Editor's Note: This article continues our series excerpted from AC360°'s contributor David Gewirtz's upcoming book, How To Save Jobs, which will be available in December. Over the next few months, we'll be excerpting the first section of the book, which answers the question, "How did we get here?" Last time, we looked at how the dot-com bubble lost $5 trillion. This time, we begin our look at outsourcing and how its hurting American jobs. To learn more about the book, follow David on Twitter @DavidGewirtz.
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David Gewirtz | BIO
Editor-in-Chief, ZATZ Publishing
To many Americans, the word "outsourcing" is a four-letter word. It implies, as Ross Perot called it, a "giant sucking sound," where jobs leave the United States for less advantaged countries.
Perot was concerned about NAFTA in the early 1990s sucking good paying American jobs to Mexico, but as it turns out, he had no idea what was coming - and certainly no idea of the magnitude of the problem we'd be facing a couple of decades later. As you'll see, NAFTA is the least of our worries.
We've been actively permitting foreign companies to set up shop here, and then bring in their people to displace ours.
Outsourcing is one of our main job-related problems and I'll talk more about it later in this chapter. But it's not our only problem. In fact, the policy of the American government over the last half a decade or so has not only made outsourcing economically viable, it's all but encouraged bringing foreign workers into the United States.
And, in a shining example of your tax dollars at work, we weren't just bringing foreign nationals into the United States, we've been actively permitting foreign companies to set up shop here, and then bring in their people to displace ours.
The failure of the H-1B visa program
So, while China and India were slowly moving their 2.5 billion people out of abject poverty and into the world economy back in the late 1990s, many American investors were trying to figure out how to make billions of dollars by creating companies that produced no products, provided no value, and made no money - in other words, the dot-com craziness was in full force.
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To support the insanity, companies that didn't exist six months earlier and had no plans of ever figuring out how to make a profit were hiring thousands of workers at a break-neck pace. For a short period of time, it was nirvana for job hunters. Companies were offering not only excessively high compensation packages, but side benefits like a company masseuse and cafeterias run by chefs who used to work for 5-star hotels.
In order to meet their soaring demand for workers, particularly specialty technical workers, many of the largest established tech companies as well as many new startups both took advantage of the U.S. government's H-1B visa program and started to "insource" jobs from - you guessed it - India and China.
The U.S. H-1B visa program allows U.S. employers to temporarily employ non-citizens and keep them in the United States for an extended period of time - three years, extendable to six, and extendable again for up to another four years - for a total of 10 years for certain workers.
Back in the early days of the program, only 65,000 H-1B visas were granted each year, and the cap was never reached. But once the Internet boom took off, American companies lobbied to have the quota increased. In 1998, it got bumped up to 115,000 and then in 2000 (at the peak of the dot-com boom) to 195,000.
Since the quota increases were temporary, they eventually dropped back down to 90,000 by 2004 and then, shortly after, to 65,000. But that didn't last.
In 2006, the United States Senate passed a bill which permanently raised the 65,000 quota to 115,000, set it to automatically increase the quota by 20 percent whenever the top-end was reached (with no provision to lower it back down), added another 6,800 visas for various trade agreements, added 20,000 additional visas for those with graduate degrees, and made visas for work at nonprofit organizations completely and totally exempt from the quota - which means colleges, hospitals, and other enormous nonprofit enterprises can bring in as many foreign workers to America as they'd like.
Ostensibly, the H-1B visa program was intended only for workers with special skills, skills that either Americans don't have, or for which there aren't enough American workers to go around. But the special provision for additional H-1B visas to those with graduate degrees showed that special skills requirement was quite loosely defined.
You'd think American companies would be the ones most likely to be issued H-1B visas, since the whole purpose of the program was to allow American firms to hire foreign individuals of unique skill.
You'd think that, but you'd be wrong. Six of the top 10 companies issued H-1B visas: Infosys, Wipro, Tata Consultancy Services, Satyam Computer Services, Patni Computer Systems, and Larsen & Toubro Infotech are all based in India. A seventh company, Cognizant, has most of its employees in India but has a U.S. headquarters in Teaneck, New Jersey.
Rounding out the top ten are Microsoft (ranked #3), IBM (ranked #8), and Oracle (the huge California-based database software maker, ranked #9).
The bottom line is the H-1B visa program doesn't work - and actually harms American workers. A program designed to bring in foreign workers with special skills to help American companies instead helps foreign companies bring foreign workers into the U.S. to displace both American workers and American companies.
While foreign workers were being brought into the U.S. to displace American workers with the help of the U.S. Congress, American jobs were also being sent to India and China...
Follow David on Twitter at http://www.Twitter.com/DavidGewirtz.
Editor’s note: David Gewirtz is Editor-in-Chief, ZATZ Magazines, including OutlookPower Magazine. He is a leading Presidential scholar specializing in White House email. He is a member of FBI InfraGard, the Cyberterrorism Advisor for the International Association for Counterterrorism & Security Professionals, a columnist for The Journal of Counterterrorism and Homeland Security, and has been a guest commentator for the Nieman Watchdog of the Nieman Foundation for Journalism at Harvard University. He is a faculty member at the University of California, Berkeley extension, a recipient of the Sigma Xi Research Award in Engineering and was a candidate for the 2008 Pulitzer Prize in Letters.