Indian IT can benefit from H1B visa restrictions

Indian IT can benefit from H1B visa restrictions

Stricter immigration policies in the US could force US tech majors and other large corporations to outsource many critical functions to foreign locations like India in order to maintain their global competitiveness. This could lead to more work for Indian IT companies and greater employment opportunities for professionals in India.

The Donald Trump administration in the US has severely restricted the issue of H1B visas, which US and Indian companies use to send Indian professionals to the US, ostensibly to protect jobs of Americans who are reeling from job losses caused by a Covid-hit slowing economy.

Earlier, in June, Trump had suspended several visa categories for skilled foreign professionals for the same reason and had trumpeted the decision as a strong measure to protect jobs in America. He had then said he was considering more such measures “so that no American worker is replaced ever again”.

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Move could actually help Indian IT sector

The instinctive reaction of most analysts has been: This will badly hit the Indian IT sector. That assessment is not entirely wrong, but it holds water only up to a point.

A deeper analysis shows that not only will this hit US companies across the board and adversely impact their competitiveness, it could actually help India by forcing these companies to outsource more jobs to India, given the lack of sufficient numbers of Americans who are qualified to carry out such assignments.

Electoral populism at work

The halt on H1B visas would lead to unscheduled reverses for the US IT industry given that companies such as Microsoft, Oracle, Facebook, Google and others hire thousands of foreign professionals every year on this visa.
The halt on H1B visas would lead to unscheduled reverses for the US IT industry given that companies such as Microsoft, Oracle, Facebook, Google and others hire thousands of foreign professionals every year on this visa.

With US elections coming up in November and the country is in the midst of high-pitched electioneering, it may be difficult for Indian interlocutors and even US technology companies - who will suffer as much as the Indian IT sector - to convince Trump to review this retrograde proposal with reasoned arguments.

The H1B is a non-immigrant visa that allows US companies to employ foreign workers in jobs that need expertise that is not readily available in the US. US technology companies such as Microsoft, Oracle, Facebook, Google and others hire thousands of foreign professionals every year on this visa. Though Indian IT professionals no longer apply for as many H1B visas as they used to, they still remain its single largest beneficiary group, bagging about two-third of all such visas issued. There are currently an estimated 130,000 Indian IT professionals working in the US.

Flawed argument

The US Department of Homeland Security estimates that these visas were responsible for about half a million job losses in the US. This has allegedly resulted in wages in some industries going downwards. With unemployment a major election issue, the restrictions on the entry of foreign workers has gained fairly wide bipartisan support, from both Republicans and Democrats, in the US.

The main argument in favour of the restrictions that US and Indian companies use the H1B program to bring in cheap workers who often not comparable to the best in the field and, contrary to the legal requirement, have skillsets that can be easily found locally in the US.

Indian subsidiaries of US tech giants are the biggest beneficiaries of L-1 visas and account for 23 per cent of all such visas issued.
Indian subsidiaries of US tech giants are the biggest beneficiaries of L-1 visas and account for 23 per cent of all such visas issued.

Move will hit US tech companies the hardest

This is only partially true. The fact is that while Indian IT and ITeS companies were the main beneficiaries of the H1B visa programme till about a decade ago, it is now the US Big Tech companies that sponsor the majority of H1B visa beneficiaries.

According to US government data, Amazon, Google, Facebook and other large US tech companies were the biggest employers of H1B visa holders. About 15 per cent of Facebook employees are H1B visa holders.

Stricter visa rules may spur an outsourcing boom

Stricter visa rules and a clampdown on the issue of H1B visas may, therefore, force these companies to send their jobs abroad. Research in this subject by Britta Glennon, Assistant Professor of Management, Wharton School found that hiring by large US corporations in countries like India and a few others rose during periods of tighter US immigration policies.

The latest decision by the Trump administration is likely to lead to the same result. A New York Times report quoted William Lazonick, Professor Emeritus, University of Massachusetts, Lowell, who is an expert on globalisation, as saying: “The work will go to India more because there is an abundance of high-quality college-educated tech labour in India... It is obviously an advantage if that higher-quality labour force is less expensive to employ than workers in the company's home country.”
The same report went on to add: “Indeed, companies have resumed looking toward outsourcing companies. In July, Vanguard, the mutual fund company, said it struck a deal with Infosys of India to assume 1,300 back office positions, like record keeping and technology services. Workers would be offered comparable jobs at Infosys, said a spokeswoman for Vanguard, adding that the decision was unrelated to the pandemic or the shifts in the H1-B program.

New opportunities will open up for IT professionals in India

The restrictions on H1B visas should not be seen as a setback for the Indian IT sector. This was expected - with US elections barely a month and a half away. And given the reverse brain drain, with all the US majors having a large presence in India and the domestic IT sector doing well, there are enough opportunities at home for Indian professionals.

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