Scapegoating India over H-1B visas

Norman Matloff, a computer science professor and leading H-1B critic, sees the visa debate taking an ugly turn. The Indian firms, including the Indian-Americans who create IT services firms here, “are being scapegoated for abuse of the visa program -- using it for cheap, immobile labor -- that actually pervades the entire industry.”

Matloff, who wrote this in a piece that appeared on Bloomberg, calls out U.S. Sen. Charles Schumer, in particular, for “demonizing an ethnic group” by referring to Indian businesses as “chop shops.”

Matloff is not rising to the defense of the IT offshore industry. H-1B visa workers are cheap labor for all tech companies, and that “the rest of technology industry arguably abuses the foreign workers even more than the Indian ones do,” he argues.

The point is clear enough. If Congress hikes the H-1B cap, visa critics see U.S. tech workers at greater risk for age discrimination and wage competition. But lawmakers will say that they are protecting U.S. workers by restraining visa use by offshore firms.

IT offshore outsourcing is a brutal activity, especially when you have to train your H-1B visa holding replacement to get severance. But there is cynicism that the only reason Schumer and others are trying to curb this is to put offshore outsourcing firms at a competitive disadvantage.

But let’s ask, nonetheless, if the immigration bill will create and protect domestic jobs with its visa restrictions.

Offshore outsourcing firms aren’t required to disclose the makeup of their workforces. I’ve asked Infosys, for instance, one of the largest H-1B visa users, to detail the size of its U.S. workforce and the percentage of those workers on a visa, but it won’t.

Let’s say then that H-1B and L-1 visa workers comprise 90% of Infosys U.S. workforce. What happens if the company is required to reduce this percentage to 50% under the immigration bill? Will Infosys expand its U.S. domestic workforce by hiring more permanent workers to make up for the decrease in visa holders?  

There is no evidence that this restriction or others in the bill, such as barring big H-1B users from placing visa workers at third party sites, will prompt offshore outsourcing companies to increase domestic, full-time permanent hiring. It is entirely possible that offshore firms will find workarounds. One strategy may be through acquisitions that increase U.S. domestic workforce of offshore firms. There may be no real net hiring gains.

But to be clear, these restrictions will pose problems for offshore firms. Wells Fargo said immigration bill restrictions could hit the earnings per share of affected firms by as much as 5%.

It’s been argued that a company like IBM might gain from restrictions. For sure, India has gained a lot from IBM. It is one of India’s largest IT employers and its Indian workforce is expanding, while its U.S. workforce is shrinking. But let’s not single out IBM. Most large domestic IT services providers have offshore workforces. If the visa restrictions raise costs for offshore competitors, U.S. domestic firms may gain market share. But all that might do is prompt them to expand their overseas workforces to meet increasing customer demand.  

The smaller domestic IT services firms and call centers that do their work entirely in the U.S. say restrictions aimed at offshore firms will help them. These are not big employers, and it’s hard to imagine a dramatic turn here, but keep an open mind.  

Will U.S. workers feel more secure in their jobs if these restrictions go through? Probably not. If anything, they may face more competition for their next job because of the immigration bill’s H-1B cap increase.

Hundreds of thousands of IT jobs have been lost to offshore outsourcing (see: Offshoring will kill 1.5 million IT jobs by 2017, by colleague Stephanie Overby), and the H-1B has had a role in this exodus.

Visa critics, broadly, don’t want the H-1B cap hiked, and they want to see higher wage levels for visa workers. Others, the IEEE-USA, in particular, want to shift the focus to permanent residency and STEM visas.  They want broad remedies.  

The upshot is there is no way of knowing, but certainly grounds to question, whether the restrictions on offshore outsourcers will help IT workers at risk or stimulate jobs. Until evidence emerges, these restrictions may be nothing more than nuisance.

Copyright © 2013 IDG Communications, Inc.

It’s time to break the ChatGPT habit
Shop Tech Products at Amazon