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

Don Tennant

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.

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Oct 2, 2012 3:06 PM SealTeam6 SealTeam6  says:
It is laughable to find Mr Wadhwa talking as if he's suddenly forgotten what he himself did back in the 90s, and boasting about being the first to start using the H1-B program to lower wages: "Entrepreneur-turned-academic Vivek Wadhwa is up front about his use of offshoring and importing foreign talent in a previous professional life as founder and CEO of two technology companies. "I was one of the first to outsource software development to Russia in the early '90s. I was one of the first to use H-1B visas to bring workers to the U.S.A.," Wadhwa says. "Why did I do that? Because it was cheaper." " He's playing both sides of the game. A true "businessman". (sic) http://www.cio.com/article/150652/The_Next_Wave_of_Globalization_Offshoring_R_D_to_India_and_China_ Reply
Oct 2, 2012 8:59 PM R. Lawson R. Lawson  says:
Wadhwa expressed those sentiments in private conversation, however he would never express them publicly and would make it appear as if all is well in the world of the H-1b visa. It was very annoying to see him launch into his campaign painting a rosey picture and leaving out the problems that he acknowledged in private. It was as if he were on a mission to slant people's opinion and deliberately not tell the full story. Glad he comes clean in the book. But how many interviews has he done where there was nary a mention of the problems? I've lost count. "The anti-immigration crusaders..." I would think supporting the H-1b visa is "anti-immigrant". You have a class of workers with limited mobility and because of corporate sponsorship as well as the perm process - very easily exploited. Using Wadhwa's definition abolitionists during times of slavery should be called "anti-black" when in fact they fought for equal rights. Anyone fighting for expansion of the H-1b visa is fighting for un-equal rights. Never lose sight of that. Reply
Oct 2, 2012 10:10 PM Perturbed Pundit Perturbed Pundit  says:
Don, You do a disservice to your readership when you throw all people who are opposed to employer-sponsored work visas into the general category of "anti-immigration crusaders". My father was an immigrant from Europe who came to the U.S. with nothing more than a sixth grade education and the clothes on his back and managed to raise a family of four in a middle-class lifestyle. My wife is an immigrant from Eastern Europe who came to the U.S. on a lottery visa (NOT an employer-sponsored visa) to flee the oppressive communist regime under which she was living. She immediately enrolled in the masters program in which we met and eventually became a U.S. citizen. I am vehemently opposed to employer-sponsored visas for the reasons Wadhwa mentions. However, I find holes in Wadhwa's argument (at least in the quote provided above). He mentions "body shops" as being the "sleezy" ones. But other, non-"body shop" corporations also abuse the visa. And while Wadhwa's claim that fraud occurs in a small percentage of H-1B visa applications, it's the abuse of the loopholes in the law that's the issue. I can criticize Wadhwa for omitting these issues and NOT be an "anti-immigrant crusader". Reply
Oct 3, 2012 2:34 PM Gary Mohan Gary Mohan  says:
Hi Don, I've written a couple of ebooks that I'm giving away for free, intended to help undermine the sales model adopted by Indian IT companies. The first explains the basics of the IT sales process to anyone who wants to know. The second is about reversing outsourcing. They are here: http://www.plainprocess.com/sales.html and here: http://www.plainprocess.com/inhouse.html I'm hoping that they can do something to help. Regards, Gary Mohan Reply
Oct 3, 2012 2:47 PM jake_leone jake_leone  says:
Infosys is huge body shop. Clearly, InfoSys has used B-1 visas to fill IT jobs that only require ordinary IT skills. For example, Unix script tester (from testimony). A job that you can do after a few months training at a community college. That's how my career started. Also, in light of Microsoft's recent offer. Tech companies can afford to pay higher prices for these Visas. Even Yahoo earns 90,000$ per year in profit, per employee. Microsoft, Google, Apple, earn north of 200,000$ per year in profit. Paying even 30,000$ in Visa fees is nothing for these companies. A fixed cost of 30,000$ to make (in Microsoft's case) ~250,000$ a year in profit. That's a tremendous return on investment. For 200+ year immigration meant you were coming here to stay, the non-immigrant visa programs, started in the 90's, have destroyed that, replaced with indentured servitude. U.S. companies have grown weak, and have lost the ability they had in the 80's-90's to train workers, because of their dependence on a government programs, AKA easy and cheap U.S. visas. A system that's been co-opted to move U.S. jobs offshore and literally shut out U.S. citizens from job opportunities on U.S. soil. Reply
Oct 3, 2012 3:41 PM Don Tennant Don Tennant  says: in response to Perturbed Pundit
You do me a disservice by claiming that I throw all people who are opposed to employer-sponsored work visas in the general category of anti-immigration crusaders, my friend. I have done no such thing. I wrote absolutely nothing to suggest that my definition of an anti-immigration crusader is a person who is opposed to employer-sponsored visas. Reply
