The ugly head of protectionism seems to be rising yet again in the United States where a group of senators — the Gang of Eight as they have been nicknamed — have introduced a bill in the Senate with provisions designed to make outsourcing expensive and cumbersome. The provisions of the bill will affect Indian IT companies such as Tata Consultancy Services, Infosys, Cognizant and Wipro, for all of whom the U.S. is the biggest market accounting for at least three-quarters of their respective businesses. There are three key provisions of the bill that worry Indian IT companies. First, H1B/L1 visa holders should not account for more than 50 per cent of the workforce of outsourcing companies in the U.S. Second, ‘outplacement,’ or the number of employees working at client sites, should not constitute more than a specified part of the workforce. Finally, wages paid to H1B/L1 visa holders should not be less than the prevalent wages for similar work in the U.S. In addition, the visa fees will also increase steeply. The objectives of the Gang of Eight are clear: push outsourcing companies to recruit local talent, and blunt the cost advantage that they enjoy through the relatively lower wages that they pay their employees in relation to equivalent American talent. Laudable objectives really, except that the senators have overlooked one important issue: the shortage of technology workers in the U.S.
Cognizant, one of the top three IT companies in India, is on record about the difficulty in acquiring adequate workers in the U.S. for equivalent work done by Indian employees. Clients in the U.S. themselves appear none too happy about the provisions of the bill as they realise that critical projects that the Indian companies are now implementing for them will be affected if the bill is passed in its current form. Indeed, that’s the crux of the matter: in the effort to create more jobs, the Gang of Eight may well be making things more difficult for a whole bunch of U.S. industries, from insurance and banking to health care and automobiles. Indian IT companies and the projects they are working on for their clients have helped the latter to cut costs and increase efficiencies in these times of recession. This coupled with the fact that the unemployment rate for technology workers in the U.S. is less than 4 per cent makes it clear that the bill is a very bad idea. To be sure, the draft will undergo several changes. As the bill passes through the House of Representatives in the next few months, U.S. clients of outsourcing companies are likely to weigh in and demand dilution of its provisions. To push them towards doing that should be the single-point agenda of the Indian IT industry.
