North Carolina’s practice of awarding millions in taxpayer-funded incentives to companies that hire foreign workers is causing concern among some lawmakers.
An Observer analysis of federal data this month revealed that companies in Charlotte and across North Carolina are stepping up their use of the H-1B visa program. The visas allow employers to bring foreign workers to the U.S. on a temporary basis to fill highly specialized positions, such as scientists and computer programmers.
Among the employers applying for visa workers in Charlotte are two companies that have received millions of dollars in state incentives to create jobs in the city, the Observer found. State law doesn’t prohibit companies from using foreign workers to meet job-creation requirements tied to the incentives, according to the North Carolina Department of Commerce.
North Carolina lawmakers say that’s troubling.
If we’re recruiting jobs for North Carolina, they should be for North Carolinians.
Sen. Bob Rucho, Republican from Matthews
“If we’re recruiting jobs for North Carolina, they should be for North Carolinians,” said Sen. Bob Rucho, a Matthews Republican. “How fair is that?”
Lawmakers said they will investigate possible changes that would ban or at least restrict companies that are awarded incentives from using visa workers, though they believe such a move would likely have to wait until next year’s regular session.
Rep. Craig Horn, a Weddington Republican who serves on the House Commerce and Job Development Committee, said he will “see if I can get folks working on this.” He said he learned of the loophole through the Observer’s reporting.
Horn said he’d like to study the issue further. But he believes awarding incentives to companies that use foreign visa workers to fulfill job-creation requirements amounts to an “unintended consequence” of the incentive program.
“I would close the loophole,” he said. “I want to see our state tax money used to benefit our state residents.”
House Speaker Tim Moore and Senate leader Phil Berger did not respond to requests for comment.
A political flashpoint
The attention to state incentives comes at a time when the H-1B visa program is becoming a political flashpoint nationally. Proponents say the visas help companies fill jobs for which they can’t find qualified workers. Critics say companies abuse the program, replacing Americans with foreign workers willing to work for less.
Since publishing its original story, the Observer has received dozens of emails from readers in Charlotte and around the country, some sharing personal stories of losing tech jobs to H-1B visa workers from India. Some laid-off workers said they were further humiliated and outraged when their company told them to train their foreign replacements.
It was not very pleasant to have someone next to you trying to learn your job so they can take it away.
A Charlotte resident who said he’s lost IT jobs in the city to visa workers twice in the past five years
“It was not very pleasant to have someone next to you trying to learn your job so they can take it away,” said one former Charlotte contract worker who described losing information technology jobs in the city’s financial sector to visa workers. It happened to him twice in the past five years, he said.
“We had to hold their hands while they learned our jobs,” said the worker, who asked that his name and employer not be published, saying he was not authorized to speak publicly.
“I even had to teach a couple of people what was banking,” he said. “I had to explain what a checking system was in this country.”
More than half of readers who responded to an Observer questionnaire this month said they have experienced being laid off in Charlotte by an employer who replaced them with an H-1B visa worker. More than 75 people responded to the questionnaire.
The Charlotte Observer’s owner, McClatchy, is among U.S. companies turning to outsourcing firms that employ large numbers of H-1B visa workers. Starting this summer, the California-based publisher will begin outsourcing some technology functions to India-based Wipro, a move that will result in layoffs of 121 McClatchy employees across the U.S., including 10 in Charlotte. McClatchy said the move is designed in part to help accelerate its transformation into a more digitally focused media company.
Outsourcing firm gets $5M
Attorney General Roy Cooper, a Democrat opposing Gov. Pat McCrory in his re-election bid, in an emailed statement said incentives should not be used to replace North Carolina workers with cheaper foreign labor. Cooper stopped short of promising to push for specific changes to the law.
“North Carolina tax incentives should be used for companies that will create jobs for our North Carolina workers,” Cooper said.
Josh Ellis, a spokesman for McCrory, said by email: “Attracting high-tech companies with high-skilled talent is good for North Carolina. Roy Cooper’s union-inspired talking points were not expressed last week at an economic development forum nor any time he personally signed off on incentive agreements as attorney general.”
Rep. John Fraley, a Mooresville Republican who also serves on the House Commerce and Job Development Committee, called the matter “worthy of further investigation and debate” before or during next year’s session of the General Assembly.
In Charlotte, outsourcing firm Cognizant was awarded $5 million in incentives in 2014 in return for an expansion that would add 150 workers in Charlotte and 350 elsewhere in the state. The New Jersey-based firm, one of the nation’s largest users of H-1B visas, submitted 2,593 initial H-1B applications in Charlotte in fiscal 2015. That’s the most of any company that applied for visas in Charlotte that year.
Also in 2014, New Jersey-based Spectra Group was awarded a roughly $2.9 million grant to create 250 jobs in Charlotte. The information technology and financial services firm has since filed initial applications for 10 visa workers to be based in Charlotte and Fort Mill, S.C., federal data show.
Spectra Group could not be reached for comment. Cognizant, in a previous statement, said it actively hires experienced U.S. workers and recruits qualified students from colleges and universities across North Carolina and the country. But the firm also said it relies on H-1B visas to fill “talent gaps” in the U.S.
Supporters of H-1B visas argue the program is a critical tool to fill science, technology, engineering and mathematics jobs for which there are too few qualified Americans in North Carolina and elsewhere.
Recruiters who work to fill IT jobs say the skills gap is real. North Carolina has 19,565 open computing jobs but had only 1,224 computer science graduates in 2014, according to Code.org, a nonprofit focused on increasing access to computer science education in schools.
The debate over the visas has reached Capitol Hill, where some members of Congress are seeking to restrict access to them. They argue some employers are abusing the program as a means to use lower-cost foreign labor to replace Americans who are more qualified. Others want to see annual H-1B visa caps raised, arguing the program is a critical tool to fill science, technology, engineering and mathematics jobs for which there are too few qualified Americans.
For his part, John Lassiter, a former Charlotte City Council member who now chairs the Economic Development Partnership of North Carolina, said employers in North Carolina and elsewhere sometimes struggle to find qualified workers for certain jobs.
“Some cases, they have to go find those skills from somewhere else around the world,” said Lassiter, who said the partnership does not get involved in the requirements placed on companies that get state incentives.
Jeff Finkle, president of the International Economic Development Council, said he’s not aware of any state where companies awarded incentives are required to hire only Americans.
“I’m not saying that a few more egregious cases (of visa practices) won’t cause some states to think about that,” said Finkle, whose Washington, D.C.-based nonprofit’s membership includes economic developers in the U.S. and abroad.
South Carolina does not ban companies that get incentives from filling jobs with visa workers, South Carolina Department of Commerce spokeswoman Adrienne Fairwell said.
It’s unclear what steps North Carolina lawmakers might take. But one option is to place limits, rather than an outright ban, on visa hiring when companies get North Carolina incentives.
That’s an idea suggested by Rep. John Bradford, a Cornelius Republican.
“In instances where skill gaps clearly exist I think exceptions can be requested and reviewed, and perhaps granted,” Bradford said.
“That said, though, jobs for North Carolinians should always be the main priority if and when North Carolina economic incentives are involved.”