You can take it to the bank: the structure of incentives created by government regulation will always end up trapping and exploiting wage and salary employees.
That’s what’s going on with the IT work force at Southern California Edison, where some 500 American employees are being let go in favor of H-1B visa workers supplied by India.
The unkindest cut of all? The Americans facing termination are being required to train their replacements. In the current economy, who can say no to that and walk out on a last paycheck?
Says a worker interviewed by Computerworld:
“They are bringing in people with a couple of years’ experience to replace us and then we have to train them,” said one longtime IT worker. “It’s demoralizing and in a way I kind of felt betrayed by the company.”
Another says the IT workers at SCE are “beyond furious.” Ron Hira, a leading researcher in such “outsourcing” says:
The SCE outsourcing “is one more case, in a long line of them, of injustice where American workers are being replaced by H-1Bs,” said Ron Hira, a public policy professor at Howard University, and a researcher on offshore outsourcing. “Adding to the injustice, American workers are being forced to do ‘knowledge transfer,’ an ugly euphemism for being forced to train their foreign replacements. Americans should be outraged that most of our politicians have sat idly by while outsourcing firms have hijacked the guest worker programs.”
Why is it happening? Because companies pay less to employ H-1B workers. This isn’t a matter of exploiting them or violating the law or even getting around the law, although many observers obediently try to depict it that way. The respective salary levels may not even be that different. But H-1B workers are compensated under a contract with their foreign employers, meaning that the foreign contractor operates under its country’s laws on benefits and employer contributions to government-mandated programs, like social and medical insurance. The outsourcing company – companies like Infosys and Tata, the Indian firms supplying workers to SCE – is the one on the hook for employee benefits and government-mandated expenses, according to the foreign country’s laws.
If an H-1B worker received exactly the same salary as an American in the same job, it would still cost the U.S. company less to employ the H-1B worker. Even with fees to the outsourcing contractor, the U.S. company’s expenses per worker would be lower – because the company isn’t having to shell out all the money that goes somewhere besides the employee’s pocket.
This has been going on for nearly 25 years, since the H-1B visa program was instituted in 1990. It’s been written about many times in the last few years, as a stagnant economy and rising business costs drive more and more companies to shift to H-1B outsourcing, especially in IT departments. And it’s easy to get mad at the U.S. businesses that do the outsourcing.
But those businesses aren’t the ones that made the American worker so much more expensive to hire than his foreign counterpart. Nor is the American worker himself receiving the extra money companies have to shell out to hire him.
If you take nothing else away from this article, take that. The extra money it takes to hire an American worker goes largely to federal and state governments, and insurance companies. (Money goes to insurance companies because the government says it has to; the insurance companies themselves have no power to compel anyone to send money to them.)
Government mandates that fill government coffers are the reason the American worker is so expensive, compared to foreign workers. The worker himself is not swimming in lard. But when the government’s mandates make employing him too expensive, he’s the one who gets the boot.
It makes a nice racket: federal and state governments can keep being leeches on the backs of American workers, without reforming their job-killing mandates. Because when the economy gets tough, there’s a safety valve for companies that need to trim costs. Bring in H-1B workers for a while. This economic charade, wholly owned by government, is sold as a method of “saving American companies,” and hence, by implication, American jobs.
The remedy is not to put more silly, unrealistic restrictions on businesses. It’s to lighten the mandates that funnel money to the government whenever a business hires an American. (See my post from July 2013, linked above, for a methodical demonstration of where the money goes. You may be very surprised.)
Reforming those job-killing mandates will never happen unless people like you wise up and realize what’s going on. When government requires your employer to send money to the government, or an insurance company, as an expense of hiring you, government isn’t looking out for you. It’s looking out for itself.