Friday, May 23, 2008

When demand outweighs supply

Source: The Hindu

Immigration debate
An arbitrary cap on the number of HIB visas issued ignores the needs of the American economy, especially when it has been proven that the “cheap foreign labour” neither depresses wages nor takes jobs away from Americans. Various viewpoints on the issue.

H1B professionals represent a small portion of the total number of workers in the American labour force and their presence does not increase the unemployment rate but rather creates jobs.

Photo: P.V. Sivakumar

Economically viable option: Companies like Microsoft are forced to relocate because of immigration policies.
Every spring, the immigration debate gains fervour as thousands of foreign nationals compete for a limited supply of H1B numbers. The H1B is quite popular as it allows many foreign nationals who have either a Bachelor’s or Master’s degree , or its equivalent, to work in the U.S. for up to three years, with an option to extend it for another three. The number of available H1Bs this year is arbitrarily set at 65,000, plus an additional 20,000 for those with a U.S. Master’s degree. Applicants can file their H1B petitions from April 1 each year, but in April 2007, the USCIS had received about 1,50,000 applications by April 2.

This year in 2008 the USCIS confirmed that it has already received more H1B petitions than allowed under law. It is believed that a large number of the H1B petitions filed were made on behalf of Indian nationals by the large H1B user companies and many “body shoppers” that process H1B petitions. The USCIS will randomly select by computer the chosen few from the pile of petitions it receives and returns the remaining unsuccessful petitions. Advocates for an increase in available H1B numbers for skilled professionals criticise the U.S. government for not taking in to account the demands of the economy when setting this cap. In 2000, the cap went from 65,000 to 115,000, and then rose again to 1,95,000 from 2001 to 2003. But the H1B quota was again reduced due to economic slowdown and has hovered at 65,000 since 2004, despite a revived demand for professionals in the tech sector. In fact, with the addition of about 6,000 H1B numbers allocated to nationals of Singapore and Chile under U.S. Free Trade Agreements with those two nations, the H1B quota has been reduced to just over 58,000 for the rest of the world.

Proposed changes

The Congressional debate rages on as lawmakers cope with this issue. Members of Congress have introduced several “innovative” proposals to revamp the cap on H1B visas, including the Innovative Employment Act, which would double the number available under the H1B quota to 1,30,000. The New American Innovators Act is another bill that proposes eliminating the cap altogether for applicants who complete a graduate program in technical fields of study at a U.S. university. The SUSTAIN Act (Strengthening United States Technology and Innovation Act), would bump the cap back up to 195,000 for the next two fiscal years. Bill Gates appeared before the Committee on Science and Technology in the U.S. House of Representatives to offer support for H1B expansion. Gates contends the U.S. desperately needs to increase the H1B quota in order to remain technologically and economically viable in the global market. As attempts at increasing available H1B visas require legislative action, so far nothing has been passed and it seems unlikely that any law will pass in time to be relevant to the current cap season, especially during an election year.

Positive developments

There have been recent positive developments to retain professionals who are in the U.S. on a student status or visa. Interest groups linked to universities, educational institutions, tech employers and members of Congress have successfully pushed for an extension on the amount of time foreign graduates of U.S. universities can work after completion of the degree on the F1 Optional Practical Training (OPT) status. According to the U.S. Department of State Bureau of Consular Affairs, roughly 2,50,000 F1 visas are issued per year and almost half of those students are enrolled in graduate programs. The fields of study F-1 students enroll in are diverse, but 18 per cent of the students pursue engineering Master’s degree and 10 per cent pursue math and computer science related post-graduate degrees. Until recently, students could work under Optional Practical Training (OPT) for only one year. The U.S. Department of Homeland Security (DHS) issued a notice on April 8, 2008, to extend the time on OPT to provide graduating seniors a chance to stay on in the U.S. for up to a total 29 months on F1 OPT status. In addition, certain H1B cap gap relief has been afforded to such students if they comply with certain conditions, including maintaining status and filing the paperwork for the H1B before the expiration of the OPT. This interim final rule will help students who invested their education in the U.S. to stay and continue to contribute that knowledge for the benefit of the U.S. economy.

