Recession unlikely to curb H-1B demand

The U.S. economy may be tanking. But a record number of applications for H-1B visas are expected to be filed this week. Here's why.

Consumer confidence is down, unemployment claims are up, and the U.S. economy may already have slipped into recession. But starting tomorrow, the federal government will likely receive a record number of applications from employers seeking H-1B visas for workers from overseas.

So why is the demand for foreign workers, including skilled software developers and other IT professionals, still rising as economic conditions grow steadily worse?

First, there's pent-up demand for H-1B visas. Last year, the U.S. Citizenship and Immigration Services received more than 143,000 petitions for the 85,000 visas available for the government's 2008 fiscal year. That forced the USCIS to choose recipients via a lottery process, and many of the people who didn't get visas are expected to try again this year.

Second, even if the overall job market is declining, the shift of technology jobs to outsourcing vendors isn't likely to abate. And many of the largest H-1B users are offshore outsourcing firms. For instance, eight of the top 10 recipients of new H-1B visas in fiscal 2007 were outsourcers that are based in India or have substantial offshore operations.

Third, H-1B proponents such as Microsoft Corp. Chairman Bill Gates claim that the U.S. doesn't have enough "world-class engineers" to meet the needs of employers. At a congressional hearing this month, Gates said that the annual visa cap "bears no relation to the U.S. economy's demand for skilled professionals."

H-1B critics dispute that contention. Nonetheless, three bills proposing increases in the cap were introduced in Congress shortly after Gates spoke. Congress may make any cap increase retroactive -- a prospect that could encourage companies to submit H-1B applications just to make sure they have a place in line. For those reasons, there's a good chance that the number of H-1B petitions filed this year will exceed last year's total, further reducing the odds of getting a visa unless the cap is increased.

The demand for visas may be inflated if companies try to boost their lottery odds by applying for more than they really need. Earlier this month, the USCIS set a new rule barring employers from filing multiple petitions for one person. But a parent company and its subsidiaries can still separately seek visas for the same worker, as long as the applications are for different jobs.

Jacob Sapochnick, a San Diego-based attorney who represents companies seeking H-1B visas, is concerned that offshore outsourcing firms will use that and other methods to improve their chances in the lottery. "This is a problem -- we're worried," Sapochnick said.

Some offshore firms are increasing their U.S. presence, partly to mitigate the effect of the H-1B limits. Last July, Wipro Ltd. announced plans to build a 1,000-worker software development center in Atlanta. And Tata Consultancy Services Ltd. said this month that it is opening a services delivery center near Cincinnati. Tata, which has more than 16,000 employees scattered at client sites in the U.S., plans to mostly hire locals -- initially, about 500 people -- at the new facility.

But Phiroz Vandrevala, Tata's executive director of global corporate affairs, said the delivery center won't significantly reduce H-1B needs at the firm, which received nearly 3,500 visas in fiscal 2006 and 2007. "Five hundred positions is not going to change the needle significantly," he said.

Getting an H-1B visa these days is "all on luck -- it's not on merit," said Brijesh Nair, an Indian national who earned a Ph.D. in civil engineering in the U.S. and has been working here on a visa for the past 18 months.

Nevertheless, the applications keep coming.

Nicole Lawrence Ezer, an immigration attorney at Sutherland Asbill & Brennan LLP in Houston, expects a flood of H-1B petitions tomorrow. And she thinks the cap for both types of visas -- 65,000 regular ones, and 20,000 for foreign workers with advanced degrees from U.S. universities -- will be reached in a matter of days.

"Nobody is foolish enough to wait," Ezer said.

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