In Defense of H1-B and outsourcing.
It’s been almost two months since the 45th President of the United States, Donald J. Trump, has assumed office and his gaudy speeches where he very blatantly opposes some salient features which are at the core of US has created a buzz across the globe. Right from saying that the whole picture of global warming is a hoax and an over-rated event to publicly disrespecting the women by threatening her to grab them by their p****y, from selecting probably one of the worst cabinet in the history of US to banning immigrants based on their religion, the US president has simply augmented the hatred and the negative image of his formed in the minds of many. Though his recent Congress address was just a slight deviation in the tone, the gist of the speech was more or less the same.
Amongst the many bills that are currently waiting to be ratified by the US Congress, the one which caught the attention of most of the Indians was the impending White House executive order on finding ways to “make the process of H1-B allocation more efficient and ensure the beneficiaries of the program are the best and the brightest” which demanded a raise in the minimum wage for H-1Bs to $1,30,000, a whopping 200% increase. Though this order was placed by Rep. Zoe Lofgren, a Californian Democrat, it was lauded by many Republicans including Trump’s key advisers, Steve Bannon and Steve Miller, and his attorney general, Jeff Sessions, who is currently under people’s scrutiny for his alleged contacts with Russian ambassador during the elections held back in November 2016. This particular idea created jitters in the IT companies, located out of India and abroad, whose ripples were seen in the Indian stock market as the IT stocks plummeted around 9% on the Bombay Stock Exchange after the announcement.
But let’s just try to decipher the rationale around such a move which was has not only raised the concerns of the Indian IT giants like TCS,Infosys and Wipro but has also caught the sight of the business moguls abroad.
One of the key point on which Trump’s campaign was based was his promise to bring back the jobs to the United States, and the perception that the H1-B visa holders are taking away jobs of the Americans is just an extended version of this misconception. A report ran by the US Chamber of Commerce, however, points out that even if that were true, the number of jobs lost — around 600 a year that are blamed on outsourcing — is about 0.0003% of the 20 million jobs lost ever year in the US due to layoffs, business closures and various other reasons.
Remember, these data is dated when the current IT revolutions namely cloud computing, automation and Artificial Intelligence has not yet entered the game. These figures will definitely take a hit when these game changers enter the market.
In addition to that, the Indian IT giants are not the greatest recipient of H1-B visas, quite contrary to the prevailing myth. In 2015, only 17% of H1-Bs went to the top seven Indian companies. In total, fewer than 15,000 slots, not enough to fill a big stadium in America. What the people who bear the misconception really need to understand is that it is no longer about the dependency but rather about the symbiosis.
The Blaring Truth:
The harsh truth about the exchange of workforce is that the Indians who shift to US on H1-B visas ended up paying a staggering $5.6 billion in social security taxes in 2012 and around $27.6 billion over the last decade, which the US won’t get back in their old age because the government finds it conveniently inconvenient to discuss a total agreement. Contrary to the prevailing myth about the H1-B holders eating away the American jobs, in reality the Indian IT industry supported over 4,00,000 jobs in the US in 2015- an annual growth of 10%. And it paid $22.5 billion in taxes to the US Treasury between 2011–2015 (which is almost equal to the cost of building the wall at Mexico border which the President is planning to build). So in future if the wall is apparently built at the border every American should know where the money came from. But that’s not it, the Indian FDI in the US between 2008–2013 was a whooping $28 billion. Do the math now, 22.5 and 28, that’s almost like building two walls at the border, and make no mistake about it, if President Trump is reading this somewhere he might be intrigued by my idea.
Though how much the Republicans praise this bill proposed by Rep. Zoe Lofgren, it won’t even pass the committee stage, forget coming to a vote. But owing to the sequence of events taking place in the US since November 2016, with Donald J. Trump getting elected at the helm, anything is possible. So in my wildest of dreams if this bill is passed then the repercussions will be serious. The $150 billion IT industry of India will definitely be hit hard but the American corporates which heavily outsource their work to India won’t be spared either.
If the bill is passed then the outsourcing companies will stop distributing H1-B visas and will end up hiring someone from US itself, in Trump’s words, “Buy America, Hire America”. But there are few reasons pointing out what’s wrong with the move:
- Profit’s will slash: One need not have a degree from Harvard or Stanford to do a cost-benefit analysis and deduce that profit of the outsourcing company will slash drastically. The work which was done before in $60,000 will now be done at $1,30,000. So, if the companies won’t be able to make enough profits then how will they pay their taxes? Let’s just overlook this point for a while assuming that one will shun away from profit if the people of the nation are benefited (A wild assumption though but lets just buy that for a while). But their is more at stake.
- Quality will be compromised: Being a person working in this field for the past 1.5 years, I can guarantee that the quality of work which is delivered by the Indian IT firms at such low price cannot be done be someone. I too deliver software for one of the biggest insurance selling company of the US and I know the dedication and hard work put in by everyone offshore.
- No 24*7 support available: Hiccup in a system is a norm these days, no one and I guarantee no one will be happy if he/she receives a call in the midnight asking them to have a look at the problem. Even the innocuous sound of the ringtone will be like a call from Satan to hell. Hence, outsourcing for 24*7 support is inevitable.
- Infrastructure needs to be set up: Apart from all the highways,bridges,airports, tunnels and railways which President Trump is promising to build in-order to boost the infrastructure of the nation, building offices and warehouse from where the Engineers can operate is imperative. I think the people of the US has enough infrastructure that can help them flee the country but not enough infrastructure that can help them carry out the outsourcing operations.
Besides these, the Indian students migrating to US to pursue Masters might just turn down their thought citing the erratic changes in the immigration policy but let’s just keep it to be a topic for some other day and let’s just give sometime for the Trump administration to ponder upon this thought and analyse it carefully. But the last person on Earth whom I want to analyse this is Betsy Devos.
Sources: The Economic Times and The Washington Post