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H-1B Visas: Large firms exploit visa system flaw, exclude start-ups and small firms

The H-1B visa is commonly known as the Professional Worker's Visa and has been heavily used in the finance and tech industries as a tool for recruiting top international talent into information technology, software engineering and other specialized jobs in the information economy. A recent article in the New York Times, headlined "Large Companies Game H-1B Visa Program" details the process whereby a small number of outsourcing companies have successfully exploited a flaw in the way the visa system is operated to capture a disproportionate share of the annual quota of these visas. The result is that small firms, start-ups and other legitimate applicants are being squeezed out of the program.

This matters very much to business in places like Hawaii, where essentially all of our businesses are small, relatively speaking, and concerted efforts are underway to foster a viable tech business community. Local entrepreneurs find themselves locked out of the international talent pool, and our academic engineering programs, where upwards of 50% of graduating PhD students are foreign students, cannot place their best students into local jobs. This in turn impacts the ability of local universities and colleges to recruit foreign s.... Places like Hawaii need to be talent magnets to compete in the global marketplace, but need a level playing field to stay in the game.

The visa system flaw is quite simple. Individuals may only submit a single application, duplicates are rejected. Firms on the other hand, may submit as many applications as they wish, as long as each is for a single individual. So the large outsourcing firms working the visa game make job offers to literally thousands of workers, predominately in India, contingent on getting a visa. They know they will receive only third of these, but are able to spread the costs over the whole field of newly visaed workers as they place them in batches into contract labor positions for companies such as Disney and Toy R Us.

Why does this  disadvantage small firms? A small innovative start-up is looking for the one "best fit" team member who adds a specific talent or expertise to the enterprise build-out. Each highly skilled tech worker on the start-up team is a key component of the product or service development process. A one-in-three chance of success in obtaining a working visa for your employee of choice introduces additional costs and a frustrating uncertainty and instability into the human resources scaling process.  For the outsourcing firms on the other hand, skilled workers are the product itself, and at the level they operate on, are essentially fungible. Functioning as high tech temp agencies, they are renting out a generic skill-set and resume, that just incidentally has a human being attached to it.

The entire U.S. employment visa system is ripe for reform, but the political action needed does not look likely in the near term. With the types of exploitation being practiced by the outsourcing firms, along with the many other negative effects of visa abuse, the whole H-1B visa program is getting a bad name.

John Robert Egan is an Immigration Lawyer practicing in Honolulu, and can be reached at jegan@migrationcounsel.com

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