As the Donald Trump administration begins to deliver on his poll promise of cracking down on the alleged misuse of H1B visas, Indian IT companies are feeling the pinch.
Donald Trump's election rhetoric is returning to bite the Indian IT sector as policy formulations of the new US administration.
First, here are some updates on the bad news on H1B visas, the visa category mainly used by Indian IT companies to ship Indian IT professionals to the US.
Tougher norms for H1B visas
In keeping with his election pledge to crack down on companies using the H1B visa to import Indian IT professionals into the US, his government has changed the relevant guidelines not only to make it more difficult for Indian companies to ship sorely needed foreign talent to the US but also to increase their costs of operations in other ways.
The US Citizenship and Immigration Services (USCIS) agency has recently said “an entry-level computer programmer position would not generally qualify as a position in a specialty occupation”. This means Indian IT companies can no longer send personnel from India to fill up such a position in the US.
Nomura Research analysts have found that about half of labour condition applications filed by Indian IT companies were for entry level or Level1 positions last year. These applications are sine qua non for H1B visa applications.
Probe into misuse
In another advisory issued to US companies, the USCIS agency has said it will “rigorously” use its authority to investigate H1B visa violators, indicating a hardening of attitudes in the Trump administration on the issue.
The US Labor Department became the third US government department after the USCIS and the Justice Department to say it will coordinate more closely with other US government departments in its efforts to protect US workers and, if necessary, prosecute offenders.
It also joined the Justice Department in cautioning US employers not to use H1B visa holders to discriminate against US workers, and pointed out that this particular visa category can be utilised to import foreign workers only if workers with relevant qualifications were not available in the US.
Meanwhile, two top US Senators, Chuck Grassley and Dick Durbin, supported the US government's actions and said: “The President should continue using his authority to prevent outsourcing companies from displacing American workers.”
Hitting where it hurts
Indian IT companies are the largest user of H1B visas. In 2018, the US plans to issue 85,000 H1B visas, but experts said a change in the minimum wage criteria for issuing such visas would hit the bottomlines of Indian IT companies, which grew at a record slow 9 per cent in 2016-17. There is little likelihood of any great improvement in the current financial year.
Indians are job creators in the US
Rational arguments often get lost when fears of job losses to foreigners leads to isolationist political rhetoric. In the US, too, more and more people are increasingly viewing protectionism as a panacea for its domestic economic problems, including joblessness.
But a study titled “Indian Roots, American Soil” by the Confederation of Indian Industry (CII) and Grant Thornton (GT) last year, about 100 Indian companies have invested $15 billion in US industry and created 91,000 direct jobs in that country.
The highlights of the report are:
- About 100 Indian companies have invested $15.3 billion and created 91,000 direct jobs across the US
- The top five states in terms of job creation by Indian companies are New Jersey (9.278 jobs), California (8.937 jobs), Texas (6,230 jobs), Illinois (4,779 jobs) and New York (4,134 jobs)
- The top five states in terms of FDI by Indian companies are Texas ($3.84 billion), Pennsylvania ($3.56 billion), Minnesota ($1.8 billion), New York ($1.01 billion) and New Jersey ($1 billion)
- The average investment per state is $443 million
- Six out of seven Indian companies present there plan to invest more in the US
- 90% of the companies plan to hire more employees locally in the next five years.
Low hanging fruit
The US accounts for 60 per cent of the Indian IT sector's annual revenues of about $150 billion. That is why an easy US visa regime is vitally important for its health. And Indian IT professionals are the biggest beneficiaries of the H1B visas, which allow professionals to work in the US.
Worryingly, a substantial portion of their revenues still come from relatively lower end work, which give steady margins, but which can no longer generate high levels of growth for the Indian IT sector. And despite their best efforts, Indian IT companies have failed to move to move up the software services value chain.
The politically incorrect secret is that Indian IT companies still focus primarily on “exporting” IT professionals to remote locations to address their clients' needs.
Contribution to US economy
“Indian Roots, American Soil” is CII's flagship event on Capitol Hill and is part of our ongoing effort to highlight the positive stories of Indian companies' contributions to the US economy and society. Our aim, through this event, is to highlight the range and depth of Indian investments in the United States. India is now the fourth-fastest growing source of investments into America - this is a very critical aspect of the burgeoning bilateral US-India business story and one that has an immediate and visible positive impact on the local communities where these companies operate. It's a story that needs to be told and re-told,” CII Director General Chandrajit Banerjee has said in a statement.
“A cornerstone of relations between India and US is the thriving commercial exchange between the countries. As India surges forward to become the fourth fastest growing source of FDI into the US, it is critical that we recognise the positive impact of Indian business investments in the country. In Virginia, Indian companies have been key players in creating jobs and engaging communities. I hope to see this trend continue in the future, with increased Indian business operations in the country,” Senator Warner, Virginia, Co-Chair, Senate India Caucus, was quoted in another statement.
