The H-1B visa programme allows companies to bring “skilled” foreign workers to fill jobs in the US for a few years. American President Donald Trump has drawn a bright line on the H-1B visa that it should include only the most skilled and highest-paid applicants and should never, ever be used to replace American workers
It is being made out that US President Donald Trump has delivered a massive blow to the Indian Information Technology (IT) sector by imposing visa restrictions on foreign workers. This move, its critics allege, will not only cripple India’s blue chip software behemoths such as Tata Consultancy Services (TCS) and Infosys but also affect millions of Indians aspiring to make a new life in the United States. But does Trump’s move really spell disaster for India?
The controversy revolves around what is known as the H-1B Visa programme, which was originally envisaged as a measure to bring in highly skilled foreign workers to the United States for its hi-tech industries. Under this programme, the US government awards 65,000 visas by lottery every year and randomly distributes another 20,000 to graduate student workers. Indians are the largest single group of recipients of this system.
“The India H1B story started with the Y2K issue in the late 90s when US required thousands of programmers to correct their legacy systems mostly written in COBOL or DB2 on mainframe systems,” explains ShekharDasgupta, former head of Oracle India. “This was indeed a specialized skill and quite a few Indian IT firms capitalized on this business opportunity, hired from good schools, invested in training before sending them to the US. They earned a good name for India
The abuse started after the year 2000 problem was overcome, says Dasgupta. This time there was a huge demand for ERP and web skills (dotcom companies were mushrooming from all corners in the US).
“More Indian IT companies – smaller and less professional – jumped into the fray, and compromised on quality. Rather than hiring from good schools and investing in in-house training, they hired from a new parallel IT school system that sprung up in the back alleys of Chennai, Bangalore and Hyderabad. The phenomenon of ‘tech coolies’ started,” recalls Dasgupta. “There were guys being shipped whose basic education (irrespective of the formal qualification they claimed to have) were pathetic. I have seen instances where guys did not know basic algebra or coordinate geometry. Their social, language and communication skills were worse. Poorly paid, they typically live in ghetto style.”
There had to be a backlash at some point. Trump’s election was the tipping point. At a media briefing on 17 April 2017, White House, press secretary, James S. Brady, explained what the Presidential order was all about: “Right now, as you may know, H1B visas are awarded by random lottery… And many people will be surprised to know that about 80 percent of H1B workers are paid less than the median wage in their fields.”
The main problem was the way the programme was implemented. Brady said “only five percent were categorized at the highest wage tier of the four wage tiers that are in place for the H1B guest worker visa. The result of that is that workers are often brought in well below market rates to replace American workers, again, sort of violating the principle of the program, which is supposed to be a means for bringing in skilled labour, and instead you’re bringing in a lot of times workers who are actually less skilled and lower paid than the workers that they are replacing.”
President Trump has been loudly and repeatedly saying: “Right now, widespread abuse in our immigration system is allowing American workers of all backgrounds to be replaced by workers brought in from other countries to fill the same job for sometimes less pay. This will stop.
Brady, in his media briefing, was more explicit: “Just to illustrate a little bit more how the lottery works — so some companies often times are called outsourcing firms. You may know their names well, but the top recipients of the H1B visa are companies like Tata, Infosys, Cognizant — they will apply for a very large number of visas, more than they get, by putting extra tickets in the lottery raffle, if you will, and then they’ll get the lion’s share of visas.
Many Indian corporate sector gurus, consultants and trade bodies are apprehensive of the Trump decision. One report prepared by ASSOCHAM clearly states that the recent moves by Trump “will act as a definitive dampener to the Indian outsourcing industry.”
ASSOCHAM feels that the Indian IT industry could be forced to lay off large numbers of employees while its realisations will be squeezed both by rising costs of operating abroad and the rising rupee.
