Backlash-II: It’s Not About the Money

In our continuing coverage of the Backlash against outsourcing, we look

behind the scenes–at issues more fundamental to nations than a few IT jobs

lost. At how Indian IT pros are only a fraction of all Indians abroad. And how

all Indians abroad are just a fraction of the immigrants that flock to the US,

Europe and Australia. The Backlash isn’t about a few H1B visas (for Part I,

see Dataquest’s 28 Feb 2003 issue). It’s about immigration–and about the

new services economy–where people are more mobile than goods. It’s about a

new world in the making–and the churn that goes with it

Imagine this:



One in every 10 people you see, meet on the street or work with, is a

foreigner.



That one of these foreigners–Arab, Bangladeshi, Malaysian–got your job and
moved into a plush new house while you were fired with a wife and two kids to

support.



That he got your job because he agreed to work for one-fourth your salary.


That there are a 100 million like him in India, all willing to work at quarter
wages…….

Now imagine your reaction...

Man doesn’t live by bread alone," Victor Hugo once said in con text of

the French Revolution. It was in many ways one of the most profound statements

ever made on politics, popular sentiment and economics. Often, what drives

popular sentiment and, therefore, politics and legislation has little to do with

the dictates of rational economy. There’s a lesson that every political party

learns at the birth of its career–emotion is a more potent force than reason,

prception more powerful than reality... the short-term a greater driving force

than the long-term.

And  that is a fundamental error Indian IT services companies are making

as they survey–slightly bewildered–the growing resistance to outsourcing

across Europe, the US and Australia. They look at the numbers and say "but

we are so few–we can’t conceivably be a threat to local jobs". When

Dataquest did its last story on this growing Backlash, the more forward-looking

companies believed that countries like the US, for instance, "are

inherently liberal"... and that "the economics of outsourcing are too

alluring to be resisted".

But it isn’t about how many people a single company has in any country–i-Flex

had only 20 in Netherlands when its CEO was arrested for allegedly encouraging

illegal immigration. It isn’t even about how many Indians there are in a

country–Indians form only 3% of the entire immigrant stock in the US, but are

the center of the Backlash debate.

It isn’t even about whether a people are inherently liberal.

Many American readers wrote back to us on the Backlash story, arguing that

Americans weren’t racist...that the Backlash to outsourcing wasn’t about

race and color. They were right–most Americans aren’t. The American nation

has been built on the idea of immigration. But here’s another fundamental

truth of political debate–it isn’t always the moderates who set the agenda.

But that’s going ahead of ourselves. The fundamental misjudgment by the IT

services sec-tor is the belief that because they are such a small pie of the big

IT spend, they aren’t big enough to be seen as a threat... That the whole

issue is really about competitive billing rates... That politics is irrelevant,

the fringe far right even more so... That economic decisions are made in

isolation of popular politics.

The Indian IT services sector may account for only a few billion dollars of

outsourcing revenues. Sure, there may be only a few tens of thousands Indian IT

professionals abroad on work visas. But these IT professionals have to be seen

in context of the total number of Indians abroad. And that has to be seen in

context of largescale immigration that most of the developed world now faces.

It isn’t really about 20 i-Flex employees. Or a total of 8,265 Indians

working in the Netherlands.

It isn’t about 60 employees of Infosys Technologies in Australia. Nor about

a total of 100,000 Indians in that country.

It is about the fact that one of every 10 people living on

Dutch or US or UK soil today is a foreigner. It is about the fact that one in

every four people in Australia today is foreign-born.

And it is about what this scale of immigration does to local

sentiment, politics and perceived economic ills.

The world’s a sieve



Immigration isn’t a new phenomenon. There are entire nations made up of

immigrant communities–the US and Australia being prime examples. But some

things are different now–its scale for one, and its nature, for another.

Prior to the 1850s, the US imported a large number of

immigrants as contract laborers to work in mines and railroads. Most of the

Western world imported people during the severe labor shortages after World War

II. Some permanently–like the United Kingdom. Some as temporary, contract

laborers–like Germany. Australia had a total of 7.6 million people in 1947, of

which only 2.7% were not of Anglo-Celtic origins. Post-war reconstruction

required a lot more people and it set itself a target of adding an equivalent of

1% of its population every year. Few exceptions notwithstanding, that was the

essence of it–low-cost, end-of-the-food-chain jobs that governments wanted

immigrant labor for.

It’s only during the last few decades that both the scale

and nature of immigration has changed.

