Logical hurdles in clearing H1-B visa bill

A similar version of the bill was introduced by the same senators in 2010, but could not gain enough support in the Congress

Political populism is not restricted to the Indian political class; their US counterparts also do it every election year. Immigration has been an issue in most of the US elections in the recent past and most of the developed world. Keeping up the tempo, two US lawmakers have introduced a legislation in the House of Representatives, which, if passed by the Congress, would prevent Indian companies from hiring IT professionals on H1-B and L1 work visas.

So should Indian IT companies and their shareholders be worried about this development?

If the bill does go through, it would affect IT companies that need professionals at the client’s base to interact and integrate their work. However, the NSE IT index seems to have taken the news in its stride and trades higher in line with the market. The market seems to have seen through the rhetoric, but IT experts are cautiously optimistic over the development.

Before looking at reasons for the optimism, let’s look at what is being proposed, the ground reality and its impact.

The 'H-1B and L-1 Visa Reform Act of 2016', introduced by Democratic Congressman Bill Pascrell from New Jersey and Republican Dana Rohrabacher from California, would prohibit companies from hiring H-1B employees if they employ more than 50 people and more than 50 per cent of their employees are H-1B and L-1 visa holders (Click here to read the story). Apparently, both New Jersey and California are states which have the maximum concentration of Indian Americans.

However, for the bill to be passed as a law it has to be first cleared by the senate and then signed by the President. The bill is yet to be introduced in the senate and discussed. With the US election campaigning now in their final stretch most congressmen would be in the midst of their campaigning. Experts do not think that any new bills will be cleared by President Obama.

Confidence also stems from the fact that Pascrell and Rohrabacher had introduced a similar version of this bill in 2010, which could not gain enough support in the Congress. Industry expert Moshe Katri said that a very similar bill was introduced by Dick Durbin and Senator Grassley in November or December last year, but nothing much has come of it.

Experts say that the bill, which sounds like election rhetoric, does not take into account the ground reality. The ‘concern’ of politicians is that outsourcing results in loss of jobs for the locals who are short-changed by getting ‘cheap’ replacements from countries like India. But the fact is there are not so many ‘locals’ available with the required skill set.

R Chandrashekhar, President, Nasscom says that data from the US labour department shows that there is a shortage of skilled workers. Unemployment rates among skilled workers are around two per cent – anything less than four per cent is considered a shortage. Secondly, Chandrashekhar points out that by 2018 there will be more than one million IT skilled jobs in the US that will remain unfilled due to lack of availability of skilled people in the country.

Finally, the shortage is expected to continue in near future. More than 50 per cent of enrolments in US universities for STEM (Science, Technology, Engineering and Math) skills are for people of foreign origin.

Finally, the changing dynamics of the industry, with digital’s now taking the central stage, does not require the number of software professionals to be stationed at the client’s office. Further, restrictions like higher visa fees and minimum salaries for foreign workers have resulted in companies hiring local talents and meeting the norm of 50 per cent local hires.

Katri presents the worst case scenario where he says that there could be a backlash from some of the heavy users of offshoring which would be the Fortune 100 to 500 companies. This should be reason enough for US lawmakers to see logic.