Vivek Wadhwa: ‘Sleazy Body Shops Are Abusing the H-1B System’


Anyone who follows the H-1B visa debate with any degree of regularity would probably agree that the best-known, most vocal advocate of attracting skilled foreign workers to the United States, and keeping them here, is Vivek Wadhwa. What most of those people might find surprising is that Wadhwa is as vehemently opposed to the widespread, shameless abuse of the H-1B visa program as the staunchest anti-immigrant crusader is.

Wadhwa, director of research at the Center for Entrepreneurship and Research Commercialization at Duke University’s Pratt School of Engineering, is the author of a book being released today titled, “The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent.” I spoke with Wadhwa on Monday, and I asked him what in the book is most likely to raise the ire of people on the other side of the immigration debate. His response was one I was able to identify with, having covered the H-1B issue for years.

“Just the fact that you can highlight both sides of the issue, but these people will read the one or two things you said that they didn’t like, and harass you for that,” he said. “They don’t read the rest of it.”

If you think those are empty words, just read this excerpt from the book, which I am providing here with Wadhwa’s permission:

Over the years, I have grown accustomed to being a target and a virtual punching bag for a vocal community that despises immigrant labor in skilled professions. Needless to say, the H-1B program is extremely controversial. Economists, politicians, and advocates for the employee rights of US-born technology workers have claimed that these types of visas are used as another form of outsourcing by Indian and US technology companies. Those companies, critics claim, use H-1Bs to import cheaper labor. Claims of a shortage of US STEM employees are exaggerated, say the H-1B opponents, who cite slow salary increases among STEM workers as evidence that the market is saturated with candidates. In fact, these critics blame the H-1Bs for depressed wages for US-born workers in technical fields.

To bolster their argument, they point to research done by labor economist George Borjas, who has reported that foreign workers in STEM fields “crowd out” native-born workers and depress salaries. Academic and H-1B critic Norman S. Matloff believes that the H-1B allows companies to hire technical talent in hot programming fields or sectors but avoid market premiums. The job classification system and salary index companies sponsoring for H-1Bs are required to only report broad sector averages and not subspecialty salary trends, Matloff said. This allows those companies to legally pay submarket wages by basing salaries to H-1Bs on broad indexes, which don’t reflect reality.

It’s easy to understand these concerns. Flouting employment discrimination laws, unethical body shops blatantly advertise in US publications for jobs that clearly target foreign nationals. A search for visa-related terms such as OPT, CPT, and F-1 on Dice.com, a leading technology recruiting site, turns up dozens of these listings. For example, an advertisement placed by AET Solutions, identified by a native workers’ rights advocacy organization Bright Future Jobs in the report “No Americans Need Apply,” has the title “Looking for fresh OPTs for training and placement in USA.” The Bright Future Jobs report correctly notes, “The ad only contains US Citizenship and Immigration Services (USCIS) abbreviations for visa workers but not one common Information Technology (IT) term. Americans about to graduate with the same technical degrees would likely never find this ad. Or, if they stumbled upon it, they would be confused.”

Some government officials also feel that the H-1B program is abused as a means to provide cut-rate IT labor to US entities that set up the equivalent of onshore body shops. “Some of those applications are blatantly fraudulent or without merit—not even close, nothing that remotely looks like a real business case,” one senior US consular employee, who is a friend and who asked to remain anonymous, told me. He said, “Those applications look more like vendors trying to cash in on demand for what is likely ordinary labor. This is not borderline abuse. It’s flagrant.”

These violations are real, but they comprise a minority percentage of H-1B applications. In September 2008, the USCIS stated in its H-1B Benefit Fraud & Compliance Assessment that 21% of H-1B visas received emerged from improper applications. This included technical violations as well as clear fraud. (The USCIS has made concerted efforts to reduce fraud since then, but according to sources I have corresponded with inside the US consular system, H-1B fraud is still occurring.)

Numerous H-1B workers have also told me that they feel they are underpaid. While conclusive evidence of institutional underpayment has yet to emerge, the US Department of Justice has on two occasions mandated that groups of H-1B employees receive payments collectively totaling hundreds of millions of dollars to compensate for years of below-market wages. In a nutshell, both the H-1B holders and the advocacy groups championing native-born IT workers feel they are the victims—and there is some truth to both of their claims.

One side note: That reference to “unethical body shops” wasn’t rendered that way at first. Wadhwa mentioned to me that he had originally referred to them in the book as “sleazy” body shops.

“I had the word ‘sleazy’ in the book, and I took it out because it was not in line with the intent of the book, which was trying to be academic,” he said. “But the fact is, yeah, there are a bunch of sleazy body shops that are abusing the system. These body shops should be shut down. Their executives should go to jail for abuse of the visa system.”

The anti-immigration crusaders probably aren’t going to mention any of that when they post their rants about Wadhwa’s book on blog sites and in reader forums. That’s OK. Wadhwa is used to it. So am I.