Another report by Indian IT industry lobby Nasscom, released in 2015, pointed out that the much maligned Indian IT sector supported more than 400,000 jobs in the US and contributed more than $20 billion in federal taxes over the last five years.
"The Indian IT industry has definitely made a big contribution to the US economy," Indian Commerce Minister Nirmala Sitharaman has said. “There has always been a popular apprehension that Indian IT industry benefits from the United States and takes away job from the US.”
Busting the cheap labour myth
Another study by the Brookings Institute has also belied the myth that cheaper Indian IT professionals are snatching jobs from qualified Americans in the US. The study points out that most Indian workers on H1B visas generally earn more than comparable US workers with similar educational qualifications.
Indian IT companies create and protect jobs in the US in the following ways:
- They provide us businesses with advanced IT services and support, which helps US companies maintain their global competitiveness, enter new markets, gain market share and remain profitable
- Indian IT companies have invested billions of dollars in setting up facilities in the US and created thousands of direct jobs there
- Indian IT companies directly employ about 100,000 US citizens and support jobs for three times as many Americans
- Over the last four years, job creation by Indian IT companies in the US grew 10 per cent annually compared to a 1.7 per cent overall job growth in that country.
Why then is there the outcry in the US against foreign businesses in general and the Indian IT sector in particular
Empirical evidence suggests that people turn insular and politicians turn protectionist in times of economic hardship and slowdowns. The US and, indeed, the entire western world has yet to recover from the sub-prime crisis of 2008.
This has allowed politicians and other purveyors of doom the space to peddle populist and protectionist slogans based on demonising “foreigners who steal US jobs”. Such rhetoric, which would usually be ignored by most Americans in prosperous times, is finding takers because jobs are difficult to come by.
Two pronged remedy
Speaking to India Incorporated for a report on the issue in the run-up to the US presidential elections, Sitharaman had said: “We have discussed the visa-related matter with the US at various levels. We have talked to US Trade Representative and US Commerce Secretary both during our strategic dialogue and later. We have also made it public that we may approach the WTO on increase in visa fees as this could be viewed as a non-tariff barrier. This is against the spirit of free trade practices on the movement of personnel. So, we make take the US to WTO.”
The issue is bound to come up for further discussions when Prime Minister Modi meets President Trump later this year.
Simultaneously, the Indian IT sector will also have to climb up the value chain and develop more proprietary software and other knowledge processes that it can then leverage for revenues.
Till then, allegations of Indian professionals “stealing” jobs of US citizens would remain a political hot potato.
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The US Department of Homeland Security has issued a stern warning to prevent the misuse and/or fraudulent use of H1B visas by employers in the US.
"US Citizenship and Immigration Services (USCIS) today announced multiple measures to further deter and detect H-1B visa fraud and abuse. The H-1B visa program should help U.S. companies recruit highly-skilled foreign nationals when there is a shortage of qualified workers in the country. Yet, too many American workers who are as qualified, willing, and deserving to work in these fields have been ignored or unfairly disadvantaged. Protecting American workers by combating fraud in our employment-based immigration programs is a priority for USCIS.
Beginning today, USCIS will take a more targeted approach when making site visits across the country to H-1B petitioners and the worksites of H-1B employees.
USCIS will focus on:
Cases where USCIS cannot validate the employer's basic business information through commercially available data;
H-1B-dependent employers (those who have a high ratio of H-1B workers as compared to U.S. workers, as defined by statute); and Employers petitioning for H-1B workers who work off-site at another company or organization's location.
Targeted site visits will allow USCIS to focus resources where fraud and abuse of the H-1B program may be more likely to occur, and determine whether H-1B dependent employers are evading their obligation to make a good faith effort to recruit U.S. workers.
USCIS will continue random and unannounced visits nationwide. These site visits are not meant to target nonimmigrant employees for any kind of criminal or administrative action but rather to identify employers who are abusing the system.
Employers who abuse the H-1B visa program negatively affect U.S. workers, decreasing wages and job opportunities as they import more foreign workers.
To further deter and detect abuse, USCIS has established an email address which will allow individuals (including both American workers and H-1B workers who suspect they or others may be the victim of H-1B fraud or abuse) to submit tips, alleged violations and other relevant information about potential H-1B fraud or abuse.
Information submitted to the email address will be used for investigations and referrals to law enforcement agencies for potential prosecution.
Existing H-1B Fraud Measures
Since 2009, USCIS has conducted random administrative site visits to ensure that employers and foreign workers are complying with requirements of the H-1B nonimmigrant classification. USCIS refers many cases of suspected fraud or abuse to U.S. Immigration and Customs Enforcement (ICE) for further investigation.
Additionally, individuals can report allegations of employer fraud or abuse by submitting Form WH-4 to the Department of Labor's (DOL) Wage and Hour Division or by completing ICE's HSI Tip Form.
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