Senator Charles E. Schumer's speech on border Security bill and H1B

[pappu]

Senate Passage of Border Security Legislation

August 12, 2010

Today, I come to the floor to seek unanimous consent to pass a smart, tough, and effective $600 million bill that will significantly enhance the security and integrity of our nation’s southern border—which currently lacks the resources needed to fully combat the drug smugglers, gun-runners, human-traffickers, money launderers and other organized criminals that seek to do harm to innocent Americans along our border….

The best part of this border package, Mr. President, is that it is fully paid for and does not increase the deficit by a single penny. In actuality, the Congressional Budget Office has determined that this bill will yield a direct savings to taxpayers of $50 million….

The emergency border funds we are passing today are fully paid for by assessing fees on certain types of companies who hire foreign workers using certain types of visas in a way that Congress did not intend. I want to take a moment to explain exactly what we are doing in this bill a little further because I want everyone to clearly understand how these offsets are designed.

In 1990, Congress realized that the world was changing rapidly and that technological innovations like the internet were creating a high demand in the United States for high-tech workers to create new technologies and products. Consequently, Congress created the H-1B visa program to allow U.S. employers to hire foreign tech workers in special circumstances when they could not find an American citizen who was qualified for the job.

Many of the companies that use this program today are using the program in the exact way Congress intended. That is, these companies (like Microsoft, IBM, and Intel) are hiring bright foreign students educated in our American universities to work in the U.S. for 6 or 7 years to invent new product lines and technologies so that Microsoft, IBM, and Intel can sell more products to the American public. Then—at the expiration of the H-1B visa period—these companies apply for these talented workers to earn green cards and stay with the company.

When the H-1B visa program is used in this manner, it is a good program for everyone involved. It is good for the company. It is good for the worker. And it is good for the American people who benefit from the products and jobs created by the innovation of the H-1B visa holder.

Every day, companies like Oracle, Cisco, Apple and others use the H-1B visa program in the exact way I have just described—and their use of the program has greatly benefitted this country.

But recently, some companies have decided to exploit an unintended loophole in the H-1B visa program to use the program in a manner that many in Congress, including myself, do not believe is consistent with the program’s intent.

Rather than being a company that makes something, and simply needs to bring in a talented foreign worker to help innovate and create new products and technologies—these other companies are essentially creating “multinational temp agencies” that were never contemplated when the H-1B program was created.

The business model of these newer companies is not to make any new products or technologies like Microsoft or Apple does. Instead, their business model is to bring foreign tech workers into the United States who are willing to accept less pay than their American counterparts, place these workers into other companies in exchange for a “consulting fee,” and transfer these workers from company to company in order to maximize profits from placement fees. In other words, these companies are petitioning for foreign workers simply to then turn around and provide these same workers to other companies who need cheap labor for various short term projects.

Don’t take my word for it. If you look at the marketing materials of some of the companies that fall within the scope covered by today’s legislation, their materials boast about their “outsourcing expertise” and say that their advantage is their ability to conduct what they call “labor arbitrage” which is—in their own words—“transferring work functions to a lower cost environment for increased savings.”

The business model used by these companies within the United States is creating three major negative side effects. First, it is ruining the reputation of the H-1B program, which is overwhelmingly used by good actors for beneficial purposes. Second, according to the Economic Policy institute, it is lowering the wages for American tech workers already in the marketplace. Third, it is also discouraging many of our smartest students from entering the technology industry in the first place. Students can see that paying hundreds of thousands of dollars for advanced schooling is not worth the cost when the market is being flooded with foreign temporary workers willing to do tech-work for far less pay because their foreign education was much cheaper and they intend to move back home when their visa expires to a country where the cost of living is far less expensive.

This type of use of the H-1B visa program will be addressed as part of comprehensive immigration reform and will likely be dramatically restricted. We will be reforming the legal immigration system to encourage the world’s best and brightest individuals to come to the United States and create the new technologies and businesses that will employ countless American workers, but will discourage businesses from using our immigration laws as a means to obtain temporary and less-expensive foreign labor to replace capable American workers.

Nevertheless, I do wish to clarify a previous mischaracterization of these firms, where I labeled them as “chop shops.” That statement was incorrect, and I wish to acknowledge that. In the tech industry, these firms are sometimes known as “body shops” and that’s what I should have said.

