CALCUTTA, India, Oct. 17 (UPI) -- The U.S. government's move to slash H1-B visa entrants into the United States appears likely to blow up in the faces of those who sought the Oct. 1 cut from 195,000 skilled workers to 65,000, according to recent report.
A joint study prepared by India's premier software lobby the National Association of Software Services Companies (NASSCOM) and a U.S.-based business research firm, Evalueserve Inc. warned that the United States economy could end up loosing significantly if the U.S. did not take appropriate measures like outsourcing and immigration to bridge this gap.
"The protectionist action in the offshoring space can lead to an unmet labor demand causing cumulative output loss of $2 trillion by 2010," said Evalueserve chief executive officer Marc Vollenweider.
Cautioning the U.S. market against protectionism, in the wake of the outcry over outsourcing to low cost destinations like India, the Nasscom-Evalueserve report has also forecasted a shortage of 5.6 million workers by 2010, a large chunk of which would be in high-tech areas.
NASSCOM and Evaluserve said that they felt this gap could be bridged through immigration to the tune of 3.2 million workers, and offshoring to the tune of 1.3 million jobs, the report said, adding that India was strongly positioned to claim over 50 per cent of offshored work on the strength of its cost and language (English-speaking) advantages.
"There will be a short term impact on the U.S. labor force. About 1.3 million jobs will move offshore between 2003-2010, impacting one million U.S. workers," Marc Vollenweider said. "The remaining labor gap of 1.1 million workers would have to be bridged with temporary workers."
"The study clearly shows that the necessity of offshore activity to support the growth of the U.S. economy," said Vollenweider. The report also found that offshoring keeps U.S. businesses competitive, create new markets for U.S. goods and services and fills the shortfall in services labor that the US is expected to face in the next seven years.
For every $100 of call-center work offshored by U.S. firms, $143 is invested back into the U.S. economy in the form of repatriated profits, increased sales of telecom equipment and cost-savings.
But while experts in India are still debating on how the dynamics may pan out for the India's information technology sector, it is almost certain that the visa reduction would force United States companies to send jobs overseas to much cheaper countries. And, India, with its extensive IT expertise is almost guaranteed to be a beneficiary.
"There should be no worries for India at the reduction of H-1 visas," said Jairam Ramesh an economist and secretary of All India Congress Committee of economic affairs. "American companies would have to come to countries like India and invest thereby benefiting the Indian industry immensely".
"Putting a cap on H1-B visas gives offshoring a big shot in the arm," said Avinash Vaishista, chief executive officer of neoIT, an outsourcing advisory. "The restriction on importing skilled manpower will push companies to do more offshoring work in India."
Still the long-term fall-out may pose adverse impacts in some ways. "We are not really worried about its impact on the Indian industry in the short term," said Kiran Karnik, president, NASSCOM. "But if the level of 65,000 is maintained for a long time, it will have fallout. The export prospects of smaller and newer companies will be badly hit."
Few in India's dollar-spinning software industry said that some companies are even accumulating visa-ready people in the belief that the non-availability of visas may upset their customers' delivery schedules and hamper project work.
The United States is the prime export destination for the Indian software industry, with export revenues jumping from $164 million in 1991 to $10 billion in 2002, clocking an annual growth rate of 45 percent. Almost 50 percent of the H1-B visas issued worldwide last year by the U.S. went to Indian professionals. India is also currently the second-largest source, after Mexico, of legal immigrants to the U.S.
The H1-B visa program has recently attracted widespread criticism in U.S. for "taking away" jobs. H1-B is the specialty-occupation visa status under which a large number of IT firms send their employees to the United States for on-site project-development work, popularly known as body-shopping.
However, if those, like Congressman Tom Tancredo, a Colorado Republican who spearheaded the movement against H1-B visa users, had hoped that the U.S. General Accounting Office's report would establish that H-1B foreign workers were pushing Americans out of jobs, they were disappointed.
The GAO study on H-1B foreign workers found that incomplete information on H-1B workers' entries, departures and a change in visa status made it difficult to accurately determine the effect on U.S. workforce.
Instead, the study found that the number of H-1B petitions that were approved in certain professions, such as information technology, generally declined with the economic downturn, as have the U.S. citizen employment levels in these occupations. What it found that most H-1B beneficiaries filled positions in areas unrelated to IT, such as economics, accounting and biology. There was a decline in H-1B and U.S. citizen jobs in occupations such as system analysts and electrical engineering between 2001 and 2002.
In 2002, only 40 percent H-1B beneficiaries were approved for IT related jobs, against 65 percent in 2000. The study also found that in the occupations of electrical/electronic engineers, system analysts/programmers, biological/life scientists, economists, auditors/ accountants, H-1B beneficiaries were younger and better educated than US citizen workforce.
"Despite increases in unemployment, most employers said that finding workers with the skills needed in certain science-related occupations remains difficult," the GAO said. Which is why Indians are hoping that the cap may be brought back to its original level soon. The U.S. Chamber of Commerce in India, notably, has even started pleading to US administration that the cap of 195,000 H1-B visas be retained to help maintain America's global competitiveness.
"It is unclear what, if any, rationale was used in developing this cap. What is clear is that the cap will cause great economic hardship to US employers," a spokesperson for the chamber said.
The chamber too disputes the theory that H1-B workers displace US workers and lower U.S. workers' wages and working conditions in certain job sectors. "It is hard to displace US workers when you don't have any US workers to choose from," the spokesman said. "If the government refuses to recognize market needs and demands, the only alternative for American companies will be to move more of their operations offshore."
Indeed, news reports in United States suggest that the U.S. President George W. Bush too was against the cut. At a private reception in Jackson, Mississippi, Bush is reported to have vehemently expressed his opposition to the bill that Tancredo introduced to reduce the quota.
Bush is reported to have said, "Tancredo and I are at opposite ends of the pole. I do not fully support Congressman Tancredo's bill against H1-Bs."
If this is true, it is apparent that the president understands that the current unemployment situation in his country is not due to H1-B visa holders taking U.S. jobs, say sources.
"It is becoming increasingly clear that the cap on H1-B visas was an emotional reaction to subvert the situation of high unemployment in the United States," said an industry source from NASSCOM. "Clearly the target was somewhere, the aim somewhere else."