The scale



By the end of last year, 10% of the population in the United States, or 28.4

million people, were foreign-born–a historical high. Add illegal immigrants

and estimates are that about 33 million people on US soil today are foreign-born

(11% of the total population). Of these, they account for 13.5% of the

working-age population–with a similar representation in the actual workforce.

In the United Kingdom, 8% of the of the total population–or

4.8 million people–were foreign-born legal immigrants in 2001. France, Germany

and the Netherlands have similar proportions. In Australia, the Migration Policy

Institute estimates that by 2000, "over 40% of the population was either

foreign-born themselves (23.6%) or had a foreign-born parent (19%)".

There’s no dependable count of the high number of illegal

immigrants in these countries.

By themselves, the numbers are mind-boggling. For perspective–India,

with a population of over one billion, is struggling with a less than 2% influx

of Bangladeshi immigrants on the Assam border. The government is in a tussle

with Bangladeshi authorities, complaining of job losses, crime, security and

national identity issues. And it is threatening deportation.

The nature



Most of Europe, the US and Australia have, at different points of time,

tried to restrict immigration by origin. The "White Australia" Policy;

the National Origins Act of 1924 in the US; the Immigration Acts of 1962 and

1971 in the UK–all were attempts to get what countries believed were

"desired" immigrants. That changed late last century–for numerous

reasons.

British immigrants alone could not fill the labor shortage in

Australia, for instance. Political upheavals around the world prompted the UK,

Australia and the US to open up their gates to asylum-seekers. More recently,

countries have looked at "skill-based immigrants"–the US being among

the first to do so in 1952 when it first introduced the H1 visa.

In UK, even today, EU countries account for a more than 40%

of the foreign workforce (the primary reason being that under EU law, people of

EU origin have a right to residency in the UK), followed by India (estimated at

141,000), America (61,000), Australia (54,000) and West Africa. Elsewhere, the

picture has changed. The dominant migrant community in Germany is still the

Turks. In the US, it’s Mexico, the Philippines, India and China–in that

order. In Australia, Asians are the fastest-growing migrant community,

accounting for 24% of the foreign-born population.

Nations constantly in the making



These nations–most specially the US, Australia and the UK–have

traditionally been immigrant-friendly, with more liberal asylum policies than

any other country in the world.

However, these are unsettling changes in difficult times. The

scale of foreigners moving in every year has turned them into nations constantly

in the making. And there’s only so much constant change that people and

countries can digest without some kind of a reaction setting in. Typically, the

reaction is showing up in two forms–in perceived economic problems of

migration and in politics.

For one, the economy isn’t in great shape just now–with

sub-5% GDP growth rates almost everywhere (see country profiles).

For another, the percentage of immigrants in all countries–without

exception–is higher than the percentage of unemployment. There’s a growing

and palpable fear, therefore, that immigrants are taking away local jobs. When

the jobs threatened are also high-profile, high-paying ones–like in the

technology sector–the fear is significantly heightened.

Add to that the growing security concerns post-9.11 and you

have a brew of issues waiting to boil over. As Nasscom president Kiran Karnik

said in a recent column–"There’s little doubt that the general ambience

of insecurity, engendered post-September 11, is contributing to a suspicion of

the ‘other’ and leading to some excesses with regard to checking of visas,

etc. In many countries, this is further accentuated by increasing unemployment

rates and concerns that immigrants are taking away local jobs."

Security concerns may well pass away. Immigration won’t.

Karnik also believes that the immigration issue is big enough to have called for

the setting up of an International Migration Organization. "As trade

increasingly moves from goods to services, mobility of people is going to be a

critical–and probably contentious–issue," he adds.

The other half



But the economy is only half of that picture. Politics is the other. It is

here that fears–real or perceived–are articulated and acted upon. It is also

a realm of activity the IT services sector and the Indian government like to

steer clear of.

The US government, on the other hand, tracks political

activity all over the world–from Burkina Faso to India and Somalia.

It regularly issues travel advisories to its citizens about

nations that are believed to be "high risk". The Indian government and

trade bodies fight shy of doing that.

It is a mistake to believe, however, that the IT sector works

in splendid isolation from politics. It is also a mistake to believe that

extremist political organizations are reactionary and, therefore, irrelevant.

Extremist leaders who lose elections nevertheless play an important role–they

bring extremist debate into the political mainstream. They also force mainstream

parties to take a more hard line stance (see box, It’s the Politics, Stupid).

Just look at the transformation of political discourse in India in the last

decade.

The far right argument may or may not be borne out by facts.

But that is irrelevant. These are not just nations in the making. It is a New

World in the making, with the Indian IT services sector–willy-nilly–dead-center

of that churn.

