Why India Is on the Side of Restrictionist Republicans on Immigration Reform

U.S. high-tech companies are using the H-1B program to cripple their Indian competitors

House Republicans aren't the only people rooting for the death of the Senate immigration bill. Ten thousand miles away, many on the Indian subcontinent are also cheering on the bill's demise.

That's because a coalition of domestic high-tech companies and pro-labor Democrats has twisted the worthy goal of knocking down America's barriers to technical foreign talent into blatant protectionism.

Companies like IBM and Accenture would benefit from the rewrite of the H-1B visa program which will allow thems to add foreign workers to their U.S. payrolls while forcing Indian companies in the U.S. to subtract Indian workers from theirs.*

Not only is this unfair but it sends the dispiriting message that America is not interested in abiding by the rules of free trade that it preaches to the rest of the world.

The Senate bill would raise the cap on high-skilled H-1B visas from 85,000 to potentially 185,000. But without naming them, it targets four companies—Tata Consulting Services, Wipro, Infosys and Cognizant—and bars them from taking advantage of the extra visas. (All are India-based except Cognizant, which is headquartered in New Jersey but was founded by an Indian.)

All four have a majority of their U.S. workers on H-1Bs or the equivalent. But the proposed visa rules would bar any 50-employee strong company with over 50% of its U.S. workforce on H-1Bs from applying for any more visas after 2016. In the interim, they will have to pay up to $15,000 in visa fees for every additional applicant compared to the $5,000 for other companies.

Even worse is the so-called outplacement restriction that would bar these companies from placing their H-1B workers on client sites in America, rather than having them work in-house.

Why are these companies being targeted for such outrageous treatment? Allegedly, because they are abusing the high-tech visa program to replace American workers with cheaper Indian workers.

"Americans would be shocked to know that the H-1B visas are not going to Microsoft; they're going to these firms, largely in India, who are finding workers, engineers, who will work at low wages in the US for three years," fumes Sen. Dick Durbin (D-Ill.) who, along with Sen. Chuck Schumer (D-N.Y.), championed these restrictions.

Cognizant President Gordon Coburn maintains that such allegations might apply to "body shops" or employment agencies that rent out H-1B workers on a contractual basis so that American companies don't have to hire permanent staff. But that's not what Cognizant or the others do.

They offer not workers but services, insists Coburn. These services include IT support or computer programming for non-core business functions such as payroll processing, tracking employee records, data analysis. And the supply chain for these services spans the globe.

For example, Indians have developed an unparalleled expertise in writing glitch-free software for old mainframe systems that American companies need to maintain as they transition to more cutting-edge web-based technologies, notes Vivek Wadhwa, Vice President at Singularity University.

This is partly because it was not cost-effective for American companies to deploy software engineers drawing top dollars for basic programming. So companies like Infosys have created entire campuses in India to train young graduates to fill this programming niche, among other things.

But these companies also need some portion of their staff on-site in the U.S. to understand the systems and specifications of their American clients, which is why they are heavy H-1B users. In fact, their clients—which include 480 of Fortune 500 companies—often contractually require them to place employees on site to troubleshoot.

The outplacement restriction deals a body blow to this whole business model. "It basically tells us not to do business in America," says Som Mittal, President of India's National Association of Software and Service Companies.

Durbin and Schumer maintain that these visa restrictions will force American companies to invest more in American talent and raise American wages. But good programmers already command up to $200,000 in wages, notes Wadhwa. Raising these salaries further will only prompt American companies to offshore their whole operations.

Microsoft supports these restrictions for the simple reason that in a world of finite visas, fewer visas for Indian companies means more for itself. But IBM and Accenture have even more insidious motives.

Both companies have been expanding their IT operations in India and are directly competing with Indian companies for American "offshore" business. IBM now generates about a third of its revenues in India where it employs over 100,000 people. The visa restrictions are simply an effort to cripple their foreign competitors and capture their offshore market share, something that won't save a single American job.

None other than Ronil Hira, a professor at the Rochester Institute of Technology, whose work was instrumental in triggering the jihad against alleged visa abuse, pointed this out during his Congressional testimony. Because IBM and Accenture have a large American workforce, they will be able to hire even more H-1Bs than the Indian companies without running afoul of the new visa regime.

"Therefore, we will simply see the outsourcing shift from a company like Cognizant, which will face restrictions, to an Accenture, which will not," he noted.

The Indian government is working behind the scenes to kill these discriminatory measures. Its effort now will be to replace the Senate provisions with a much cleaner H-1B bill proposed by Republican Congressman Darrell Issa that has already passed House Judiciary Committee.

If this effort fails, backlash would be inevitable. Infosys, TCS and Wipro are a pillar of India's $100 billion IT industry and a source of national pride. Watching them be mistreated after they have worked hard and played by the rules is already igniting calls for retaliation, including giving Indian companies preferential access to government contracts over IBM and other American companies.

How ironic it would be if immigration reform that was meant to knock down America's existing walls to foreign talent ends up erecting new walls against American business abroad. Protectionism has a way of backfiring. Both Durbin and IBM should bear that in mind.

This piece was originally published in Business Insider.

*Update: The original wording of this sentence read:

 Companies like IBM and Accenture have managed to rewrite the H-1B visa program so as to allow themselves to add foreign workers to their U.S. payrolls while forcing Indian companies in the U.S. to subtract Indian workers from theirs.

It was modified after Accenture informed us that it "has not advocated for any changes to U.S. immigration law intended to penalize another company."