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Wall street Journal:

A draft U.S. immigration law, likely to be unveiled this week, holds good and bad news for Indian IT companies.

Indian outsourcing firms like Infosys, Tata Consulting Services, and Wipro have large offices in the U.S. that service American clients. To keep costs down, these firms send thousands of Indian workers to such centers on skilled worker, or H-1B, visas.

Indian firms have long argued a cap on these visas is unfair. This year the cap of 65,000 H-1B visas already has been reached, meaning Indian companies will need to hire more-expensive short-term workers locally in the U.S., depressing their margins.

The obvious statement shows that there are U.S. workers available, however they are being bypassed because the U.S. government allows this.  No other government in the world would allow their own citizens to be treated this way.

The draft U.S. immigration law, described to the Wall Street Journal by Senate aides, aims to drastically overhaul the nation’s immigrations procedures. It seeks to create a pathway to citizenship for some 11 million people living in the U.S. illegally.

For Indian firms, the bill’s interest lies in changes it proposes for the H-1B program. The legislation seeks to increase the cap on these visas to 110,000, with the ability to go as high as 180,000 depending on economic conditions and demand. An additional 25,000 visas would be available for people who have earned advanced degrees in the U.S.

This statement above shows how the outsourcers are salivating at the oportunity to replace an even greater number of U.S. workers, to the tune of 180,000 per year!
But that’s where the good news ends, says the National Association of Software and Services Companies, or Nasscom, the Indian IT industry trade body. It is worried by other proposals in the bill that will demand employers who want to tap the high-skilled-visa program to “pay significantly higher wages for H-1B workers than under current law.”
Many people believe that the companies are required to pay the imported workers the market wage.  However,  these companies have been using the law to legally underpay the H-1B workers, which in turn brings down the wages of all workers.
The bill also would require those employers to advertise open jobs for 30 days on a U.S. Department of Labor website before they could bring in foreign workers.
Outsourcers have been advertizing job openings for jobs on U.S. soil where U.S. citizens cannot see them.
The idea here is to soften criticism in the U.S. that the visa program is being used to give jobs to Indian and other foreign workers that U.S. employees could do at a time of relatively high unemployment.
Soften criticism?  God forbid anyone point out one of the major causes of high unemployment in the U.S.
“The comprehensive immigration reform was necessary in the U.S. It’s good that it’s happening,” says Ameet Nivsarkar, vice president of Nasscom. But he said the association was worried the higher wage provision could be used to keep out Indian companies, by far the biggest users of H-1B visas.

“Our single biggest worry is that these rules may be applied in a discriminatory manner, only on a certain section of companies,” Mr. Nivsarkar said.  

Nasscom is lobbying for a fairer visa policy in the U.S., he said. “That’s our job. We are working through our partners in the U.S. and with the government in India.”  

More than 80% of the operating costs of Indian technology companies come from wages. Salaries to employees at overseas locations account for half of total wage costs. Any increase in overseas salaries may squeeze the profitability of the companies, analysts say.  

“Any crimp on the movement of human capital will hurt trade between India and the U.S. and will eventually impact both Indian and non-Indian services companies, as well as their U.S. clients,” says Siddharth Pai, president of the Asia-Pacific business of U.S.-based technology advisory services firm Information Services Group.

By raising the overall costs for skilled-worker visas, the U.S. is raising barriers to trade with India, he added.

Shashi Bhusan, a senior research analyst at Mumbai-based brokerage Prabhudas Lilladher, says he expects the bill in its current form to lead to up to a four-percentage-point decline in operating margins for India’s IT companies as wage costs in the U.S. increase.

However, Mr. Bhusan says an increase in the cap on H1-B visas could help offset this by reducing IT companies’ dependence on expensive U.S. contract workers.

Earlier this month, the U.S. reached a limit on the yearly allotment of applications for skilled-worker visas for jobs starting in October or later, leaving many Indian IT companies at the mercy of a random selection of applications.

Infosys, India’s second largest software exporter by sales, last week warned that the shortage in visas may weigh on its operating profitability in the short term as the company will have to rely on more-costly American workers rather than Indian expatriates.

There are other bills in Congress that seek to bring even greater restrictions on the use of skilled worker visas but face a slim chance of passage through the legislature. Last month, U.S. Senator Charles Grassley, a Republican from Iowa, proposed a series of restrictions to the H-1B visa rules, including denying these visas to foreign firms operating in the U.S. who are deemed to be relying too heavily on expatriates rather than hiring locally.

Every H-1b worker replacing a U.S. worker represents another unemployed American, another house in foreclosure, another bankruptcy.  Is this the time to increase this horrible guest worker program from 65,000 such U.S. job replacements to 180,000?

Originally posted to IT Professional on Tue Apr 16, 2013 at 05:30 PM PDT.

Also republished by In Support of Labor and Unions.

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