New H-1B Law Robs Peter and Paul

Since illegal immigration became the third-rail issue on Capitol Hill, we have seen a number of elected officials posturing, some in anticipation of upcoming elections, to let their positions be known.  Unfortunately, in the heat of the moment, some representatives have taken good faith attempts at securing the border and intertwined them with legislation that targets India and hurts the burgeoning relationship between the U.S. and India.  In so doing, they

Not your typical "Chop Shop" -- But the InfoSys campus in Pune, India.

are ultimately hurting the American economy and perhaps sending the strong trade relationship between the two nations into a downward spiral.

The border security bill was spearheaded by Sens. Charles Schumer (D-NY) and Claire McCaskill (D-MO) as part of a $600 million emergency package to improve monitoring along the U.S.-Mexican border.  It will deploy 1,500 new enforcement agents and fund unmanned aerial vehicles to boost border surveillance.  The new initiative would be funded by charging more for H-1B and L-1 visas.  Adding insult to injury, Sen. Schumer referred to InfoSys, the highly-respected employer as a “chop shop” on the Senate floor when promoting the bill.  The legislation passed in the House and Senate unanimously and was shortly thereafter signed into law by President Obama.

Funding for the new measures come from nearly doubling the fees for H-1B and L-1 visas.  Fees for these visas have been raised by $2,000 per visa, per person — an increase of over 86%.  Through this legislation, the U.S. government has robbed Peter and Paul by keeping some of the best and brightest employees around the world out of the country and rewarding those companies who hire people overseas.

While this has drawn particular criticism in India, it barely been a blip on the screen here at home.  This speaks to the fact that some fail to realize this fresh piece of legislation, though aimed largely at India (as Sen. McCaskill herself admits) not only hurts numerous qualified employees and growing companies from all over the world – Indeed, it hurts the American economy most of all.

Consider the basics: The H-1B program allows foreign nationals to enter the country only if a company can prove that their skill set cannot be found within the pool of American candidates.  Once this employee has entered the United States, likely with a substantial salary, he or she is going to spend the money they earn here in America, contributing to the American economy.

By increasing the fees for the visa, you are providing companies based here in America with a stumbling block – A stumbling block which companies will likely circumvent by hiring experts – Experts, who prior to this legislation would make an American company more efficient and spend money in the American economy are kept out of the United States.

This new law has things backwards. Instead of supporting companies that have an interest in hiring in the U.S., we are supporting companies that are aggressively hiring and growing their work force in India.

In an era of ubiquity in the global economy, we need to take note of how other companies and countries operate.  Technology is all pervasive and global technology providers go where they find the most cost effective competencies and skills. The larger providers of technology (i.e. IBM, Accenture, Deloitte, Cap Gemini, Logica, Infosys, Wipro, TCS, etc.) are truly global with a workforce spanning the globe in support of clients all over.

IBM is the second largest private employer in India with over 100,000 employees.  It is on a hiring tear in India while its hiring in the U.S. is essentially frozen and so is the case with Accenture etc. They are doing it to be cost competitive with the Infosys, TCS, Wipros of the world.

On the other hand the, companies like Infosys and Wipro are busy hiring in the U.S. and setting up competency centers in the U.S. since they realize that in order for them to compete with companies like Accenture and Deloitte, they need local competencies and presence – as they already have the cost effectiveness model developed. Given this fact, who would you want to encourage and support and who would you want to punish?

If we consistently increase the fees on these companies they will have one of two options: Pass the costs to their clients, which seems highly unlikely since clients will go to someone else or they can just move the jobs over to a more cost effective environment i.e. India.

Look at the past 12 months of hiring numbers of the Indian IT industry and correlate it to the increasing fees and delays in the H1B and L1 visa programs.  It tells the story of jobs moving offshore. Statistics show that once the job moves offshore, the odds are that it will stay offshore, which is a loss in taxes, social security and if these folks become permanent residents/Citizens a loss in intellectual capital.

President Obama says that he wants to double U.S. exports in the next 5 years.  And yet 95% of our customers and growing economies are outside the U.S. 1.2 Billion of the customers that he talks about are in India which boasts of the second fastest growing economy in the world. By targeting what is arguably India’s symbol of economic resurgence we are not winning friends in India.

When Sen. Schumer called one of India’s most admired companies a “chop shop” he made the average Indian think of Americans as protectionist and not favorable to India. This has led to calls for retaliation by the Indian government on the issue of Nuclear Liability Bill, defense procurements etc. which does not bode well for the future trading relationship between U.S. and India.  The worst scenarios could involve a trade war between the two nations as the tit-for-tat exchange continues.

The companies that we are targeting are world-class companies that have been recognized with awards, industry gold stars. Tom Friedman who wrote “The World is Flat” talked about the Infosys campus, which can rival a Microsoft or a Google campus.

These companies now do business with almost all of the Fortune 500 companies. To call them chop shops, body shops, job stealers etc. only demeans the reputations of the clients that they serve – reputable American companies such as GE, Wal-Mart and Marriott etc.  Should we have activists protesting these companies like Gap and others were protested for using child labor?

Most unfortunate in all of this is the fact that the previous version of the H-1B and L-1 system, though imperfect, worked.  And now, it is being changed so dramatically that employers and employees around the world are going to feel the effects – and it will be two strong allies, America and India, who will feel the ill effects most of all.

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