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Saturday, February 18, 2012

H1-B Visas and the Neufeld Memorandum

I don't generally spend much time delving into the intricacies of U.S. immigration law but I thought this issue was interesting because it touches directly on my field, IT.

The H1-B visa is a work permit program that targets that highly sought after group of skilled migrants (called "travailleurs hautement qualifiés" in French) who work in professions like healthcare, IT, engineering and many others (list here).  It is similar to the EU Blue card in the sense that a migrant must first find a position and then it is the future employer who requests the visa from the U.S. government.  Though it is good for 6 years (and allows for Green Card status later on), it does not allow family members to come and work as well (unless of course they qualify for their own H1-B visas).

Nevertheless this visa was both sought after and fought over for many years.  In times past the quota for each year was reached very quickly.  In 2007, for example, the cap of 85,000 for 2008 was reached by April 3, 2007 - a mere 3 days after the program was opened on April 1.  What kind of companies were requesting H1-B visas?  To no one's surprise, a lot of IT companies were taking advantage of this program:  Infosys, Cognizant, Wipro and Microsoft.

Then came the crisis and demand dropped precipitously.  How bad was it?   It took months for the quotas to be filled instead of weeks or days.  As MPI reports in Migration and the Great Recession, legal immigration to the U.S. slowed considerably in those years. (Note to Tea Party and all other anti-immigrant groups in the U.S. - if you want to stop immigration in its tracks, just tank your economy.) 2010 was a bit better but the bloom is off the rose.  This article from Forbes India, "The H1B Visa's Fall From Grace,"  says that there were two other factors that are leading to decreased demand:  a steep rise in application fees - it now costs between 3000 to 5000 USD to apply - and increased scrutiny of applications - the Obama administration has, contrary to what the Right in the U.S. is saying, stepped up enforcement of immigration law to a nearly unprecedented degree.

Into this already troubled picture, has marched the U.S. government, specifically the United States Citizenship and Immigration Services, with the the Neufeld Memorandum (something similar to a "circulaire" here in France) which aimed to step up enforcement of H1-B immigration and employment law.  The issue was the mobility of H1B workers and how IT companies can assign them to different client sites.  Something, by the way, that is pretty standard if you are working in an IT service company.

According to this article, in the past it was understood that when an IT worker changed work locations, all the company had to do was file a little form called a Labor Condition Application with the Department of Labor.  The Department of Immigration was not informed and had no way of knowing where the worker was actually working based on his or her original H1-B application.

With the Neufeld Memorandum that sets higher standards for investigation of employer/employee relationships combined with greater enforcement, immigration agents are checking out these workers by going to the original site/employer to investigate.  If they find that the worker is no longer physically present in that location, they report back that the worker and his/her employer are, shall we say, in an "irregular situation."  The seems to be causing everyone to waste a great deal of time and energy.  One article I read even said that "the USCIS’s fraud detection national security division may also pay a “friendly” surprise visit to the client company to ensure that the work location and other terms of employment are consistent with the H-1B petition."  Oh my.  I'm sure that those clients were just THRILLED to get a visit from U.S. immigration.

So what is the impact of all of this?  Forbes reports that companies are using different strategies to get around this.  Some are simply hiring more U.S. citizens and legal residents or trying for L-1 visas instead since "Visas issued in the L-1 category involve transfers within the same company, and employees do not need to be paid the minimum wage levels of the US, which are much higher than what an employee on an L-1 would be paid."  Other IT companies are simply tweaking their off-shoring models and keeping more of their staff at home and doing the work from Bangalore, for example.

Now I am pretty sure that U.S. government did not intend to make the United States less competitive in the global market for worldwide talent.  I'm even more sure that they are or will be mightily annoyed by efforts of foreign migrants and multi-national IT companies to work around their rules.  But the fact remains that both migrants and companies are rational actors and all of their solutions are quite logical and well within the law.  To make matters even worse, I fail to see how anyone is going to benefit from this:  certainly not U.S. IT workers who may see a few more jobs available but who will face increased competition from migrants in the U.S. on L-1 visas who are apparently not subject to minimum wage laws, and IT workers in lower-cost locations outside the U.S.  It will also hurt migrants who come in with good skills needed by U.S. industry and who, frankly, have other options and other countries that are much more inviting.  These people are legal, for heaven's sake, and making them jump through multiple bureaucratic hoops and harassing them in front of their clients is just unbelievably counter-productive and punitive.

In the 2011 MPI report, Shared Challenges and Opportunities for US and EU Immigration Policymakers, they issued this mild warning:
The U.S. has a strong competitive advantage in attracting and integrating the highly skilled... However, analysts argue that the United States is resting on its laurels and that without more active strategies to provide an attractive immigration "package" to the highly skilled, it may lose some of its traditional advantage.
"May lose"? 

Sorry, mes amis, it is time to take that sentence out of the possible future and move it firmly into the present tense.


Anonymous said...

Well said. The most recent H1B also got finished very soon. And I became a loser :-(


Victoria FERAUGE said...

