H-1B and L-1 Visa Fee Hike Could Lead to More Offshoring

UPDATED: H-1B visa critics and advocates agree that an increase in visa fees that targets Indian IT service providers is inequitable. What's more, they say, it will do little to create or maintain American IT jobs, and could in fact lead to increased offshoring.

By Stephanie Overby
Mon, August 16, 2010

CIO — UPDATED 8/17/2010 -- It's not often that H-1B visa critics and advocates are on the same page, but Senator Charles Schumer (D-N.Y.) has accomplished the seemingly impossible. Representatives on both sides of the H-1B visa debate agree that the increased visa fees established as part of a new border security appropriations act introduced by Schumer in the U.S. Senate are inequitable and likely to be ineffective in creating or maintaining American IT jobs.

Dr. Norm Matloff, a professor of computer science at the University of California, Davis and a leading voice in the call for temporary visa reform, says the increased fees are a setback and discriminate against Indian IT service providers. Vivek Wadhwa, a visiting scholar at the University of California, Berkeley, who is usually on the opposite side of the H-1B visa debate, agrees with Matloff. Wadhwa says the legislation is "misguided, misleading, and won't achieve its purpose."

The law, signed by U.S. President Barack Obama on Friday, stipulates that any company employing more than 50 workers in the U.S. must pay $2,000 more for an H-1B visa application and $2,250 more for an L-1 visa application if more than half of its U.S.-based workers are non-citizens. Those new fees come on top of a $320 filing fee, a $500 anti-fraud fee and a $1,500 American worker training fee.

India's National Association of Software and Service Companies (NASSCOM) says it will lobby against the additional levy.

Critics of the measure say the law amounts to a visa tax on Indian outsourcers like Infosys, Tata Consultancy Services (TCS) and Wipro, while it ignores other heavy users of H-1Bs, like U.S. IT service providers IBM (IBM), Accenture (ACN) and UST Global.

Matloff says the lopsided fees fail to address what ails the skilled worker visa program. "It will be ineffective [because] the mainstream American firms abuse H-1Bs for cheap labor just as much as the Indian services firms do," he says.

U.S.-based outsourcers, many of whom have laid off thousands of American workers while hiring overseas, would not see any increase in H-1B visa fees because U.S. citizens make up the majority of their stateside workforces.

"The H-1B/L-1 visa tax will be more effective for developing income for the U.S. treasury than Schumer's proposed call center tax, as it's much easier to administer, but that's where the positives end," says Phil Fersht, founder of outsourcing analyst firm Horses for Sources. "In terms of creating more U.S. IT jobs, this is another step backward for the IT services industry."

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