The current base cap of 65,000 H-1B visas is "arbitrarily set" and bears no relation to the US economy's demand for skilled professionals, Gates told a House of Representatives Panel on Science and Technology.

Appearing before the panel at a time when US lawmakers cutting across party lines are hammering away at the "abuses" in the H-1B visas and outsourcing in general, Gates took on Republican Congressman Dana Rohrabacher of California who said there is "no excuse" for keeping out "'B' and 'C' American students" just because there was an "A student from India".

In his formal statement to the Committee, Gates made the point that Microsoft was unable to hire one-third of the foreign-born candidates it wished to hire because of too few H-1B visas.

Gates said when companies like Microsoft hire top foreign engineers, they create jobs for 'B and C American students' around them.

The Microsoft founder told lawmakers that the immigration system would have to be revamped in such a fashion so as to allow more number of people to get into America on H-1B visas and it did not make sense for a bright foreign student to be educated using American tax-payers money and then sent home on some immigration requirement.

"It makes no sense to educate people in our universities, often subsidised by US taxpayers, and then insist they return home," Gates said.

"Today, knowledge and expertise are the essential raw materials that companies and countries need in order to be competitive. We live in an economy that depends on the ability of innovative companies to attract and retain the very best talent, regardless of nationality or citizenship.

"Unfortunately, the US immigration system makes attracting and retaining high-skilled immigrants exceptionally challenging for US firms," Gates said.

He said Congress's failure to pass high-skilled immigration reform has exacerbated an "already grave" situation.

"For example, the current base cap of 65,000 H-1B visas is arbitrarily set and bears no relation to the US economy's demand for skilled professionals. This situation has caused a serious disruption in the flow of talented graduates to US companies."

Because an H-1B petition generally can be filed only for a person who holds a degree, when May-June 2007 graduates received their degrees, the visa cap for fiscal year 2008 had already been reached, he pointed out.

Accordingly, US firms will be unable to hire those graduates on an H-1B visa until the beginning of fiscal year 2009, or October 2008.
"As a result, many US firms, including Microsoft, have been forced to locate staff in countries that welcome skilled foreign workers to do work that could otherwise have been done in the United States, if it were not for our counterproductive immigration policies," Gates said.

"Microsoft has found that for every H-1B hire we make, we add on average four additional employees to support them in various capacities. Our experience is not unique. A recent study of technology companies in the S&P 500 found that, for every H-1B visa requested, these leading US technology companies increased their overall employment by five workers," Gates maintained.

As Gates is pushing lawmakers to relax the numbers on the H-1B visas, top Republican Senator Chuck Grassley of Iowa has asked Homeland Security Secretary Michael Chertoff what progress has been made toward the Department's reform of the H-1B visa programme.

"The H-1B visa programme was created to serve American employers who need high-tech workers. It was created to fill a void in the labour force. The visa holders were intended to fill jobs for a temporary amount of time while the country invested in American workers to pick up the skills needed," he said.

"The programme may be beneficial to some businesses, but it's even better for companies based outside. The fact is most H-1B visas are going to foreign-based companies," Grassley said in a letter.

"Businesses that need highly skilled workers are getting the short end of the stick. Americans are seeing ruthless tactics by some companies to bring in foreign workers, pay them less, and increase their bottom line," he said.