The US has, over the years, grown into a land of opportunities for Indian IT companies. As free market economics helped companies like Infosys and TCS provide IT services to foreign clients at relatively cheaper rates, which in turn, have provided higher profit margin than. The presence of IT companies within the US markets has been a major reason for their rapid growth.
There have been several reasons that have aided the rapid growth of the Indian IT sector. One of the primary reasons has been its ability to capture a significant share of the US IT sector which has provided IT companies with several ways to cut operating costs while at the same time providing a quality service to their clients. One way doing this has been to hire Indian IT talent relatively cheaper compensation levels and allow them to work in the US, thus bringing down their overall cost incurred on hiring employees. This has been possible majorly due to the lottery system of allotting H-1B visa that the US government had adopted in the recent times. A move that has been under much criticism by the newly appointed Trump administration. In line with Donald Trump “Buy American” and “Hire American” view towards boosting employment rates within the US, he signed an executive order that aimed at making the allotment process more stringent for H-1B visas.
With the goal of boosting domestic job creation, the order aims to restrict foreign companies to hire talent at relatively cheaper compensation.
It attempts to reform the H-1B visas program; the order has directed a stricter adherence to H1-B visa laws by the federal agencies. It has also asked them to ”propose reforms to the program to prevent fraud and abuse and ensure visas are awarded to the most skilled applicants.” This focus on allowing the “most-skilled” helps the US government redirects the growth of a foreign company on its soil, towards domestic job creation.
The move, that could effectively mark the end of the lottery system of H-1B visa allotment in the coming times, comes as little surprise. The Trump administration had on many previous occasions, accused that employers have abused the program to hire workers who will accept cheaper pay than Americans. In the press conference before the signing of the executive order, companies like TCS, Infosys, and Cognizant were mentioned hoard a significant share of visas allotted that ensured their lower labour costs. By putting in strict measures and enforcing the strong monitoring of how the H-1B visas are allotted, the US government seeks to push job creations within these sectors, domestically.
And from the initial response to these string of moves, it seems to have its intended impact. Infosys, one the giants of the Indian IT industry today, which was incidentally accused of “cornering a lion’s share” of the H-1B visas by putting extra tickets in the lottery system, announced recently that I would be hiring a fresh batch 10,000 employees within the US. A move which is being viewed as one that appeases the US government, Infosys plans on hiring 10,000 US staff over the next two years; in addition to opening four technology centres across the US.
Many analysts and talent experts have critiqued the move that such talent decisions would lead to increased costs and shortening of margins.
All this would, in turn, impact its hiring capabilities back in India, and might just lead to off-shore job cuts here. An increase in operating costs often also lead to companies utilising more of automation and robotics programs, that brings the problem job cuts much closer to reality.
A move which has been welcomed by the White House seems to be a victory for Trumps “pro-growth” economic stance, although the “growth” referred here is a mostly aimed towards the domestic markets. But as countries like the UK, Australia, and Singapore continue to push forth protectionist measures towards job creation, many o the other IT companies might soon follow in the footsteps of Infosys.
Although most companies today operate in within economic markets which are often regulated by government policies, one the biggest critique of such an intervention comes the free market economics (one that the US as been staunch proponent of) that postulates the free flow of labour becomes essential for economies to grow. The rationale behind not having barriers, in the form of government checks and balances, has been that creating barriers to the free flow labour would lead to economic inefficiencies. This has been one of the core components that has shaped the face of the modern political economy. The free flow enables the global economy to expand without have major negative, offsetting costs. Something that the tightening of immigration rules is bound to create.
The Indian government, aware of the detrimental impact of such measures on the employability of India’s IT talent, has said that they’re in touch with the US government to ease out the problems of H-1B visa allocation. Nasscom, post the announcement of the executive order being directed towards many of the big IT companies, came out in their support. “Nasscom would like to clarify the statements made by the White House on Indian companies getting the lion’s share of H1B visas and highlight that in 2014-15, only six of the top 20 H1B recipients were Indian companies,” it said in a statement. It has also pointed out that US is might currently be facing a growing shortfall between the supply and demand for computer science majors in the US workforce. “All Indian IT companies cumulatively account for less than 20% of the total approved H1B visas although Indian nationals get about 71% of the H1B visas,” Nasscom added in a statement.
As both, the US government and the IT companies, alike work towards their self-interest it becomes imperative for all the parties tied to this economic shift to establish a greater level of conversation to ensure that the needs, hopes, and aspirations of a growing talent pool are not held at ransom to pass populist measures. And even if they are, Indian companies needs to figure innovative solutions towards maintaining growth estimates, without sacrificing on their capability to create jobs.