B-1 visas are the problem, not H-1Bs

In the frenzy worldwide about skilled immigration, the US is leading the way by clamping down on H-1B visas. To be sure, changes to the skilled visa programme have been coming for some time. In 2013, the US Senate voted 68-22 for a comprehensive immigration bill which included changes to the H-1B programme and was fully supported by President Obama, but this died in the US House.

With full support from the new Trump administration, and with both Congressional chambers under Republican control, dramatic changes in the H-1B programme, some needed to prevent abuse and others a bit draconian, are expected to become law.

The triggers for this frenzy have been many: Just a few companies, mostly India-based, gobble up the lion’s share of the annual 65,000 tech visas each year. Many H-1B holders are not the “best and brightest” but perform mundane technology tasks, often displacing Americans already doing these jobs.

Corporate America relies on H-1Bs as a source of cheap labour which is why tech salaries, in places other than Silicon Valley, have stayed flat for nearly two decades.

But it is wrong to blame the H-1B visas alone for upsetting the supply curve of the US IT workforce. According to CompTIA, the US’ Nasscom equivalent industry group, there were 6.5 million tech jobs in the US in 2013, so the 65,000 H-1B visas granted that year represented just 1 per cent of the total. The real culprit could well be abuse of the B-1/B-2 Business/Visitor visa. The B-1 allows temporary US entry for limited business purposes and short durations, such as for marketing a product or attending a meeting. For example, the US issues B-1 visas to pilots of foreign carriers to train at Boeing’s US facilities.

The underlying rule for B-1 visa holders is well known: they are forbidden to perform skilled or unskilled labour while in the US.

In return for this restriction, the US is generous with its B-1 visa issuance policy. There are no numerical limits. Supporting documentation is rather basic — an invitation to attend a meeting, confirmed hotel bookings and proof that visitors are not likely to become stay back, such as multiple entry US Visas issued in 10-year blocks.

Naturally, the B-1 visa is a ripe candidate for fraud.

The B-1 economics makes sense to all in the scam. A US client wants the services of a web developer for three months. US contract web developers can cost upwards of $100 an hour — about $16,000 a month. The client is glad to accept a competing bid from an Indian company, supplying B-1 labour, for only $10,000 a month.

The Indian company gets the web developer a B-1 visa by paying $190 in fees to the US consulate. (In contrast, H-1B visas cost from $3,685 to $7685 plus attorney costs.) He is paid full salary in India during the three-month trip, say, $1,000 a month. The round trip airfare is $1,200.

On arrival, the developer checks into the many short-term-stay-based hotel chains located within walking distance of the client’s location. Even if the room costs $125 a night (often discounted because of block booking), the monthly expense is only $1,875 because the room is shared with another developer mate.

These hotels offer free continental breakfast and hors d’oeuvres for the evening meal. The developer is encouraged to stock up on free milk, fruits and juice from the breakfast bar and save them in his in-room refrigerator.

The hotel offers free Wi-Fi, so the developer does not even need a cellphone plan. He is additionally given a generous $1,200 per diem allowance for the entire month — a windfall for someone with practically no expenses.

Doing the math on a monthly basis shows that the total expenses for the Indian company, with travel prorated, is $4,375. The company pockets a cool $5,625 per employee while the US client saves $6,000 in US contracting costs. The employee is happy to be in the US with his Indian salary (and part of his per diem) practically all saved. If ever there’s a win-win-win situation, this is one.

To be sure, there are several losers in this scam. The US government does not get a dime in income or social security taxes. It loses out on the $8,000 in H-1B visa fees which are largely used for employee re-training programmes.

The US developer charging $100 an hour is probably unemployed and seeks government assistance, a double whammy for the US government. And for Indians legally working here, it can be dangerous.

The extreme example of this was when an innocent Indian engineer, Srinivas Kuchibhotla, was murdered in Kansas City. The first question he was supposedly asked by the killer was, “What visa are you on?”. It is not that the US government is not aware of this fraud. Procedures are already in place to prevent it, such as the E-verify system, which is a free Internet-based system that businesses are mandated to use to determine eligibility of employees to work in the US. But enforcement is poor and as long as the winners in the scam collude, the fraud will likely go on unabated unless there are whistleblowers.

It was such a whistleblower which caused an Indian IT major to settle B-1 visa abuse charges by paying a $34 million fine.

The B-1 toothpaste is already out of the tube. It is hard to put it back and unfortunately, the collateral victim is the H-1B programme.

The writer is the managing director of Rao Advisors LLC, Texas