A Bloomberg News investigation recently uncovered how some outsourcing and information technology (IT) firms exploit the H-1B visa system by submitting multiple registrations for the same worker, boosting their chances in the lottery.
In 2023, the U.S. Citizenship and Immigration Services (USCIS) received 446,000 H-1B visa applications despite only 85,000 being available. The Department of Homeland Security data reveals that over 11,600 visas went to multinational outsourcing firms, while 22,600 were granted to IT staffing companies.
Moreover, between 2022 and early 2023, the top 30 H-1B employers laid off at least 85,000 workers. Thirteen of these firms were outsourcing companies that either offshored U.S. jobs or underpaid migrant workers. Despite these layoffs, U.S. immigration authorities granted 127,600 H-1B visas for fiscal year 2023.
Ironically, while the H-1B program aims to address labor shortages in fields such as accounting, journalism, health, and education, most H-1B visa holders work in computer systems analysis and software development. This mismatch highlights ongoing issues with the program’s effectiveness in meeting its goals.
Regulation updates and loopholes
USCIS revised the H-1B registration process with a new rule to ensure fairness. Beneficiaries are now selected by unique beneficiary rather than individual registration.
However, loopholes persist as staffing firms exploit the system, charging fees, submitting false information, and violating labor laws. Weak enforcement allows these practices to continue.
Experts and policymakers call for stricter regulations to address exploitation and maintain the program’s purpose of filling high-skill jobs. Enhanced oversight is crucial to protect both U.S. businesses and legitimate foreign talent.
How H-1B manipulation affects outsourcing
The manipulation of the H-1B visa program reshapes the outsourcing industry. Here’s how unethical practices affect the broader outsourcing industry:
- Increased regulatory scrutiny. The outsourcing industry faces heightened scrutiny from government agencies, leading to higher compliance costs and reputational risks due to visa fraud and labor abuse investigations.
- Increased talent acquisition challenges. Stricter H-1B regulations complicate acquiring and retaining skilled IT workers, potentially causing talent shortages and affecting project delivery.
- Eroded client confidence. Negative publicity surrounding H-1B abuses can erode client confidence, leading to fewer outsourcing contracts and reduced revenue.
- Competitive disadvantage. Ethical firms might struggle against competitors using unethical practices, which hinders their growth.
- Shifting business models. To adapt, outsourcing firms might focus more on domestic hiring, automation, and talent from countries with less stringent visa rules.
Outsourcing companies might shift to high-value services, such as consulting and digital transformation, to reduce H-1 B reliance, while the industry persists with its reputational challenges and works to rebuild trust with clients and stakeholders. Moreover, increased regulatory burdens might lead to industry consolidation, with larger firms acquiring smaller ones.
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Suroy suroy, HJ. (2024, August 12). American H-1B visa system exploited by outsourcing firms, investigation reveals. Outsource Accelerator. Retrieved from https://news.outsourceaccelerator.com/american-h-1b-visa-system-exploited/
Costa, D., & Hira, R. (2023, April 11). Tech and outsourcing companies continue to exploit the H-1B visa program at a time of mass layoffs. Economic Policy Institute. Retrieved from https://www.epi.org/blog/tech-and-outsourcing-companies-continue-to-exploit-the-h-1b-visa-program-at-a-time-of-mass-layoffs-the-top-30-h-1b-employers-hired-34000-new-h-1b-workers-in-2022-and-laid-off-at-least-85000-workers/
Hankinson, S. (2024, March 6). Why the US tech sector is so dependent on immigrant labor. Washington Examiner. Retrieved from https://www.washingtonexaminer.com/opinion/beltway-confidential/2749020/why-the-us-tech-sector-is-so-dependent-on-immigrant-labor/
Mider, Z., Fan, E., Lu, D., & Patino, M. (2024, July 31). How Thousands of Middlemen Are Gaming the H-1B Program. Bloomberg. Retrieved from https://www.bloomberg.com/graphics/2024-staffing-firms-game-h1b-visa-lottery-system/