At the very least, what we need to do to turn the tide is

take our blinkers off.

Sarita Rani and TV

Mahalingam

The Backlash–No longer a Coincidence>>>>>>>

It’s no longer about isolated incidents. They can no longer be dismissed as

unconnected. Across Europe, the US and Australia, there’s growing umbrage

against offshore outsourcing. And some local governments are responding with

legislative backtracking...

United Kingdom



February 2002: Soon after the fast track work permit system is introduced,

Mastek comes under fire for getting Indian workers "on the cheap" at

lower than market rates. Company denies the claim saying Indian programmers are

willing to do work that British workers don’t want to — base level coding

for instance.

August 2002: UK takes IT off list of occu—pations that have a

workforce shortage. IT Visas to UK now more difficult to come by.

March 2003: British Telecom comes under flak for plans to open two

call centers in India with 2,200 seats. Employees threaten strike though BT says

no UK jobs will be lost. One of the call centers is at Infosys’s BPO

subsidiary Progeon.

May 2003: BT faces union ire again for employing Indian programmers

from Mahindra BT (MBT) at "quarter rates" (one-fourth the going

billing rates). BT fobs off the attack, but BPO outsourcers now more secretive

about deals in India.

Australia





July 2002: Despite a skills shortage problem, the government suspends

priority visa processing arrangements for Information and Communications

Technology workers.

September 2002: Infosys chief Narayana NR Murthy goes to Melbourne to

inaugurate the company’s new development center. Is confronted by a hostile

media and a series of tough questions on how many "locals" the company

would employ.

Same month–the Australian Computer society (ACS) issues new guidelines for

a skills test, making it tougher for IT professionals to immigrate.

March 2003: In the midst of continuing acrimonious debate on

immigration, law amended to make Temporary Business–Long Stay–visas more

difficult to come by. Students visa laws also become tougher.

April 2003: Australian telecom major Telstra faces a storm of

accusations for hiring Indian programmers from Infosys and Satyam at what are

alleged to be "sweatshop wages." All three companies deny charges but

it is clear that outsourcing deals are now under closer scrutiny than ever

before.

Germany




April 2002:
A new immigration law aimed at getting foreign high skilled

students and workers is approved by the Bundesrat (the Upper House of the German

parliament), leading to a constitutional crisis. Six of Germany’s

conservative-run states challenge the bill in a constitutional court.

December 2002: Court declares the bill void

February 2003: Gerhard Schroeder’s government back tracks a little.

Withdraws the Green Card scheme for IT professionals introduced two years ago.

May 2003: However, government sticks to its guns on the immigration

bill. Re-introduces it in parliament — unchanged. Fresh trouble expected.

United States




October 2001:
President George W Bush signs the USA Patriot Act, which,

among other things, establishes new guidelines for monitoring international

students and migrants. Allows foreigners to be detained for a week before the

government decides what to do with them.

November 2001: Guy Santiglia, former Sun Micro employee, files a

complaint with the Labor Department accusing Sun of replacing U.S. workers with

H-1B non-immigrant workers. Says Sun discriminated in favor of H1Bs, even hiring

them for "non-speciality occupations."

December 2002: The New Jersey State Senate unanimously passes bill to

prevent the government from outsourcing IT jobs outside the US. Bill sent to the

NJ State Assembly for consideration. Other states like Connecticut, Missouri,

Maryland and Wisconsin considering similar bills.

March 2003: Though the Santigglia case is thrown out, Walter Kruz,

another former Sun employee files a class action suit claiming the company

violated age and race discrimination laws by keeping younger Indian workers

while firing him and other American workers.

The suit sought class action status on behalf of all "non-East

Indian" employees that were affected by Sun’s work force reduction

policies–an estimated 2,400 of them.

April 2003: A New Jersey government department ( the Department of

Human Services) renegotiates its contract with a private company Efunds. Forces

it to move its customer call center from Mumbai to Camden in New Jersey.

May 2003: State department officials propose face-to-face interviews

for all Visa applicants and fingerprinting of all entrants to the US.

Florida Congressman John Mica introduces a Bill in the House of

Representatives to stop perceived abuse of L1 visas by Indian IT services

companies. His contention–L1s are a backdoor to cheap labor, because of which

"Americans have found themselves in the unemployment line."

The Netherlands



March 2003: i-Flex Netherlands chief executive officer V Senthil Kumar

arrested in London, UK on the behest of the Dutch government. The Dutch ask for

Kumar’s extradition accusing him of conspiring to get Indians into Netherlands

illegally.

