Back before I gave up on the beat, I used to write quite a bit about abuses of the H-1B program, particularly by technology companies who exploited the program and foreign-born workers for cheap labor. Why did I give up? Covering the issue became a waste of time, because the government wouldn't actively investigate the program, and a mere shouting match between nativist anti-H-1B activists and the program's supporters is only interesting for so long when there are no new developments. But this past Thursday, there was, at long last, a real development: a federal grand jury indicted 11 people in six states for using the H-1B program to commit immigration fraud, and specifically for violating prevailing wage laws.

"What we found here is that some folks have found some ways to make misrepresentations to the government that disadvantage American workers who did not have the opportunity to apply for the real jobs that existed," US Citizenship and Immigration Services official Michael Aytes told CNN-IBN.

All 11 of those indicted were Indian nationals who worked for Vision Systems Group, and there are at least five other companies under investigation.

An Iowa US Attorney involved in the case told BusinessWeek that the government is only "at the tip of the iceberg" with these initial investigations and expects to uncover much more fraud.

If even half of what I heard from programmers during my H-1B coverage days was true, then not only is there plenty of fraud to investigate, but some of the biggest names in technology have been guilty of abusing the program to varying degrees at different times.

The most common abuse scenario goes something like this: a company looking to hire a low- or mid-level programmer posts a job advertisement containing some patently ridiculous set of qualifications, like 20 years of Java programming experience (Java hasn't even been around that long) and a Ph.D. in computer science. Upon getting no responses, the company applies to the federal government to fill the position with an H-1B worker on the grounds that it can't find any qualified Americans. Having hired the H-1B worker, the company may pay him less than the advertised wage, or it may offer him no benefits, or his working conditions may be poor, or some combination of these and other factors, yet the immigrant worker sticks it out for a set number of years in hopes of getting a green card.

But the bigger problem with this kind of H-1B abuse isn't necessarily that the immigrant workers are exploited—many of them are quite happy in their US jobs, even if their wages are lower and they have no benefits. Rather, the program (anecdotally) has a second-order, negative effect on American programmers' wages, and therefore on the overall attractiveness of the profession for high school and college graduates. I described how this may work in a 2006 article using a slightly contrived and un-nuanced example:

Let's say that an H-1B-free labor market has set a price on a year's worth of work from a programmer with a bachelors degree and two years experience at US$35,000 + $12,000 (benefits like health insurance for a family of four) = $47,000. Now let's say that companies acquire the ability, via the introduction of the H-1B program, to import foreign labor of comparable quality. The average imported worker is willing provide the same work for $35,000, but instead of benefits she wants health insurance for herself only ($3,000/year) plus a green card. Thus the promise of a green card to the H-1B worker is valued by the market at $9,000/year, and you can and must factor this in to account for the H-1B employee's total compensation. The cost of the green card to the employer is much less than the cost of the American worker's insurance coverage, plus the foreign worker is obligated to work for the employer for a set period if she wants to get the promised green card. This is a win-win for the employer and the H-1B worker, but not for the American employee, to whom the green card is worth exactly US$0. The American has been priced out of the market because the H-1B will sell her labor at what amounts to a steep discount in exchange for a green card.

When the H-1B program is used properly, it's a great way to increase America's global technology competitiveness. By enabling American companies to tap the best and brightest workers from foreign labor markets, we can bring even more of the world's money back to America and create more American jobs in other corners of the labor market, for a net gain in employed citizens. But when the program is abused, it can have precisely the opposite effect by making the affected fields look less attractive to bright and ambitious Americans, some of whom may opt for non-tech career paths with better compensation prospects.

Let's hope that in this present period of a shrinking job market and falling wages, the federal government takes a very close look at the H-1B program to ensure that it's working as designed. The current crackdown is an encouraging start, but if it adds momentum to a protectionist backlash against the very existence of the H-1B program, then that would counter-productive—a "reverse stimulus," if you will, and at a time when we need every edge we can get.