Chiranjit Banerjee, Managing Partner, PeoplePlus Consulting, a firm that works with the top end of the captive IT space in India, does not believe that the IT industry is staring at disaster. “The bill being proposed by the Trump administration seeks to raise the cut off salary to USD 130,000 but Indian IT industry veterans believe that the final number will settle closer to USD 100,000 following the intense lobbying that is ongoing. The higher cut-off might shave off at least 200 basis points from the operating margins of Infosys and TCS among other Indian outsourcing heavyweights
Pradeep Mehta, head of CUTS, the country’s leading think tank on trade and consumer issues, believes that the impact of President Trump’s executive order remains uncertain despite the rhetoric. “While potentially threatening to Indian tech companies that greatly depends on the visa programme, including possibly requiring higher minimum salaries and education, it is unclear how long this review will take and what exactly will come of it.”
“As for legislation from Congress,’’ Mehta believes, “considering immigration is taken as a comprehensive issue in the United States, any bill reforming the H-1B visa will take substantial time and effort to pass. This all plays into the challenging uncertainty emanating from the Trump presidency. Although Indian technology and other companies must necessarily continue their relationship with the US as one of India’s top trading partners, this may also be an opportunity to explore expanding the global market for Indian service providers and high-skilled professionals.”
All said and done there would be no immediate effect of the changes, argues Ravi Garimella, an Indian origin software professional based in the US. “As far as visas go, there is no likely impact this year as the process has not changed and the visas are being distributed as in prior years. However, there will be an update on enforcement of these visas i.e. random checks and potential interviews while crossing into the country. Even the latest executive order is more on enforcement than a change in policy.”
Sayantan Nandi, Director, Pages Consultancy, who has been associated with IT services here and in the US for several decades, says,“the current Outsourcing model which was key to the IT industry's success story has to be given a quiet burial. This will, at least on a short-term basis, trigger heavy unemployment impacting industry at large and the IT industry in particular. It will also squeeze the margins of the current biggies like TCS, Infosys and Cognizant.”
THE CONTROVERSY REVOLVES AROUND WHAT IS KNOWN AS THE H-1B VISA PROGRAMME, WHICH WAS ORIGINALLY ENVISAGED AS A MEASURE TO BRING IN HIGHLY SKILLED FOREIGN WORKERS TO THE UNITED STATES FOR ITS HI-TECH INDUSTRIES. UNDER THIS PROGRAMME, THE US GOVERNMENT AWARDS 65,000 VISAS BY LOTTERY EVERY YEAR AND RANDOMLY DISTRIBUTES ANOTHER 20,000 TO GRADUATE STUDENT WORKERS. INDIANS ARE THE LARGEST SINGLE GROUP OF RECIPIENTS OF THIS SYSTEM.
Nandi is however not entirely pessimistic: “Having stated that, I don’t see this tremor in the industry to be long lasting if the industry is willing to effectively redraw its strategy, reskill the workforce and move up the value chain. In the event that they convince their clients to offshore to India to manage competitive price points and simultaneously hire local US resources, they should continue to remain successful. However, the question which remains to be addressed back home is what do we do with this large workforce which is ‘hard coded’ to perform low-end programming jobs?”
“Chances are that these Indian outsourcing giants will develop stronger near shore capability or hire more expensive US nationals to change the human resource mix in the US,” feels Chiranjit Banerjee. “This cutback could also lead to US companies off-shoring (rather than outsourcing) work to their own captives in India where visa don’t come into the equation at all as they are considered extended arms of the parents. In sum, the most impacted would be the Indian IT outsourcers and the least would be those US companies that display the flexibility to rapidly move work to their captives in India and other cost-effective destinations.”
At the same time, it remains to be seen how President Trump’s policies actually play out. For, executive action can only do so much regarding H-1B and legislation will be more difficult to accomplish.
There is also the larger India-US context which the Trump Administration cannot ignore. The US and India have built up dependencies over the years, which cannot be entirely disregarded. Indians in the US send home more than the US $ 10 billion a year in remittances, while Indian workers in that country pay millions in taxes to the US government. The two countries have become more interdependent than generally believed. Any major rupture would hurt both
Indranil Banerjie is a senior journalist and political commentator