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."

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  1. I am almost totally convinced now that I am continuously stepping through some type of space/time continuum loop and randomly arriving a few days back or forward in time…

    1. Since Shikha Dalmia keeps writing the same story its hard to tell

    2. Hyperion: Reason policy is to blog an article its staffers have written for an outside publication on the day it appears and then post it in its entirety a few days later. If it is a time-sensitive piece, our readers get alerted right away without us running afoul of any copyright considerations.

      1. Ah, thanks for the info. I’ll keep this in mind.

  2. “the worthy goal of knocking down America’s barriers to technical foreign talent into blatant protectionism.”

    Errr… What is your nationality? If you’re a citizen, have you lived here long? Do you really believe the principle goals for the United States should be to further corporate profits and improve the lives of non-citizens? Perhaps you’ve overlooked that this is government “of the people, for the people and by the people”. Or that the role of the US government is to represent the interests of this nation and citizens.

    This country’s primary issue is a ruling plutocracy who refuse to serve the interests of this nation and citizen — and instead yield to the voice of money. But the US has an armed populate — these plutocrats WILL serve this nation and citizens, or discover they seriously misjudged the distance to the guillotine.

    1. NoGig, what is your point? Are you saying that protectionism will help the United States? Afraid not. As for the role of the US gov’t to represent the interests of this nation and its citizens, so how are the politicians supposed to decide exactly whose interests are represented? By how much they donate? Americans have a lot of different interests that often conflict. And you want politicians to decide who is favored? No thanks.

      1. Good response. But of course, the answer to your question is that NoGig assumes that his/her views of what is best for the US is what is right, and everyone else is either ignorant, stupid, or just plain evil. Which is sadly but completely expected.

  3. There are many reasons to kill the senate bill, and this article has some of them. Good article. Other reasons are cost of handing out money to community organizations, not strong enough border security (congress needs to decide if border is secure or not). But the main reason is that the bill is TOO LONG. Being long means that it has lots of loopholes, complexities, of which the article names a few.

    I did not understand the phrase “The visa restrictions are simply an effort to cripple their foreign competitors and capture their offshore market share”. If you cripple the foreign companies working in the US, they will leave and hire more in India. So wouldn’t that hurt IBM’s etc foreign operations?

    1. No. This limitation means that US companies will basically be able to neuter their foreign competitors in the US (labor) market. Meanwhile, as much as our immigration policy is terrible (widely accepted) and overly restrictive (my opinion), most other countries’ immigration policies are as bad and restrictive, or worse.

      I would argue that that is one reason why the US has been so successful – our immigration policies are among the least bad in the world.

  4. I did learn something from reading this article, however I’d like to point out that the vast majority of programmers, even the “good ones”, don’t make 200,000. Most are lucky to make half that, and that’s in cities with the highest living expenses.

    1. most wage earners would also consider earning half that, in any US city, as “lucky”.

  5. You should be concerned about the creeping Caste system in USA due to H1B/Immigrants from India.
    Caste system is worse than terrorism. It’s a slow poison that will destroy your middle class.

  6. You should be concerned about the creeping Caste system in USA due to H1B/Immigrants from India.
    Caste system is worse than terrorism. It’s a slow poison that will destroy your middle class.

    Google “Companies ruined or almost ruined by Indians”

  7. The H1-B system is basically a form of slavery and is used and abused by companies to cut costs. These are not jobs Americans can’t do, these are jobs they most certainly can and want to do for a market rate salary.

    H1-B was meant to be like the special workers visa programs in Australia and Canada – you had to demonstrate that the worker could supply skills that you could not access in your country’s marketplace.

    Shit, I sound like Jimmy Hoffa. Thing is, I’ve seen how this works in the tech sector and it’s a sham. From an operational point of view its also a fricken nightmare to manage on many different levels.

  8. Who says congress doesn’t do anything useful? They save some serious clock-cycles on my ol’ brain machine. If Durbin and Schumer are both fer it, I’m agin’ it. If they’re agin’ it, I’m fer it. No thinking necessary.

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