H-1B Visa Demand Plunges with Economy

Demand for the controversial H-1B visas is falling sharply, at least in the early going of the annual lottery for educated foreign workers that began April 1. The U.S. Bureau of Citizenship and Immigration Services reported April 8 that only about half of the 65,000 allotment had been taken. In 2008, the USCIS filled the same 65,000 quota in one day.

For technology companies like Microsoft and Cisco Systems, though, the demand is still strong. In addition to the 65,000 visas for workers with undergraduate degrees, the government grants another 20,000 H-1B visas for foreign graduates with advanced degrees. The USCIS said almost all of those slots have been filled.

The USCIS does not releases the exact number of H-1B visas filled or the names of the companies seeking them until all applications have been processed for the federal fiscal year that begins Oct. 1. Another surge in H-1B applications is likely to occur following May college graduations, as the USCIS rules prohibit foreign students from applying for H-1B visas until after graduation.

While Congressional criticism of the H-1B program, which some lawmakers claim tech companies are unfairly using to fill American job openings, and recent disclosures of fraud and corruption in the program may have dulled the appetite for H-1B visas, the most likely reason for the slowing demand is the recession. Historically, the demand for H-1B visas can be directly correlated with the state of the economy.

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In the 1990s, as the tech economy sizzled, Congress kept raising the cap, which peaked in 2001 with 163,000 of 195,000 available H-1Bs issued. When the tech bubble burst and the Silicon Valley economy began to fizzle, demand fell to 79,000 visas issued. By 2004, Congress dropped the cap to the current 65,000 but appeased the tech industry by granting the additional 20,000 H-1Bs for advanced degree workers.

Adding to 2009's slow start is a new law that bars financial companies receiving federal bailout funds from applying for H-1B visas.

"It's very good for tech companies if the numbers are lower [from the financial industry]," Eleanor Pelta, an immigration partner with Morgan, Lewis & Bockius, told eWEEK. "Last year, there were 133,000 applications [for the 65,000 quota]. This year, chances are likely to be better for tech companies."

Four Indian IT outsourcers topped the 2008 list of companies obtaining H-1B visas, followed by Microsoft as the top U.S. user of the controversial temporary work visas. Leading the list of 2008 H-1B permits was Infosys Technologies with 4,559 visas granted.

Following Infosys were Wipro Technologies with 2,678 H-1B visas, Satyam Computer Services with 1,917 H-1B visas and Tata Consultancy Services with 1,539 H-1B visas. Microsoft clocked in with 1,307 H-1B visas in 2008.

Cognizant Technology Solutions (467 visas) and Cisco Systems (422) were the only other U.S. companies making the top 10 list of H-1B users. Other notable U.S. technology companies using H-1B visas in 2008 included Google (207), Oracle (168), Yahoo (139), Motorola (112), IBM (104) and Apple (70).

Despite the lower demand so far this year, Sens. Chuck Grassley of Iowa, Dick Durbin of Illinois and Bernie Sanders of Vermont are still likely to seek a reform of the H-1B visa program. A bill introduced in the 110th Congress by Grassley and Durbin would require employers to make a good-faith effort to hire American workers first. Employers would also have to show that the H-1B worker would not displace an American worker.

"We need to stop worrying about the numbers and let the market decide," Pelta said. "The market should be dictated by employer needs."

In February, federal agents conducted H-1B-related raids that resulted in 11 arrests across seven states. According to the Department of Justice, the scheme involved hiring college-educated foreign workers to allegedly fill high-tech jobs in Iowa when, in fact, the workers were sent to the East and West coasts while being paid the lower prevailing Iowa wage rate.

The investigation seems to center on Vision Systems Group, of South Plainfield, N.J., and Praveen Andapally, identified as president of VenturiSoft, also based in South Plainfield. Among the others indicted was Vishnu Reddy, identified as president of Pacific West, of Santa Clara, Calif.

Two months before those arrests, the hammer had already fallen on a Massachusetts scheme in which a state employee allegedly created bogus H-1B job certifications. Four men were charged Dec. 4 with producing documents falsely stating that H-1B visa applicants had jobs with the commonwealth of Massachusetts. Richard Schwartz, a now former Massachusetts employee, signed the documents and is charged with one count of visa fraud, which could mean penalties of up to five years in prison time and a $250,000 fine.

Sridhar Reddy, Sudha Rani and Venkat Naidu are also charged with one count of visa fraud. Reddy and Rani face additional charges of visa fraud totaling up to 15 years of prison.

In October 2008, a USCIS report found that the H-1B program has a more than 20 percent violation rate. The fraud identified in the report included jobs not being located where employers claimed, H-1B visa holders not being paid the prevailing wage, forged documents, fraudulent degrees and "shell businesses."