While I strongly oppose the manner in which these firms are using the H-1B visa to accomplish objectives that Congress never intended, it would be unfortunate if anyone concluded from my remarks that these firms are engaging in illegal behavior.

But I also want to make clear that the purpose of this fee is not to target businesses from any particular country. Many news articles have reported that the only companies that will be affected by this fee are companies based in India and that, ipso facto, the purpose of this legislation must be to target Indian IT companies.

Well, it is simply untrue that the purpose of this legislation is to target Indian companies. We are simply raising fees for businesses who use the H-1B visa to do things that are contrary to the program’s original intent.

Visa fees will only increase for companies with more than 50 workers who continue to employ more than 50 percent of their employees through the H-1B program. Congress does not want the H-1B visa program to be a vehicle for creating multinational temp agencies where workers do not know what projects they will be working on—or what cities they will be working in—when they enter the country.

The fee is based solely upon the business model of the company, not the location of the company.

If you are using the H-1B visa to innovate new products and technologies for your own company to sell, that is a good thing regardless of whether the company was originally founded in India, Ireland, or Indiana.

But if you are using the H-1B visa to run a glorified international temp agency for tech workers in contravention of the spirit of the program, I and my colleagues believe that you should have to pay a higher fee to ensure that American workers are not losing their jobs because of unintended uses of the visa program that were never contemplated when the program was created.

This belief is consistent regardless of whether the company using these staffing practices was founded in Bangalore, Beijing, or Boston.

Raising the fees for companies hiring more than 50 percent of their workforce through foreign visas will accomplish two important goals. First, it will provide the necessary funds to secure our border without raising taxes or adding to the deficit. Second, it will level the playing field for American workers so that they do not lose out on good jobs here in America because it is cheaper to bring in a foreign worker rather than hire an American worker.

Let me tell you what objective folks around the world are saying about the impact of this fee increase. In an August 6, 2010, Wall Street Journal article, Avinash Vashistha—the CEO of a Bangalore based off-shoring advisory consulting firm—told the Journal that the new fee in this bill “would accelerate Indian firms’ plans to hire more American-born workers in the U.S.” What’s wrong with that? In an August 7, 2010 Economic Times Article, Jeya Kumar, a CEO of a top IT company, said that this bill would “erode cost arbitrage and cause a change in the operational model of Indian offshore providers.”

The leaders of this business model are agreeing that our bill will make it more expensive to bring in foreign tech workers to compete with American tech workers for jobs here in America. That means these companies are going to start having to hire U.S. tech workers again.

So Mr. President, this bill is not only a responsible border security bill, it has the dual advantage of creating more high-paying American jobs.

Finally, Mr. President, I want to be clear about one other thing. Even though passing this bill will secure our border, I again say that the only way to fully restore the rule of law to our entire immigration system is by passing comprehensive immigration reform….

The urgency for immigration reform cannot be overstated because it is so overdue. The time for excuses is now over, it is now time to get to work.

[pappu]

Senate just passed the border bill which also applies the new 50-50 rule with additional fee for companies having employees on H1/L1 visa.

The bill is now headed for President's signature for making this the law of the land.

[gc28262]

Why is the senator backtracking from "chop shop" comment ? Here is why

Visa row: US keen not to hurt ties with India before Obama visit - US - World - The Times of India

[vbkris77]

So much for unions to support them for mid term elections.. Come next year, if dems still have same majority, H1B/L1B word will be removed from India's IT dictionary..

[greyhair]

Originally Posted by gc28262

Why is the senator backtracking from "chop shop" comment ? Here is why

Visa row: US keen not to hurt ties with India before Obama visit - US - World - The Times of India

What difference does it make? Whatever he calls it, the law still means the same. Indian companies should know better than that. I mean if this is their best defense then god help consulting companies.

[anandrajesh]

Originally Posted by vbkris77

So much for unions to support them for mid term elections.. Come next year, if dems still have same majority, H1B/L1B word will be removed from India's IT dictionary..

All they had to do was to introduce another $2000 fee for every Green Card Re-Captured. Most of us would have been out of this mess and they would have got the money they needed. This Grand posturing is extremely disturbing and i hate the politics behind it.
I wish the Democrats lose big time and lose their hold from Senate and house.

