Location:
EMPLOYMENT; LABOR;
Scope:
Connecticut laws/regulations; Federal laws/regulations;

OLR Research Report


September 29, 2011

 

2011-R-0339

OUTSOURCING JOBS FROM CONNECTICUT AND WORK VISAS IN CONNECTICUT

By: John Moran, Principal Analyst

You asked (1) if any state or federal laws regulate outsourcing jobs to companies overseas, (2) if the federal tax code encourages companies to outsource U.S. jobs overseas and when the relevant provision was enacted, and (3) how many foreign employees are working legally in Connecticut.

The questions and answers follow.

DO ANY STATE OR FEDERAL LAWS REGULATE THE OUTSOURCING OF JOBS TO COMPANIES OVERSEAS?

No state or federal law prohibits a company from moving or transferring jobs from within the United States to another country, according to the state Department of Labor.

While there are no laws that ban outsourcing, some federal laws take a more indirect approach to limiting the number jobs that can be given to foreign nationals. For example, the American Recovery and Reinvestment Act (i.e., “stimulus bill”), included a separate act, the Employ American Workers Act (EAWA) Public Law 111-5, Div. A, Title XVI, 1611, that for a limited time made it more difficult for certain companies to hire foreign nationals to come to the U.S. on temporary work visas. EAWA was in place for a two-year period and expired on February 17, 2011.

EAWA set stricter standards for companies receiving Troubled Asset Relief Program (TARP) money to hire foreign workers under the H-1B temporary work visa. For more on EAWA go to: www.uscis.gov/files/article/H-1B_TARP_qa_20Mar2009.pdf.

Also, there are federal laws in place that help workers who are displaced by international trade, including situations when a company outsources some or all of its operations overseas. These include the Trade Adjustment Assistance Act (TAA) and the Worker Adjustment and Retraining Notification Act (WARN). While these laws do not prevent outsourcing, they attempt to mitigate its effects and other types of job loss (TAA: www.ctdol.state.ct.us/TradeAct/default.htm; WARN: www.ctdol.state.ct.us/progsupt/bussrvce/rrwarn.htm).

Connecticut does not have a law banning or limiting outsourcing. But it has a law that, in certain situations, favors in-state contractors over out-of-state contractors when the state issues an invitation to bid on a state contract. The circumstances that would trigger this law are so narrow that, according to the Department of Administrative Services, it has never been used (CGS 4a-59(c)). While this law was primarily intended to affect out-of-state U.S. contractors, it would also apply to foreign contractors seeking to be awarded a contract for Connecticut state work.

DOES THE FEDERAL TAX CODE ENCOURAGE COMPANIES TO OUTSOURCE U.S. JOBS OVERSEAS AND WHEN WAS THIS PROVISION ENACTED?

Many economists and policy analysts believe the current federal tax code encourages U.S.-based multinational firms to locate work at their overseas affiliates by allowing them to defer taxes on profits earned on some activities in foreign countries until the profits are brought back to the U.S. Generally these firms do not pay corporate income taxes on their overseas profits until the income is “repatriated” or sent back to the U.S. parent corporation. This often allows the firms to indefinitely defer payment on the U.S. corporate income tax on that profit.

Over time this tax provision has come to be seen as an incentive to outsource (IRC 951-964). When it was first enacted in 1962, long before the Internet and numerous other technological advances, it was much harder to move operations overseas and the demand for U.S. products overseas was not as strong as it is today. On the other hand, some say this tax provision helps U.S.-owned businesses compete in foreign markets against foreign-owned businesses.

HOW MANY FOREIGN EMPLOYEES ARE WORKING LEGALLY IN CONNECTICUT?

This report focuses on foreign nationals who come to this country under employer-sponsored visas specifically to fill jobs where there are shortages of qualified candidates. It does not include those holding permanent resident cards (i.e., “green cards”), which are another way for foreigners to live legally in the U.S. Green cards can be issued for a variety of reasons besides jobs, including family ties, political asylum, refugee status, and diversity lottery.

Because the federal government does not readily track work visas by individual state, there is no specific visa data available for Connecticut. The state does not track visas in Connecticut, but the website Myvisajobs.com suggests the demand for visas here. According to the site, there were 2,018 applications for H-1B visas in Connecticut in 2010. The number covers new applications and renewals. This placed Connecticut 16th on the list of 50 states (link: www.myvisajobs.com/Reports/H1B-Visa-2011.aspx?T=WS).

Congress places an annual limit of 65,000 H-1B temporary work visas (with the possibility of an additional 20,000 more for those who have received at least a master's degree from a U.S. college or university). The federal government grants nearly that number each year.

H-1B visas are sponsored by employers who must file a petition with the U.S. Citizenship and Immigration Services (USCIS). USCIS must approve the petition before the State Department can issue the visa. The initial visa is for three years and they may be renewed for three more.

Most H-1B visas applications are seeking permission for someone to travel to or stay in the U.S. to work in a specialty occupation where the employer indicates there is a shortage of available U.S. workers to fill the jobs. (H-1B visas are also used, to a lesser extent, for exceptional services in Department of Defense cooperative research and development projects and fashion models of distinguished merit.) The employer must agree to pay the foreign national at least the actual or prevailing wage for the position, whichever is greater.

In order to work in a specialty occupation the foreign applicant must:

1. hold a U.S. bachelor or higher degree, as required by the occupation, from an accredited college or university or possess a foreign degree determined to be the equivalent from an accredited college or university;

2. have any required license or other credential to practice the occupation (for example, accountant, architect, surveyor, physical therapist) in the state in which employment is sought; or

3. have, as determined by USCIS, the equivalent of a U.S. bachelor's degree required by the occupation acquired through a combination of education, specialized training, and progressively responsible experience related to the specialty.

There are a number of other work visas not included in this report that allow smaller numbers of foreign workers to be temporarily employed in the U.S. These include:

1. temporary agricultural workers (H-2A);

2. temporary workers performing other services or labor of a temporary or seasonal nature (H-2B);

3. foreign national with extraordinary ability in sciences, arts, education, business or athletics (O visas); and

4. other narrow specialized visas.

JM:ts