Senator Charles E. Schumer, not content with ludicrous attempts to tax the US consumer for taking an offshore call, has continued his personal tirade against the use of offshore services, by pushing through legislation to add a further $2,000 tax for an H-1B visa application, and $2,250 more for an L-1 visa application. This CIO Magazine article by journalist Stephanie Overby does an excellent job discussing the situation.
You have to wonder about the motives of a US senator, who describes Infosys as a “chop shop” and pushes through legislation that is deigned to antagonize service providers, as opposed to what he should be doing: helping to make US service providers become more competitive, and US IT / BPO workers more attractive to be hired than those offshore.
In terms of creating more US IT jobs, this is a further backward step in trying to re-energize the US IT industry for the following reasons:
1) Indian IT services providers will attempt to conduct more IT work offshore / outside of the US, whereas in the past they would have conducted the work locally with either a US employee, or an Indian visa holder in the US. Impact: more work moves offshore as opposed to onshore work being created
2) Indian IT service providers have been investing heavily in hiring onshore staff, and have been creating local employment. However, the new visa taxes will only help to accelerate the movement of more complex IT work offshore. The Indian providers have a proven successful strategy of taking on complex IT projects and “learning on the job” with their offshore personnel. This new fee will only encourage them to take bolder steps to take more work offshore. Impact: more work moves offshore as opposed to onshore work being created
3) When Obama was elected and voiced potential moves to slowdown offshoring, several Indian IT providers made investments in locations such as Canada (especially Ontatio) and Latin America. They will now look to leverage these investments more aggressively. This is great news for the developing nearshore IT services markets. Impact: more work moves offshore and nearshore, as opposed to onshore work being created
4) With the global IT services industry poised for consolidation, this may encourage several of the leading Indian IT giants to acquire onshore US firms, now they have more financial incentive to do so – which would likely have further negative ramifications for the US IT job market. When Indian firms acquire US IT services firms, they will seek to rationalize the existing onshore staff to support their offshore operations, while keeping salary costs at a minimum. Impact: more work moves offshore as opposed to onshore work being created
5) The US IT and hi-tech industries grew up on bringing talent into the country that added new skills and ability – and was often more affordable. By further discouraging bring the talent to the states, Schumer and co are driving the next wave of IT development out of the country. Impact: innovation moves offshore, and more vacant office-lots in Silicon Valley.
President Obama has set out to be a transformative president, who can elevate US competitiveness in a global economy and create jobs by intelligent fiscal stimulus. He needs to drive policies that will stimulate employment, and stimulate innovation. The economic wonder that became America, was centered on an immigrant society, and attracting talent to these shores. My fear is that policies like Schumer’s are moving the US further away from the very principals with made its economy what it once was. The imperative word here is “was”…