To H-1B or Not To?

November 4, 2008 will forever be remembered as a historic date, as it was the
day a black man (Barrack Obama) was elected as the 44th President of the United
States. His victory against all odds was wildly celebrated not only across towns
and cities in the US but also across the globe.

Thousands of people across different continents were seen cheering and
celebrating Obamas election to lead US for the coming four years. But back here
in India, there was muted skepticism for the new president. Though overtly,
there were congratulatory messages being exchanged and right noises being made,
deep down inside there was a niggling fear of Obama as a policy maker and
Democrats in large.

The trepidation was not without reason. The world at large and the US
specifically is facing one of the biggest economic challenges in the past few
decades. Prompted by the sub-prime crisis, the US economy has been going down,
and going down fast. With factories shutting down and jobs being retrenched,
Obama promised a policy that was a complete anti-thesis of the Republican
pro-business line. He talked about pumping money into the economy and, more
importantly, ensuring that Americans did not lose their jobs to migrant workers
(read Indians). In fact, he had even spoken against the H-1B Visa program,
wherein companies were allowed to bring in specialist workers for some six odd
years in the US.

The main beneficiary of the H-1B Visa program were Indian tech companies,
namely TCS, Wipro, Infosys, that sent their workers to the US on deputation.
Using H-1B, Indian IT companies could offer a range of outsourcing services to
corporations across the US. But with job losses at a historic high in the US,
the loud voices against the H-1B program are growing stronger by the day. In
fact, the latest data released by the US immigration authorities shows that
Indian IT majors received the maximum number of H-1B work permits in 2008. It is
certainly not a new trend as Indian IT majors had dominated the H-1B recipient
list last year as well. Last year 163,000 immigrant workers applied for 65,000
slots. These figures are being used by critics of the H-1B program, ranting
against the dominance of Indian IT firms.

The Noose Tightens

Protectionism is indeed on the rise in the US. There are numerous senators
who are lobbying hard to have the H-1B program scrapped or have severe
restrictions imposed. Not surprisingly, last month, when President Obama
presented the $787 bn federal stimulus bill to the US Congress, he spoke about
how restrictions would be imposed on H-1B use by financial-services firms that
receive bailout funds. On the other hand, pressure is also rising on the US MNCs
who are being asked not to employ H-1B workers, for instance, Senator Chuck
Grassley sent letters to Microsoft mentioning that the company had a moral
obligation to put the jobs of US citizens ahead of H-1B immigrant workers
amidst layoffs.

There was also much hue and cry among the Indian community in the US over the
three-month deadline to leave the US for H-1B visa holders who have lost their
jobs. US-based organizations of Indians have asked for an extension of the
deadline, as in a falling market it is difficult for returnees to sell their
assets and settle their affairs.

Back in India, the response has been much refrained. While quite a few
politicians have decried against any sort of protectionism, not much has been
forthcoming from the IT sector.

Likely Impact?

So how bad is the news for India, and Indian companies in particular, is the
big question on everybodys mind right now. There is a body of thought that in
order to stay competitive, companies in the US will have to look at ways and
means of increasing productivity while at the same time cut costs and hence they
cannot do away with outsourcing all together. It is simple economics and no
amount of politics can really score over it. Also, the fact remains that in
spite of his Democratic antecedents, the Clintons (former president Bill Clinton
and current secretary of state Hillary Clinton) have been supporters of the H-1B
program. In fact, the wind seems to be still blowing in favor of the H-1B
program, as Obama chose Senator Judd Gregg as the secretary of commerce. Gregg
had in the past stood out in the Senate in strong favor for expanding the cap on
H-1B visas from the current 65,000 per year.

In the meantime, companies and job seekers are again gearing up to apply for
the H-1B visas that will become available in financial year 2010, which begins
in October. The USCIS will receive applications for the 65,000 visas on April 1.
Business icons like Eric Shmidt (Google) and Bill Gates (Microsoft) are known
proponents of the H-1B program. Thus, there is the likelihood that all the words
might not really translate into action, and Indian companies might continue to
benefit like they have done in the past.

In the end, it all boils down to the economics. If the crisis worsens and
there are more job cuts and losses in the US, the opposition against outsourcing
in general and H-1B in particular will increase manifold. Banks and financial
institutions that have been bailed out by the US treasury will be under enormous
pressure to hire American citizens over immigrants. With a bevy of banks being
funded by the US government, this is certainly not a great scenario.

On the other hand, if in the next few quarters the pall of gloom lifts and
there is an improvement on the ground in terms of the US economy, the tirade
against outsourcing will lessen. Indian companies are desperately hoping and
praying for the same as their own health is intricately linked with this
scenario. The big question is: Will it happen that way? And, what if it doesnt?

Shashwat DC

shashwatc@cybermedia.co.in