It is amazing, in this racially enlightened century, that we still see members of the U.S. Congress demonizing an ethnic group. Yet that is what happened when the Senate adopted a provision in the immigration bill singling out Indian and Indian-American information-technology companies that have operations in the U.S. with punitive restrictions on H-1B work visas. By contrast, the legislation expanded access to the visa to others in the technology industry.

Indian and Indian-American (collectively “Indian” below) IT businesses are being scapegoated for abuse of the visa program -- using it for cheap, immobile labor -- that actually pervades the entire industry. Dick Durbin, an Illinois Democrat who was one of the “gang of eight” senators who oversaw the bill, accused Indian businesses of usurping the program. His Democratic Senate colleague Charles Schumer of New York even used the term “chop shops” in referring to Indian employers.

The word “Indian,” of course, doesn’t appear in the text of the bill, which essentially defines the targeted class as those companies that rent out computer programmers to other companies. But those businesses are virtually all run by ethnic Indians; Indian-Americans lead the majority of them, though many of the largest companies are based in India. Schumer has cited a number of specific India-based operations, such as Infosys Ltd., in his speeches.

Distorting Facts

Why gang up on the Indians? The technology industry has publicly called on Congress to enact punitive legislation against Indian companies, a strategy that appears aimed at diverting attention from the entire industry’s own widespread abuse of the visas.

Propaganda typically relies on distortion of facts. In this case, the argument is based on excellent research by professor Ron Hira of the Rochester Institute of Technology on the Indian companies. Although Hira says abuse pervades the entire industry and he opposes making the Indians the target of H-1B visa changes, his work was hijacked to justify the attacks on them in the Senate bill.

It’s true that almost all the programmers the Indian companies hire are foreign workers, and that they offshore some of their work. But for many U.S. companies, most of their programmers are foreign workers, too; just plug “software engineer EBay” into LinkedIn’s search engine for a dramatic demonstration. And those companies do offshoring as well.

Most important, both Indian and other businesses use the H-1B program for cheap labor. Although the Indian companies hire at the low end -- typically holders of bachelor’s degrees -- while other companies often hire at the master’s level, both types of companies are underpaying at those respective levels.

And the underpayment is legal. Even Schumer has conceded that the Indian-owned businesses are doing nothing illegal. All employers can abuse the visa program by using some gaping loopholes, which includes the definition of the legally required wage. Other IT companies aren’t going to pass up the loopholes in H-1B rules any more than they would leave money on the table by not making full use of tax-code loopholes.

My own research, published in the academic journal Migration Letters, has shown that non-Indian companies use the visas to acquire cheap labor, saving about 20 percent in an apples-to-apples comparison -- i.e., young foreign workers versus young Americans -- and as much as 50 percent for hiring young H-1B visa holders instead of older Americans. A 2001 National Research Council report, commissioned by Congress, also found that underpayment of the visa holders is an industrywide practice.

Further Abuses

U.S. companies also abuse the related green-card process, which renders a foreign worker immobile for the several years during which the green-card approval is pending. The employer doesn’t want engineers leaving for a competitor during an urgent project. The beholden workers can’t move around to find the best salary, and this holds wages down. Sankar Mukhopadhyay and David Oxborrow of the University of Nevada have shown that workers attain significantly higher salaries after their green cards finally come through and they gain their freedom.

Because Indian companies only rarely sponsor their foreign workers for green cards, the rest of technology industry arguably abuses the foreign workers even more than the Indian ones do.

Hira projects that if the Senate bill’s provision is enacted, the biggest beneficiaries will be companies such as International Business Machines Corp., much of whose work involves the same “programmer rental” business model as that of Indian companies. This would seem to be the ultimate in Capitol Hill cynicism: Squash the little guys to help the ones with deep pockets.

(Norman Matloff is a professor of computer science at the University of California at Davis.)

To contact the writer of this article: Norman Matloff at matloff@cs.ucdavis.edu.

To contact the editor responsible for this article: Katy Roberts at kroberts29@bloomberg.net.