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The H-1B Visa Conundrum

Posted 09-04-2013 Print

Given the uncertainty about H-1B visas, CIOs would be well served to prepare now for a range of potential scenarios and contingency plans.

Arrow, decision

Another compelling long-term issue is how the future demand for labor resources will be met. The H-1B program dates to the 1990s, suggesting the existence of a long-standing domestic shortage of workers with specific skill sets. Yet, the provisions in the legislation mandate that this shortage will decline, as the percentage of visa holders that a company can employ must gradually shrink over time. As Paul Roy summarizes in a recent article on the proposed H-1B legislation, “as of 2015, the bill would cap the combined number of H-1B and L-1 employees at 75 percent of a company’s U.S. workforce. In 2016, the cap would decrease to 65 percent, and from 2017 on, the maximum would be 50 percent.”

How would an increasingly larger share of labor demand be met by domestic resources? One way would be for more qualified U.S. workers to enter the market. The labor argument holds that there are plenty of qualified Americans and the H-1B program is just a way to suppress wages. If that’s the case, capping H-1B visas would likely result in significantly higher costs and lower margins for providers.

Meanwhile, the business view is that there is a serious shortage of skilled workers. (Given that unemployment rates in the tech sector are about half of the national average, that view arguably holds some merit.) Absent the H-1B vehicle, alternative means of closing the U.S. workforce gap would be needed. Job training focused on specific skill sets is an obvious choice, and the rural sourcing model already relies heavily on university partnerships and training programs. If visa restrictions end up incenting the India firms to invest more aggressively in a U.S. presence, it’s conceivable that the WITCH (Wipro, Infosys, TCS and HCL Technologies) firms will ultimately emerge as a significant force in training U.S. workers, which is not a bad outcome.

Also, remember that NAFTA residents are not subject to H-1B visas for temporary work assignments, thereby expanding the pool of labor resources beyond the U.S. borders. Cynics could argue that immigration reform will benefit skilled Mexican and Canadian workers more than American ones.

Then again, if we’re really thinking long term, we need to consider how—as my colleague Thomas Young describes—the traditional outsourcing model of labor arbitrage is rapidly giving way to a new paradigm where repetitive tasks are performed by software tools. And according to Erik Brynjolfsson, a professor at the MIT Sloan School of Management, we are entering a new era of human and machine collaboration characterized by fundamentally redefined work roles for humans, who will work in concert with smart machines.

If these trends play out, discussions of work visa quotas for low-cost resources may gradually become moot. In fact, by trying to regulate the movement of an increasingly global workforce, governments may be, perhaps deliberately, promoting the development of new technologies that replace more and more human tasks.

About the Author

Esteban Herrera is an outsourcing advisor at Information Services Group.


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