By Ibu Sanjeeb Garg
Beating the Rhetoric
Since the election of Donald Trump there is much speculation about how American policies would change vis-a-vis the rest of the world. The proposed travel ban on seven Muslim countries and subsequent execution of the order only confirmed fears of some that these would be traumatic times indeed. And in the midst of all this the news of introduction of a private members bill regarding changing conditions with regards to H-1B visa shook the Indian markets. During his election campaign President Trump had extensively talked about bringing back jobs to Americans and the Indian software industry seemed a likely target. While overall the administration and President Trump himself has been positive about India the Indian IT industry was left guessing. And thus it came as no surprise when the private members bill was introduced.
To understand the current debate one must first understand the background itself. And in the background lies the issue of H-1B visa. The H-1B visa is used by American countries to hire foreign workers when skilled American workers are not available. The number is capped at 65,000 visas per year and an additional provision of another 20,000 visas for foreigners with advanced degrees from US universities. The application is a two step process where the application is made to the Department of Labour. The United States Citizenship and Immigration Records review the records and grants the visas accordingly. While there is a cap on the number of applications a person can make, there is no cap on the number of applications a company can make. Since its inception the total number of applications has far exceeded the total number of visas granted every year.
In the recent case however a Senator has introduced a bill in the House of Representatives which seeks to double the salary paid to employee who has been brought under the H-1B visa regime. It also seeks to reserve 20% of the total applications for the smaller players as well as the start-ups, while eliminating the masters’ degree exemption. Yet this is only the introduction of a private bill. The bill has to be passed by both Houses before it is sent to the President; in short a long way off until it becomes an actual law.
Yet this would be a good opportunity to look at the whole issue in a bipartisan manner. For a long time those opposed to this visa regime have argued that companies around the world especially Indian IT companies use these norms to stop American companies from getting their due. And if a closer look is taken at how applications shape up in USCIR office then the data would indeed show some interesting results. If the data of the applications received in USCIR in the last six years are analysed then some contours would indeed become visible. First of all among all the applications made, the top six Indian outsourcing firms have captured almost 20-30% of the total number of applications. This is a skewed figure considering that almost 8000 companies in total submit applications. Secondly, the share of Indian citizens in H-1B visa has progressively risen through the years to touch almost 65% in 2014. This shows that the figures are very skewed towards the Indian side.
Further a dominance of bachelors degree rather than a masters’ or specialistion shows that this is used primarily to cross cut labour prices rather than focussing on innovation. The greatest benefit of H-1B visa becomes clear once the salaries that are offered are introduced into the analysis. On an average an Indian firm pays closer to the median or lesser than the median salary which is paid to a professional in the US. US firms like Amazon and Google pay far more than the outsourcing firms. Hence seen from the above there is undoubtedly some truth in the fact that the H-1B visa is being used by certain major Indian companies to reduce their labour costs while increasing the profitability margin substantially.
The most important issue however is that of innovation. Almost all the Indian outsourcing firms score poorly on innovation. These companies have merely restrict themselves to client side service and technical support alone and desist from innovation. Critics around the world argue that Indian companies have already missed the second round of innovation in IT sector. No major Indian company today is carrying out research in Big Data, Artificial Intelligence or Internet of Things. The most important homegrown IT innovation in the last decade has only been growth of e-commerce i.e. shops in a digital platform! An analysis of the innovation parameters of companies whose employees obtain H-1B visas show that Indian companies stand at the bottom in terms of innovation.
In essence whether the Bill is passed or not this opportunity must be utilised by the Indian IT companies to do some soul searching. When a similar trade barrier was put up in the US against Japanese automakers, the Japanese automakers rose to the occasion. Japanese cars which were known for being cheap begun to focus on quality and soon Japanese cars became a hallmark of classes. Newer luxury brands of Japanese cars were introduced in the American market and soon the companies were thriving once again. The Japanese car makers had accepted the challenge thrown at them and had emerged stronger.
Whether the proposed amendments are put in place or not, Indian companies must rise to the challenge as well. Today the focus is on automation on AI and on IoT hence the Indian IT companies must focus on each of these. IBM has raised the level of automation with the introduction of Watson so Indian companies must now flex their muscles as well. If the measures are out in place, indeed the profitability of Indian IT companies will take a beating initially. However if they innovate right then newer markets will emerge for new kinds of products and services. The Indian IT industry must firmly attach itself to the government’s vision of Make in India and Skill India to prepare a crop of engineers and technicians who would take IT industry into the next level. Seen right this would serve as a golden opportunity for the Indian IT industry.
( Views expressed by the author are entirely personal)