Wages and cheap labor

A few years ago I had a long running contract as a programmer at a large company. If you are a contractor two rates are important, the “bill rate” that the corporation pays your contract agency and the “contract rate” that the agency pays you. Contract agencies hate to tell you the “bill rate” because then you know how big a cut they are taking and how little you are getting.

But sometimes you can find out. And I found out that the corporation had a standard bill rate of $68 an hour that they paid to the contract agencies for most of the programmers they got.

Until they started hiring guestworkers in a big way. Most large companies and contract agencies know how to game the system so they can pay guestworkers much less (about 30% less) than they would pay an American. So they get as many as they can. But once they do, then all contractor rates go down. And sure enough, when the company started hiring guestworkers, it lowered if bill rate for all contractors from $68 an hour to $65 and hour, and then lowered it to $50 an hour.

Well, some of us got a wage cut of 100% when they replaced just about all American contractors with guestworkers. And when we tried to get another contract, all the agencies started offering us 50% less than we hade been working for (because they found that they could send the work offshore where the workers were paid only one tenth as much as here).

Cheap labor doesn’t just hit the individual who loses their own job. It hits everyone from that moment onward as the wages for all jobs go down to match what the companies can get away with paying anywhere in the world.

Your job’s next.


3 Responses to Wages and cheap labor

  1. Edward says:

    I totally agree with you! I have been running a Consulting firm for over 20 years, so this phenomenon of cheap labor forcing rates down for Americans in not new. I am running my own Blog to discuss these issues and suggest way of fighting back.

    With the combination of Outsourcing IT Jobs Offshore to places like India and the total ABUSE of the H1-B and L-1 Visa Programs (Guest Workers), the IT Consultant has an up hill battle to fight.

    As an American who has worked in the IT Industry for over 20 years running an IT Professional Services and Consulting Organization, I would like to say that the current abuse and corruption within the H-1B and L-1 visa program must stop and the “TRUE” Intent of the law must be implemented!!

    Of those who support increasing the H1-Bs quota, (i.e. Bill Gates, Hillary, etc), not one person who advocates for the increase in the H-1B, also advocates that the H-1B be paid “MORE”, or at least, in par with their American based counterparts…. which is part of the law. The H-1B is about bringing “Exceptional” talent into the USA, not about bringing in “Cheap Labor”.

    As to the H-1B Visa, in “Concept” the program is good for America, but it’s implementation is currently harming America, and to a certain degree, can be consider a treasonous act against the American people. That’s right “Treasonous” . The concept of the H-1B is to scan the globe for some of the most talent individuals in the world. These individuals have skills and talent that are far above what you can find in the US Market Place. We bring these individuals in to add a competitive advantage to firms in the US which supports our US based economy. These individuals could be Artist, Writers, Chemists, Physicists, Researchers, Computers Science experts, etc. These individuals must have a very special skill or talent that cannot be found in the US market or are very scarce in the US Market. As a result, these individuals with these talents should be paid at the high end to above the salary range that Americans with comparable would get, since these people are of “Exceptional Talent”. By adding these people to our Economy, their skills and talent help produce more jobs and opportunity ‘HERE IN THE USA”. That is the Concept, the implementation is different. The current implementation is destroying any opportunity that would bolster the US Economy though this program, which the H-1B program was intended for!!!!

    In implementation, the H-1Bs is paid far less than an American….”a violation of the law”. The skills are commonly found in the US market place, thus the only “Exceptional Talent” that the H-1B has is the fact that they are “Cheaper” than Americans. Do you really believe that INDIA is the source of the majority of the H-1B, because these people are disproportionately of “Exceptional Talent” as compared to the rest of the world? The H-1B should be evenly distributed from all around the world. But that’s not the case. Most of the H-1Bs and L-1 Visa holders are from Indian Outsourcing firms looking to take advantage and profit on America’s hide, using …and abusing … the H-1B and L-1 Programs.

    The “Treasonous” Act is the fact that a “Truly” Exceptional H-1B Candidate from some other part of the world who may have contributed to Technological development here in the USA, which would of bolstered and strengthen our US based economy, thus helping America stay Free, has not been given the opportunity to enter the US under this program. Since the Indian Outsourcing firm dominate the H1-B applications process with their workers, whose main talent is being “Cheaper than Americans”, the truly talented one that can help American are shut out!!!

    I read on the web that Tata and Infosys put in for 20K of Applications each for H-1B (40k total), of which Tata got around 3000 H-1B in 2006 and Infosys got close to 5000 H1-Bs. The 20K of H1-b applications in 2006 for Tata represented 1/3 of their entire global workforce.

    I’m all for bring talent into our country, but the H-1B has transitioned into a highway for “Cheap Labor” to displace a higher paid US based worker. That is not the “Spirit nor Intent” of Law.

    As to the L-1 Visa, there maybe even more abuse and corruption than H-1B program. An L-1 cannot work at the capacity as a “Body Shopper”. Funny, some of the Top users of the L-1 are Body Shoppers…hmmmm…could there be abuse?

    At present Tata is making very good money on its use of the H1-B and L-1 Visa based workers in the USA. As it is, these workers are paid less than what Americans Citizens or Permanent Residents would get….. which goes against the spirit and intent of the law!!! In year 2006, TCS imported from India over 4800 workers working on the L-1 Visa alone.

    Under the L-1 Visa, if any of these persons have worked under the capacity of Body shopping, working at a client site or even working on a client fix cost project, or hourly time & materials project for an end client of Tata, this maybe a massive violation of the Spirit and Intent of the law. With the 2008 elections coming in US, TCS cannot hide from their past and present deeds.

    It’s simple, Foreign Corporation and Outsourcing firms should NOT be allowed to use the H1-B program….that is good for America!

    If you have time, please check out my Blog at Peningo Opinion Blog

    Thank you

    Edward Pellon
    Peningo Systems
    Providing IT Consultants to the Business Community with expertise in WebSphere, Tivoli and DB2 – UDB for years

  2. numen says:

    Maybe it’s because I have spent my career in the Fortune 500 instead of the more innovative smaller companies, but I have never seen a “truly exceptional” guestworker in the workplace. Before Y2K they were nearly always competent (never did they have skills that were not commonly available here, though), during Y2K their abilities were more spotty, and after Y2K it is primarily a matter of age and experience, with the older ones more competent and the youngest ones having almost no skills. I attribute it to our emptying the well in India, because I’m finding the ones from other countries (which are just starting to be tapped) are better. But never have I seen any guestworkers who were “exceptional”. In fact, most of the Fortune 500 would not know how to utilize anyone who is exceptional…

  3. Idetrorce says:

    very interesting, but I don’t agree with you

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