judicial system was victimizing Indian companies by suing Infosys for misusing B1 VISA.  Well lets simply put it that Mr.Murthy is lying. It is a well known fact that Indian companies like TCS,Infosys,Wipro and even US based companies like IBM abuse the B1 and L1 visas.

Sending in 1-2 years experienced guys in the name of Business meetings cant be any further from truth. Most Indian companies send their resources to Onsite on B1  for short term for various reasons like implementation of a System, or a temporary vacancy or even just like a carrot to motivate employees.

In US a candidate is eligible for B1 VISA    ” if the purpose for your planned travel is to consult with business associates, travel for a scientific, educational, professional or business convention, or conference on specific dates, settle an estate, or negotiate a contract, then a business” as defined in US Govt  Travel Website. Typically Senior Managers who are negotiating contracts, Business Meetings, attending convention are eligible. Typically anyone with more than few years of management experience will qualify for this VISA, but the list of candidates our companies range from a fresher who cant communicate and some who cant even repeat what was taught as part of VISA appearance training.

In past few years the no of candidates who were getting rejected in US Consulates in India, was getting huge. And despite this most companies were still sending candidates who repeatedly mumbled infront of the irritated interviewers. And with Obama Administration tightening screws, there were more questions in Immigration for all Indians and there were cases where B1 holders were sent back after reaching US, and then started the massive investigation into all major Indian companies, and found several discrepancies.

And the increased B1  abuse  is a result of multiple factors, but ultimately  it points to companies margin. Many of the big companies were always reluctant  to file H1B visas for their employees,  considering the risk that they could leave employers anytime in US. And the increased filing costs was also another reason. Meanwhile in the last 5-6 years number of intra company transfers (L1B VISA)  increased but again, it was meant for skills not available in US, and when companies started sending Mainframe and Java candidates to US through L1B, US did not like the idea. So Indian companies had to easier and faster option of B1 VISA’s.

Though Indian companies are trying maximize profits, the chain of steps US has taken over last few years is part of what Obama promised  and what irked Indian Companies. US is trying to protect its Job market, keep some of its Job within US. By making off shoring costs higher and immigration difficult , US Government is well on its protectionist approach. Well more than anyone else, Indian IT companies will be hoping for a change in Republican fortunes in the upcoming elections.