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Visa issues cloud the future

Brought to you by Staffing Industry Analysts Inc.

July 2006

The subject of visas has gained importance in recent years and even become somewhat of a hot potato issue. With so many immigration hurdles, barriers and issues to keep track of when dealing with overseas workers’ visas, it is essential that IT services firms keep up to date with what’s happening on this legislative front.

Commonly known as the specialty occupation visa, an H-1B visa, which was created in 1990, is the most common type of visa used by workers responding to overseas IT recruiting. To receive an H-1B visa, certain requirements must be met: the recruiting company must pay the prevailing wage as well as a $1,500 education and training fee ($750 for employers with less than 25 full-time employees) and a $500 anti-fraud fee, and the employer must notify its U.S. workforce of the hire and provide access to information about wage and workforce protections, as well as provide workforce protections.

The continuing challenge with the H-1B visa program is the cap put on the number of workers allowed to enter the country with this designation. The current cap is 65,000. The cap for fiscal year 2007 was reached in May 2006, four months before the start of the next fiscal year. The fiscal year 2006 cap was reached in August 2005. As Mark Roberts, CEO of the National Association of Computer Consultant Businesses (NACCB), said, “Here we are in June 2006, and you cannot bring in a new H-1B until October 1, 2007.” This is the eighth time since 1997 that the cap was reached before the end of the fiscal year and the third consecutive time it was reached on or before the start of the fiscal year.

The cap used to be higher, as high as 195,000 for the three years including fiscal year 2001, 2001 and 2003. That was a time, however, when the IT services industry experienced a downtown. “The system is clearly broken,” Roberts explained. “Congress never seems to get it right. It’s low when it should be high and high when it should be low.”

An additional 20,000 H-1B visas are available to graduates of U.S. universities with a master’s or Ph.D. degree. But because the number of people with these qualifications is quite small, the availability of these additional H-1B visas does not alleviate the overall shortage problem.

COMPREHENSIVE IMMIGRATION REFORM ACT OF 2006
Currently, a legislative proposal before Congress would raise the H-1B cap from 65,000 to 115,000 visas with a market-based cap adjustment of up to 20% per year. Workers who have earned a science, technology, engineering or math degree (master’s or higher) would be exempt from the cap, regardless of whether they earned their degree in the United States or overseas.

The U.S. Senate, which is the more liberal of the two houses of Congress, passed its version of the immigration reform bill, S2611, in May 2006. The Senate’s version of the bill encompasses comprehensive immigration reform and is a key priority of President Bush. The controversial H-1B visa issue is actually a very small part of what the Senate bill addresses. The bigger but more contentious areas of the immigration bill concern other issues, primarily those involving lower-wage workers.

The U.S. House of Representatives is generally more conservative than the Senate and prioritizes the perceived need to secure U.S. borders when considering most immigration reform legislation. This may explain why their proposal is an enforcement-only bill. In other words, the House bill focuses exclusively on enforcement of immigration laws with the intent of prohibiting illegal immigrants from staying in the United States and dealing more severely with employers that hire those that enter illegally.

“The big question out there is, ‘Will the two bodies, House and Senate, get together and attempt to reconcile the bills?’ They are so far apart in general approach,” Roberts said. What is currently happening is a series of field hearings around the country, with each side trying to drum up support for its own point of view. One particular idea seems to be gaining ground: implementing any new immigration reform law in phases, in which the president would have to ensure border security before implementation of any new ways for immigrants to work legally in the United States. Some fear that continuing to hold such hearings will only postpone efforts to negotiate a timely compromise. In Roberts’ opinion, the odds for passage of the House bill are less than 50/50, but he also said, “I’ve been surprised before.”

This bill was born at a time when the general philosophy regarding immigration into this country is highly politicized. Roberts said in an interview, “To some extent, we are at the mercy of issues completely unrelated to ours.” He believes that if anything is going to happen, it will take the president using his political capital to intervene.

H-1B VS. L-1B
As a way to circumvent the stringent requirements for obtaining an H-1B visa, the L-1B visa, created in 1970, was often used. However, the L-1B visa was only used to import labor by a firm that had a foreign operation, usually on an intracompany basis to transfer those workers with “specialized knowledge” from the foreign operation into the United States. L-1B differs from the H-1B visa in several important ways, including not being subject to an annual cap on the number of available visas, creating no obligation to pay prevailing wages or first recruit U.S. workers, and requiring lower fees.

The L-1B visa created a loophole used by some offshore IT services firms to provide de facto staff augmentation, which predictably put U.S. IT services firms at a disadvantage. For example, with no prevailing wage obligations and without the other H-1B restrictions, overseas IT services businesses could significantly undercut pay and bill rates of U.S. IT services firms. According to Roberts, CEO of NACCB, “Folks will always find clever lawyers that bill at hourly rates to find ways to circumvent existing rules.”

THE ROLE OF THE NAACB
The NACCB is a national trade association exclusively devoted to representing IT services companies. As such, it acts as an industry voice for public policy issues and supports Congressional lobbying activities aimed at immigration and visa issues. In May 2003, for instance, the NAACB started a successful campaign to close the loophole created by the L-1B visa and eventually testified before the Senate Immigration Subcommittee on L-1B abuse. The L-1 Visa Reform Act was consequently introduced in the Senate and by December 2004, President Bush had signed the bill containing the provision to close the L-1B visa loophole, with legislative changes going into effect in June 2005.

To heighten support for addressing the H-1B cap problem, Roberts advocates that staffing companies let their elected representatives know of their pain. Specifically, Roberts says, they should ask their elected representatives to raise the H-1B cap. In addition, companies that want to use H-1B visas should plan ahead and apply as early as possible.

OTHER STRATEGIES
It is possible for a standalone immigration reform bill to be proposed and passed, but President Bush does not seem supportive of this type of bill. Politicians and IT services companies seem to agree that the H-1B program needs relief. But others believe that taking care of highly-compensated high-tech workers in the form of a standalone bill is not enough when faced with the need for total immigration reform. Still, burying a fix for the H-1B cap problem in wording for a much more extensive immigration bill may not be the answer either, particularly if the larger bill is not ultimately passed into law.

The NACCB believes that a reasonable and balanced approach would be to link the annual cap to an objective measure of the state of the market for IT professionals. Such an approach would also eliminate the perennial need for Congressional involvement in adjusting the H-1B visa cap in response to changes in market demand for IT professionals. Accordingly, NACCB supports a modification of the H-1B visa program to link the annual cap to an appropriate index reflecting the state of the IT job market. Under this proposed modification, the cap would never fall below 65,000 nor exceed 195,000.

“Whether it is the leveling of the competitive playing field through increased regulation or a market-based approach to H-1Bs, NACCB will continue to advocate reasonable legislative solutions on immigration and other pubic policy issues affecting the IT services industry,” Roberts said.

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