Outsourcers Help Tech Firms Keep Up Appearance of High H-1B Salaries

By David North on June 15, 2017

When a baseball player sees a teammate hit a bases-loaded, game-winning home run he experiences two emotions — elation for the team, and a whiff of jealousy that he did not get those four RBIs and all that applause.

Well, South Carolina lawyer Geoffrey Rhodes, someone I had never heard of, has just pulled off a similar feat in the H-1B field, and I am frankly envious.

Using an interesting research method, he has just demolished the fantasy of high H-1B salaries paid by the big players in the IT world. He discovered that Cisco, PayPal, Microsoft, and E-Bay, for example, follow a (misleading) double track as they use the H-1B system.

On one hand, they seek petitions to hire H-1Bs directly at relatively high salaries (that's the "Apparent Average H-1B Salary" in the table below), while, on the other, they are quietly using the Indian outsourcing firms (often called "body shops") and thus paying low H-1B salaries for large numbers of other, lesser workers. But because of the way they play the game, up until now only the high salaries could be gleaned from the government data.

Rhodes presented information on the extent of the companies' use of low-wage hires at their headquarters, in percentages. I added in the latest average salary information as it appears on Myvisajobs.com, and we see:

 

Employer Apparent Average H-1B Salary Percent of H-1B Hires through Outsourcers
Cisco $127,884 60%
Paypal $134,666 50%
Microsoft $129,610 43%
EBay $137,362 29%

 

EBay wins that round, on the bases of both higher apparent average salaries and lower use of the outsourcers.

Rhodes apparently did this work out of non-vocational curiosity. He found, in a part of the Department of Labor data set that was not tabulated, that if you looked at a job site's address, you could see where the outsourcers were placing their workers. He then constructed a program that provided him with the data in the third column above.

What no one has yet written about is that this little sleight-of-hand, to the extent that it is for public-relations purposes, is an expensive one. Someone in each corporation decided that keeping up the appearance (for lobbying purposes) of paying high salaries is worth millions if not tens of millions of dollars a year in fees to the outsourcers. By playing this game, the Ciscos of this world are presumably paying a 15 or 20 percent markup on the lower-paid workers, in the form of fees to the body shops which they would not have to pay if they'd hired the H-1B workers directly. There are, no doubt, other reasons to use these cheap contract workers, flexibility presumably chief among them. But the arrangement provides a useful talking point for industry lobbyists defending the H-1B program in Congress.

There must be, on one side of the issue, many a lobbyist gnashing his teeth and hoping that this story will not be told, while, on the other side, there's a nice warm feeling at this information getting out, tainted with a little jealousy at being scooped. (Another, similar tale, about EB-5, will be posted soon.)

For the full story on this development, see "The Secret Way Silicon Valley Uses the H-1B program", by Joshua Brustein of Bloomberg News.