The current H1B cap arguably operates to siphon economic opportunity and technological know-how out of the U.S. resulting in substantial economic injury to the U.S. in the long run. Frustrated companies with a desire to do business primarily in the U.S. are shipping operations overseas to countries with more favourable immigration policies, sometimes despite greater expense. Canada, Ireland and India are all taking advantage of the failed immigration policies of the U.S. by attracting highly skilled professionals. American companies, including Microsoft, are forced into outsourcing operations to countries with more favourable immigration policies in order to keep their most valued workers and remain globally competitive. Similar to Microsoft opening an office in Vancouver, Google is now considering building a facility in Vancouver, Canada to cope with H1B inadequacies. Groups advocating a reduction in immigration argue that any H1B quota cap increase would take jobs away from some U.S. workers and will depress wages of others; a serious concern as symptoms of recession permeate throughout the U.S. economy. Supporters of a larger H1B cap cite a study by the National Foundation for American Policy that shows employment of American workers is actually stimulated when H1B workers are employed. According to the study, for every H1B professional hired, approximately five U.S. workers are employed to support their work in various capacities. The Bureau of Labor Statistics of the U.S. Department of Labor (DOL) reports the unemployment rate for computer and math-related occupations was 2.7 per cent for 2007, compared to the total unemployment rate of 4.8 per cent. A 2006 study showed that H1B professionals made up only .07 per cent of the American workforce, most of whom reside and work in California, New York and New Jersey, respectively. According to the DOL, these workers comprise less than one per cent of the total workforce in each of those States. It is difficult to see how such a small population within the labour force can depress wages or working conditions of U.S. workers or dampen the economy. However, there are reports that companies are paying foreign programmers $40,000 per year, making it difficult for their American counterparts to compete. The average H1B salary is $50,000 to $55,000 and Microsoft boasts an average salary of more than $1,00,000 per year for its H1B employees. Although this hardly sounds like the “cheap foreign labour” CNN commentator Lou Dobbs often refers to, wage abuse does occur and needs to be resolved as part of any reformation plan.

H1B professionals represent a small portion of the total number of workers in the American labour force and their presence does not increase the unemployment rate but rather creates jobs. For the first time in five years, the Labour Department reported a net loss of jobs in January 2008. Initiatives that create jobs are needed now more than ever. Advocates of the cap increase say that it will be mutually beneficial to U.S. and foreign workers alike but the current cap has no bearing on the demand of the American marketplace. A system that allows for a static number of visas issued annually is one that is irresponsive of American economic need. The current climate is one where an increase is needed in order to stimulate the American economy and remain globally competitive. However, after the 2002 economic slowdown, when the cap was set at 195,000, only 78,000 of them were used. The remaining 117,000 visas were simply discarded and the cap has been set at 65,000 visas ever since. Congress is sluggish to respond to economic indicators in the tech sector, causing more damage to an already injured economy. Why is the cap set at 65,000 when 78,000 visas were needed in 2002, even after the 9/11 terrorist attack on America’s financial hub and the dot com bubble burst? Why is it that the Federal Reserve can make decisions based on market conditions but the H1B cap cannot be set with similar financial methodologies and indicators? The last few years have shown that Congress rubber stamps the cap without giving appreciable consideration to the current economic climate and the American economy loses more competitive footing with each passing year.

Thwarting exploitation

Increasing the H1B cap is just one part of the solution. There has been much debate that more stringent prevailing wage guidelines are needed to ensure that employers are not exploiting H1B professionals and American workers are not experiencing wage depression as a result. Employers are already required to apply for a prevailing wage determination from the DOL when applying for permanent residency but the current H1B policy condones a haphazard approach to determine the prevailing wage. The DOL is changing its system and strengthening the prevailing wage process to ensure fair wages for foreign nationals without creating unfair competition for American workers. Hopefully this will result in less negative backlash against H1B workers and businesses hiring such workers.

Despite the drastic need for major immigration reform, the H1B cap debate has become politically enthralled in the broader debate over illegal immigration, and has understandably been relegated by the American media in favour of covering more widespread issues like the real estate collapse, the credit crunch and the protracted Democratic presidential primary. But as more governments realise the benefits of attracting tech-talent to their respective countries, American lawmakers and the DHS must react by implementing sensible immigration policies geared towards attracting and retaining highly skilled professional workers to the U.S. in a market that seems to be able to absorb them quickly. If policymakers wait too long, the U.S. will quickly find itself trailing behind its competitors, especially in the tech sector. According to Moore’s law (in layman’s terms), technology doubles in efficiency every two years. No other industry can boast such exponential growth. The American economy must remain at the forefront of this rapid development in order to survive the globalisation era. A policy aimed at attracting the “best and brightest” professionals is essential to achieve this end.

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