May 2003: The UK court finally rejects the extradition order. Kumar is

a free man. But the Dutch investigations to continue.

Sarita Rani & TV MAHALINGAM

It’s the Politics, Stupid! The Far Right Rises>>>>>>

Through most of Europe the far right is either setting the agenda for

mainstream political debate or actually in power. In the US and Australia, the

conservatives are taking a more hard line stance. The menu of issues is the

same: corruption, immigration, crime and national identity. The argument also

similar: Immigrants threaten civil order (crime, riots, corruption); they take

away local jobs; and they threaten national identity.

All of them leading up to one common refrain–Stop Immigration. Here’s a

rundown on the politics of immigration in some countries key to the Indian IT

services sector…

France:

France shocked itself and Europe by almost voting Jean-Marie Le Pen to power

in 2001. His far right party- The National Front–promised an end to all

immigration, camps for illegal foreigners awaiting deportation and withdrawal

from the EU. An agenda on which Frenchmen voted him the second most popular

person in the country.

Le Pen did not become president finally but his 20% of popular vote sent a

powerful message to Europe. BBC’s comment on the event: "Europe’s far

right made its single biggest advance in 50 years."

Germany:

Ten years ago, it was the Turks who came under attack from mushrooming

neo-Nazi parties. One of them won close to 10% of the vote in the German

Parliament, raising the specter of pre-war Germany.

Two years ago–it was the Indians. When the government decided to allow

faster visa processing for IT professionals, the opposition slogan was–"Children,

not Indians".

In the last few years mainstream parties like the Christian Democratic Union

and the Christian Social Union have moved further into what was earlier

considered the extremist fringe. Among the most radical of them - Edmund Stoiber

who fought the 2001 elections promising an end to all immigration.

Stoiber and the Christian Democrats lost the elections but forced the new

government of Chancellor Gerhard Schroeder into a more conservative position.

Germany recently withdrew the green card scheme for IT professionals saying

there was already too much unemployment in the country.

United

Kingdom: In 2001 Asian and British youth rioted against each other for a

week on the streets of Oldham, Burnley and Bradford. In elections later that

year, Tory leaders like William Hague made immigration their main election

issue. Hague promised an end to illegal immigration, and deportation camps —

Germany style. Labor policies on immigration he said, had turned Britain into a

"soft touch" not just a "safe haven." More ominously, the

mainstream Tories found support from the far right British National Party. The

BNP sowed a minefield — fielding and winning 3 seats from the riot ravaged

constituencies.

Labor won the elections finally, but has since gone tough on immigration. It

also recently removed IT from the list of occupations with a skills shortage. A

growing and more often vocalized sentiment these days — immigrants lead to

more crime.

The

Netherlands: Within a year of being formed, the far right List party came to

power as part of a coalition on a strident anti-immigrant agenda. Started by a

former sociology professor called Pim Fortuyn the party promised an end to

immigration and demanded that "anti-discrimination" laws should be

reconsidered.

When Fortuyn was assassinated last year, 40,000 people came for his funeral.

A 100,000 to sign the condolence register. An outpouring of grief in Europe not

seen since the death of Princess Diana.

Though the party lost some steam after the assassination of Fortuyn, his

anti-immigrant agenda is now firmly on the windscreen of mainstream political

parties.

Austria:

A far right party is now the dominant party in power. When Joerg Haider’s

Freedom Party won 30% of the vote and first entered the government as a

coalition partner three years ago, Europe was shocked. So shocked in fact that

the EU slapped sanctions Austria and boycotted it for several months.

That hasn’t hurt Haider’s fortunes. Since the mid-90s he has built his

career on crime and immigration issues and is now in power with the promise that

he will put a stop to both.

Italy:

A center-right coalition is in power led by Silvio Berlusconi who was

elected on an anti-immigration plank. His coalition partners from the far right

include Gianfranco Fini’s National Alliance with roots in Mussolini’s

fascists and the Northern League whose Umberto Bossi demanded deportation of all

illegal or unemployed immigrants.

Australia:

Traditionally open to asylum-seekers and immigrants, Australia has had

immigration problems in the last three years of a rather extreme nature. Asylum

camps and the refusal to take in boat people even moved the UN once to warn the

country. Not surprisingly, it has also had troubles with its own version of the

far right. The One Nation Party came to the forefront in 1998, with a call for

immigration policy changes–the shift to fewer and more skilled immigrants.

Among the mainstream parties, New South Wales Premier Bob Carr has over the last

year been an increasingly vocal critic of both immigration and outsourcing–specifically

to India.

Sarita Rani & TV MAHALINGAM