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H-1Backlash: Despite $377M in Profits, Fossil Replaces American Workers With Temps from India

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A year after profiting $377 million on $3.5 billion in sales, retailer Fossil is laying off many of its IT workers and replacing them with outsourced H-1B visa workers from India. Fossil’s reason? The need to cut labor costs. 

The Indian workers will be provided by Infosys, the same company at the center of a layoff fiasco at Southern California Edison. The Edison revelations brought about a swift H-1B backlash from both the left and the right.  No exact number has been provided by Fossil, but estimates suggest between 100 and 200 American IT workers will be displaced.

In what can only be viewed as the workplace equivalent of rubbing salt in a wound, these workers’ severance packages are tied to their willingness to train their Indian replacements.  According to The Dallas Morning News, the “knowledge transfer sessions” will be videotaped and used to train Infosys workers in China, the Philippines, India, and the Czech Republic.

Ron Hira, research associate with the Economic Policy Institute said: “It’s a reminder of just how little bargaining power they have.  Workers have to feel like they’re very disposable.”

Infosys was granted more than 6,000 H-1B visas in 2013, the most of any company.  The system is designed to ensure that foreign workers earn the prevailing wage in their field, but annual wages $20,000 shy of those earned by the American workers’ being replaced have been reported.  

The pervasive trend is growing nationally. Hira argues that it is the system that is broken. He contends it is illogical to think that large companies will choose to do the right thing when the bottom line is clearly their greatest concern. As he told the Senate panel looking to improve and reform the H-1B visa program: “The executives making these decisions aren’t villains.  They are simply acting rationally to cut labor costs.”

While some on the right — most surprisingly, Rep. Darrell Issa — are changing their tune regarding H-1B, pro-business Republicans still wholeheartedly support the program and argue that it is good for the economy.  In response, the Economic Policy Institute posted a detailed blog post to tackle these claims. Titled, “H-1B Visas Do Not Create Jobs or Improve Working Conditions,” it states:

Much more careful, groundbreaking research on the effects of H-1Bs has recently been completed by economists at Notre Dame, the University of California, Berkeley, and the Office of Tax Analysis at the U.S. Department of Treasury. Their findings should put an end to the notion that H-1Bs are in any way good for U.S. workers. The research solves the problem of causality by employing a natural experiment. Two types of businesses were studied, those that applied for and received visas through the H-1B random “lottery” (because more employers want H-1Bs than are annually available, the government has to allocate them via lottery), and those that applied but failed in the lottery. If the H-1B visa raised wages, led to job creation, or spurred innovation, the companies that were awarded the visas should do better on each of those counts. In fact, they did not. On the contrary, over the eight years following the hiring of an H-1B worker, U.S. workers were displaced, wages were lowered, and there was no positive effect on innovation.

As the authors write: “We demonstrate that H-1Bs given to a firm on average do not raise the firm’s patenting and/or other employment, contrary to firms’ frequent claims. Overall our results are more consistent with the second [i.e., the critics’] narrative, in which H-1Bs replace other workers to some extent, are paid less than alternative workers, and increase the firm’s profits (despite little, if any, effect on firm patenting).”

In a video posted to YouTube, Dallas Morning News writer Mitchell Schnurman provides commentary on Fossil’s decision through the lens of the “race to the bottom.”


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