Hi K,

I checked here

and they say that the 2012 cap was reached in November 2011 which seems quite late. Certainly a far cry from the pre-crisis demand. I also noticed that the 85,000 cap is actually split in two with 65,000 for workers and 20,000 for students. That dosn't seem like very many to me. US has a population of around 300 million people but not nearly enough highly-qualified people to fill certain kinds of jobs in US companies. The Siemens CEO talked about this here

Not a lot of options here - either they send Americans back to school to get IT or engineering degrees or they hire qualified people from outside the US. :-)


Ovid said...

This is rather interesting. Historically, Europe's only been attracting 5% of the mobile skilled labor market compared to the US's 55%. If the US continues its hostility towards immigrants, that trend could change. The EU Blue Card still leaves a lot to be desired, but for those seeking greener pastures, it maybe it will be enough of an added perk for immigrants to skip the US?

Victoria FERAUGE said...

Hi Curtis,

I think that was THE reason behind the Blue Card. The EU wants to grab a slice of those folks and get them to come here as opposed to the US or Canada. Now if the member-states can get the show on the road I think they do have a chance of doing this.

MPI's point is really well taken. Things change. Just because the US was a magnet does not mean it will be so much in the future. This will require a major revision of the mental map. I am always struck when I read the US news how Americans are still framing this debate as "everyone wants to come to the US" and the real issue is keeping them out. No mention at all of what happened in 2009/2010. It's as if it never happened and the politicians are still talking about electric fences and the like. That I find really frightening because it indicates a level of ignorance (and arrogance) that just might come back to bit them hard. My .02.


Ovid said...

I really need to spend some time writing graphing software which will show the trend of people renouncing their US citizenship versus people not immigrating to the US. Could be interesting.

Of course, that means finding time and reliable data sources :)

Victoria FERAUGE said...

That would be very cool (and very useful), Curtis.

The other statistic I would look at is the naturalization rate in the US which, according to Peter Spiro, has plummeted. People are coming to the US but they are not becoming citizens. Why is that? Does it have something to do with the tax situation? Hard to say. MPI remarked that they think the immigration to the US is becoming more circular with the young and talented coming to make some money and get some experience and then leaving. One effect of this is less integration into the larger culture - why integrate if you are only going to stay a few years?

You're absolutely right about the lack of data but you might want to contact the people at MPI. They have good reports and they list their sources. Other possibilities would be the OECD and the ILO.


Anonymous said...

Many leave US not because of choice (they still find the standard of living and school education and of course the market and salaries to be great in the US), but because of compulsion - what does one do if H1B does not get extended? I know friends who worked in the Bay area for more than a decade and when they wanted to start their own company, they had to come back to their own country as they did not get thier visa extended. But they are doing great here!

France has one of the best engineering and math talent - have you wondered why it is not able to create a silicon valley within the hexagon?


Victoria FERAUGE said...

Hi K,

I know what you mean. I was helping a friend here (American) try to get her visa renewed and it was touch and go there for a few weeks. They did finally extend it but who knows what will happen a year from now? When you aren't a citizen or you don't have permanent residency status you are pretty much at the mercy of politics and the social climate.

The US has had some advantages - big internal market, for example which France doesn't have. The US has poles of innovation like Boston or Silicon Valley. There was a lot of opportunity and it's easy to start a business. Some of that is still true I think. But there are other forces working against it: crumbling infrastructure and a political system that is deadlocked. Those poles of innovation were fueled by immigration - less immigration will equal less innovation.

Things like salaries and education are relative. Coming from Europe the US school system (pre-university) is pretty bad. Even 20 years ago I and my brother were taken out of the public school system and sent to private schools. Even so my level is nothing compared to what my daughters have received here in France. On the other hand in the US there was always the possibility of making it big - starting a company that takes off and is very successful.

You make a good point about France. One answer would be one place where I worked for a few years, Dassault Systemes which has a number one bit of software that is used by industry everyone: Honda, Boeing, Airbus and many others. Very successful company with visionary leadership. Another answer would be all the things that the government has done to make it easier to start a business. Much simpler then it used to be. And there is more help for those who want to go into risky innovative sectors. In the middle of Paris is something called the Silicon Sentier I saw a presentation by one of these companies, Etalab, and their work on Open Data for the French government.

That said there are still some things that make it hard here. There is less bureaucracy and more support for innovative industries but still probably more than in the US. Taxes are high. Big companies are still favored.

I think the most important thing to remember is that just because something WAS true doesn't mean that it will be true in the future. The world is changing at light speed. Today there are American IT students flocking to companies in India for internships. I've met French entrepreneurs in Shanghai. I've encountered North African entrepreneurs in France and other EU countries. What I think I am seeing is that there is more opportunity in MANY places. The US is still a great place to go, work and get experience but it is not the only place. Everything is changing and our old stereotypes about countries need to be re-evaluated in the light of new information. Nothing stands still and our worst enemy may be our difficulty in revising our mental maps. Depending on your situation you just might be better off in Singapore than in Boston.