H-1B Program Fraud: How a Temporary Worker Visa Became Permanent Cheap Labor
The Immigration Act of 1990 created the H-1B visa as a temporary program for exceptional foreign talent. Thirty-five years later, the program has been transformed into something its authors never intended: a permanent pipeline of lower-cost labor dominated by outsourcing firms.
The H-1B Program Today
85,000
Annual H-1B Cap
Plus unlimited exemptions
758,994
FY2024 Registrations
9x the available slots
65%
Renewals vs. Initial (2024)
258,000+ renewals of 400k approvals
6+ years
Average Years on H-1B
Originally 'temporary'
What the 1990 Law Actually Required
The Immigration Act of 1990 created the H-1B visa with specific requirements and limitations. Congress intended a narrowly tailored program for genuinely exceptional circumstances:
Original H-1B Requirements (1990)
- 1Specialty Occupation
Position must require "theoretical and practical application of a body of highly specialized knowledge" and at minimum a bachelor's degree in a specific specialty. Routine IT work was not contemplated.
- 2Temporary Status
Maximum initial period of 3 years, extendable to 6 years total. The worker was expected to return home—not remain indefinitely while waiting for a green card.
- 3Direct Employer Relationship
The petitioning employer was expected to directly employ and supervise the worker—not contract them out to third parties.
- 4Prevailing Wage
Employers must pay at least the "prevailing wage" for the occupation in the geographic area—intended to prevent undercutting American workers.
- 5Numerical Cap: 65,000/year
Congress set an annual limit reflecting its intent for a limited, targeted program—not mass labor importation.
How the Program Has Been Subverted
Each of the original requirements has been systematically undermined through regulatory reinterpretation, loopholes, and deliberate exploitation:
"Specialty Occupation" Rendered Meaningless
The vast majority of H-1B positions are now standard IT roles: software developers, systems analysts, and programmers. These are not rare specialties requiring exceptional foreign talent—they are among the most common occupations taught at American universities, with hundreds of thousands of domestic graduates annually.
"Temporary" Became Permanent
Through the "AC21" extension rule, workers with pending green card applications can extend H-1B status indefinitely—year after year, sometimes for a decade or more. In 2024, 65% of all H-1B approvals (258,000+) were renewals and extensions—nearly twice as many as new approvals. The "temporary" program now maintains a permanent workforce of an estimated 600,000+ H-1B holders.
Staffing Firms Dominate the Program
The original H-1B contemplated a direct employer-employee relationship. Today, staffing and consulting firms—who place workers at third-party client sites—are among the top H-1B users. These firms profit from labor arbitrage: they pay H-1B workers less than market rate while billing clients near-market rates, pocketing the difference.
Prevailing Wage Loopholes
The Department of Labor allows employers to use "Level 1" wages (entry-level) for H-1B positions regardless of actual experience required. Studies show 60%+ of H-1B positions are certified at Level 1 or Level 2 wages—well below market rates for the actual work performed.
Cap Exceptions Swallowed the Rule
While the statutory cap is 65,000 (plus 20,000 for advanced degrees), extensive exemptions for universities, research institutions, and related nonprofits mean actual annual admissions far exceed the cap. Combined with unlimited renewals, the program operates with no practical limit.
Who Uses the H-1B Program?
Analysis of the top 10 H-1B employers in FY2025 reveals that outsourcing firms—not innovative technology companies—are among the heaviest users:
| Rank | Company | Approvals | Type |
|---|---|---|---|
| 1 | Amazon | 10,044 | Direct |
| 2 | Infosys | 8,140 | StaffingOutsourcing |
| 3 | Cognizant | 6,321 | StaffingOutsourcing |
| 4 | Tata Consultancy | 5,765 | StaffingOutsourcing |
| 5 | 4,892 | Direct | |
| 6 | Microsoft | 4,756 | Direct |
| 7 | Wipro | 3,842 | StaffingOutsourcing |
| 8 | Meta | 3,654 | Direct |
| 9 | HCL America | 3,421 | StaffingOutsourcing |
| 10 | Capgemini | 3,105 | StaffingOutsourcing |
30,594
Approvals to Staffing/Outsourcing Firms
57% of top 10
23,346
Approvals to Direct Employers
43% of top 10
The Renewal Pipeline
Perhaps the most significant deviation from Congressional intent is the renewal system. What was designed as a temporary 3-6 year stay has become effectively permanent through unlimited extensions:
Source: USCIS H-1B data; Pew Research Center analysis
The renewal system creates a "captive" workforce. H-1B workers waiting for green cards (which can take 10-20+ years for applicants from India and China due to country caps) have limited job mobility and reduced bargaining power. They cannot easily switch employers, negotiate raises, or push back on working conditions without risking their immigration status.
Why This Matters
The transformation of H-1B from a temporary program for exceptional talent into a permanent cheap-labor pipeline has significant consequences:
- •Wage suppression: Studies consistently find H-1B workers paid 17-34% below market rates. This suppresses wages for all workers in affected occupations.
- •Displacement of American workers: Companies have financial incentive to replace domestic workers with cheaper H-1B labor, even when talent is available locally.
- •Exploitation of H-1B workers: The visa's employer-tied structure and endless green card waits create conditions ripe for exploitation.
- •Reduced investment in domestic workforce: Companies have less incentive to train American workers or offer competitive wages when cheaper foreign labor is readily available.
Policy Response
The Affordability Act of 2026 proposes ending the current H-1B program and restoring the original H-1 visa framework:
- •Direct employment only—ban staffing agencies from using the program
- •True specialty occupations—require positions that genuinely cannot be filled domestically
- •Market-rate wages—eliminate Level 1/2 wage loopholes
- •Enforce temporary status—maximum 6 years with no indefinite extensions
The goal is not to eliminate pathways for exceptional foreign talent, but to restore the program to its original purpose—and end its use as a tool for wage arbitrage and labor exploitation.
Sources & References
Government Data
- USCIS H-1B Employer Data Hub — Approval data by employer
- Department of Labor Foreign Labor Certification Data — Wage levels and LCA data
Legal Framework
- Immigration Act of 1990 (S.358) — Original H-1B statutory language
- 8 U.S.C. § 1184 — Current H-1B statutory requirements
Research & Analysis
- Economic Policy Institute: H-1B Visas and Prevailing Wage Levels — 60% of H-1B positions at Level 1/2 wages
- Pew Research Center: What We Know About the U.S. H-1B Visa Program — Approval data, renewal rates, active workers estimate
- Center for Immigration Studies: H-1B Reform Analysis
Read the Full Policy Proposal
The Affordability Act of 2026 proposes comprehensive H-1B reform alongside housing and immigration policy changes.