New Limits on Imported Software Expertise

Companies that hire low-cost foreign software experts may be hit by a Labor Department crackdown and a proposed immigration reform law

The Labor Department is cracking down on companies that recruit low-wage foreign software professionals.

The move will affect several companies around the Beltway, including Mastech Corp., whose mid-Atlantic division in Fairfax, Va., uses several hundred foreign software experts to complete government and commercial contracts, and Tata Inc., an India-based software company with offices in Silver Spring, Md. Both firms employ hundreds of foreign software experts -- often from India -- and have U.S. revenues of roughly $100 million.

Other companies that could be hurt by the crackdown include Complete Business Solutions Inc., based in Farmington Hills, Mich., and Syntel Inc., based in Troy, Mich. Syntel recently signed an agreement with the Labor Department, under which the company must pay $77,700 to the foreign software professionals that it hired at less than U.S. "prevailing wage." Also, Syntel must hire 40 U.S. software experts and spend $1 million on training U.S. programmers.

Foreign software experts are attractive to U.S.-based companies, because they can be paid as little as $8,000 a year.

The crackdown comes as Congress prepares to reform immigration law. Among the measures envisioned are sharp reductions in temporary work visas, used to legally import foreign software experts under short-term contracts.

Up to 65,000 visas are allowed each year under current law. The immigration reform is being pushed by Rep. Lamar Smith, R-Texas.

However, the immigration reform effort may backfire, warned Mark Rosenker, a spokesman for the Arlington, Va.-based Electronics Industries Association. Foreign software experts "bring creative ideas... [and] help us open markets around the world," he said.

"We are less than supportive" of the immigration reform measure, he said.

One group pushing for the changes is the Washington-based Institute of Electrical and Electronics Engineers Inc., which represents the interests of U.S. electronics engineers and software experts, who are threatened by low-wage foreigners working in the United States.

The number of foreign engineers and scientists temporarily brought into the United States grew from 40,000 per year during the late 1980s to more than 80,000 in the early 1990s, according to an association statement. In 1993, 10,846 computer scientists were admitted to the United States, up from 3,424 in 1986, according to an association statement.

Stricter enforcement of the Immigration and Nationality Act triggered the Labor Department action. "We will vigorously enforce this law to ensure that U.S. workers are not displaced by employers hiring foreign workers for less than the wages paid to comparable U.S. workers," according to a statement from Labor Secretary Robert Reich.

However, the IEEE and the Labor Department can't put too many restrictions on the importation of labor for fear that U.S. companies will move more software-development work overseas. Already, AT&T Corp., Motorola Inc., Texas Instruments Inc. and Hewlett-Packard Co. have established software-development centers in India or China.

"It's a tough issue, so we try to take a reasoned approach to it," said IEEE spokesman Christopher Currie.

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