[greyhair]

Originally Posted by gc28262

Why is the senator backtracking from "chop shop" comment ? Here is why

Visa row: US keen not to hurt ties with India before Obama visit - US - World - The Times of India

One more thing, if you read the comments, he is not back tracking. If I were him, I wouldn't either. Sen. Schumer is saying, btw, if I offended anyone, then its not chop-shop, its body shop, take that? He is ridiculing those who thought they cornered him.

[gc28262]

This will infact increase offshoring.

These companies will pay the extra fees, but will change their onshore/offshore model. Will use less H1/L1 visas , but will increase the headcount of offshore operations.

So the smart senator will force more jobs to be outsourced. These jobs will never comeback once gone. If we look back at the 2000 recession, it caused a major shift in the way US companies looked at outsourcing. Pre-2000 many companies didn't believe that all jobs could be outsourced. 2000 recession forced them to think otherwise.

These kind of bills will cause a re-thinking in corporate america's thought process. They will think of creative ways to outsource. Against this senator's hopes, it will reduce jobs here.

[harivenkat]

this seems to me ... the master stroke in using documented as weapon towards undocumented ...eventually getting rid of both weapon and the target ....

[eb3retro]

Not surprised that this is coming out of a Democratic senator, as they are never pro-business. Democratic party - watch out, its going to be bumpy in November.

[chanduv23]

Almost all companies, in every field (engg, medicine, nursing, research..) hire people through contracting agencies. Most of the companies these days hire only US citizens or GC or EAD and try best not to hire H1b and if you look at their employees, it is rare to find 50% or more h1b holders.

On the contrary, outsourcing companies may have majority of their workers coming here on L1 or H1b and when such a fgee is imposed, I guess, for the biggies, it is just a small adjustment in their costs of bringing workers which they will adjust in their other expenses.

Overall, I am not sure, how much revenue such a law will generate. Will it generate enough revenue which is being claimed (600 million?)

To me, this kinda speech and trashing Indian companies and outsourcing etc... and showing that they acted on it just looks like it is pure politics to save face during the election year.

[pappu]

Originally Posted by gc28262

Why is the senator backtracking from "chop shop" comment ? Here is why

Visa row: US keen not to hurt ties with India before Obama visit - US - World - The Times of India

He has already been able to pass the law. Now whether he calls them chopshop or backtracks, or praises them.......it does not do anything. This will soon be a law.

[harivenkat]

Just dont get what the senator is intending here ....

"The business model of these newer companies is not to make any new products or technologies like Microsoft or Apple does. Instead, their business model is to bring foreign tech workers into the United States who are willing to accept less pay than their American counterparts, place these workers into other companies in exchange for a “consulting fee,” and transfer these workers from company to company in order to maximize profits from placement fees. In other words, these companies are petitioning for foreign workers simply to then turn around and provide these same workers to other companies who need cheap labor for various short term projects."

Does this mean every H1b at MS, Apple invents ipod, iphone, USB etc.... and there is no similarity in the nature of work done by him compared to that coming from a consulting company at a client site..... he talks about products or technologies but what about services/speciality occupation using these products/technologies ... that is exactly what most of the IT sector does....

"The H-1B is a non-immigrant visa in the United States under the Immigration and Nationality Act, section 101(a)(15)(H). It allows U.S. employers to temporarily employ foreign workers in specialty occupations."

Not sure if senator is missing it or dodging it ....

[pappu]

Originally Posted by anandrajesh

All they had to do was to introduce another $2000 fee for every Green Card Re-Captured. Most of us would have been out of this mess and they would have got the money they needed. This Grand posturing is extremely disturbing and i hate the politics behind it.
I wish the Democrats lose big time and lose their hold from Senate and house.

They could have done this and re-captured visas with additional fees or whatever. And called it greencard fraud fees it that makes them happy. But the fact is they did not want to do anything to give relief to Immigrants. Recapture (hundreds of thousands of visas) would have significantly helped helped retrogressed countries like EB3 India, China, ROW and EB2 India China. They can take additional fees as long as we know the recapture is being done.

[gc28262]

Originally Posted by pappu

He has already been able to pass the law. Now whether he calls them chopshop or backtracks, or praises them.......it does not do anything. This will soon be a law.

By the very nature of this senator, he didn't even have to rephrase it. If he did that, there is a reason for it.