Oct 3, 2012 9:28 PM Pro Pro  says:
Don, any update on DOJ investigation on INFY and other firms? Will charges ever be filed? B1/L1 abuse is rampant! Reply
Oct 3, 2012 10:19 PM Perturbed Pundit Perturbed Pundit  says: in response to Don Tennant
"The anti-immigration crusaders probably aren’t going to mention any of that when they post their rants about Wadhwa’s book" Don - According to the above statement, if I "rant about Wadhwa's book", I am an "anti-immigration crusader". I will rant about Wadhwa's convenient omissions. I will rant about Wadhwa's calling H-1B abusers "sleazy" while conveniently omitting the fact that he also abused the visa (see SealTeam6's comment posted Oct 2, 2012 8:06 AM). I will rant about Wadhwa calling "body shops" sleazy while conveniently omitting (based on the provided quote) the fact that the likes of Cisco and Pfizer are well-known to have abused the visa. The implication is quite clear. Because of my "rants", to you I am an "anti-immigrant crusader". Reply
Oct 4, 2012 1:26 AM Perturbed Pundit Perturbed Pundit  says: in response to Don Tennant
OK, Don. I re-read our exchange and I can foresee that it has a real potential to devolve into a pissing match where every word will be parsed and analyzed in excruciating detail in an effort to back our positions. I don't wish to engage in such an exchange and I think I'm safe in assuming you do not either. So please allow me to restate my position in a way that might be agreeable to both of us... I take issue with the statement, "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." One who chooses to "rant" (and by "rant", I understand that to mean a strong expression of disagreement) about Wadhwa's book is not necessarily "anti-immigrant" or an "anti-immigration crusader". Reply
Oct 4, 2012 3:47 PM Odumbo Odumbo  says: in response to jake_leone
Even Yahoo earns 90,000$ per year in profit, per employee. Microsoft, Google, Apple, earn north of 200,000$ per year in profit. Paying even 30,000$ in Visa fees is nothing for these companies. A fixed cost of 30,000$ to make (in Microsoft's case) ~250,000$ a year in profit. That's a tremendous return on investment. You missed mentioning the rest of the story. There are millions of shareholders such as investors, retirees, funds etc who get a part of these profits through the shares of these companies they own. Further, companies like Microsoft and Apple have good dividends that return profits back to shareholders. Reply
Oct 5, 2012 4:16 PM Wakjob Wakjob  says:
America is losing out on ahem.... "foreign entrepreneurial talent" not because we're shutting out immigrants, but because they don't want to come here now. And why don't they? Because for the past 15 years millions of them have been grifting out America and now there's nothing left to take. In 1998 when Americans ran the economy and it was booming, these people were unable to compete with us. So we opened our doors, let millions of them in, trained them, gave them lots of $ to remit back home, bankrupting our govt and siphoning our capital base. Well now it's 14 years later and they've finished their mission here. NOW they can compete with us thanks to the training and tech we gave them, NOW they have our capital, which they will use to start businesses to compete against us, NOW they don't want to live here because there are no jobs, no prospects, no reason to come here. America is a wasteland. The only time we'll see these people come back here is with their militaries when they want our land too. America is a fool. Reply
Oct 31, 2012 11:07 PM Wakjob Wakjob  says:
Looks like Fraudhwa is getting scared. The whole country knows about the Indo-conshop scam called H-1B. Fraudhwa was in favor of it for 15 years. Now all of a sudden he's flip-flopped again? Is this just election crap? Or is he trying to reverse the supposed "death threats" that never occured? Maybe he's fearing he'll be found to be taking illegal foreign $ from illegal foreign RICO organiations such as NASSCOM, which would in fact make Fraudhwa a foreign agent, and required to file with the US gov't as such under US law. Perhaps we need a little FBI investigation of Fraudhwa and his bank accounts and where his $ is coming from. And also how he came out of nowhere to become a writer at nearly every top business mag in the nation. The feds need to investigate Fraudhwa because he is undoubtedly a foreign agent. I think Fraudhwa knows an investigation is coming and is now trying to look like he's on the side of Americans and playing nice. Reply
Oct 31, 2012 11:10 PM Wakjob Wakjob  says: in response to Perturbed Pundit
How is merely demanding the law be enforced, deporations take place as required by Title 8, Section 1182? Merely demanding your own country's immigration laws be enforced is being an "anti-immigrant crusader"? Well then that makes all of congress an "anti-immigrant crusader" since they passed such laws. Fraudhwa seems to think immigrants have some kind of right to come here and are immune to all US federal laws which do protect US citizen workers. He and his armies of "immigrant" wealth siphoners seem to think there are no laws and that they should be allowed to do whatever they want due to some deep historical grievances with white people. Laws and laws and they must be enforced. That is all the American people are asking for. Not for a "crusade". Fraudhwa is a scofflaw. He should be deported. Reply

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