An interesting article came out recently in the Wall Street Journal covering the proposed H1-B visa fee hike, slated to go into effect as soon as the House votes on the $600 Billion spending bill to enhance border security. It appears that the hike will be to the tune of $2000 (increasing the fees to $4500 for new visas and $4000 for visa extensions respectively).
Given the discussion about restrictive trade practices and whether a visa fee hike should be taken up to the WTO; and in the face of discussion by Indian IT services companies about how this will restrict American competitiveness in the global marketplace, we decided to take a quick look at the ruling and judge it’s impact.
What does the H1-B visa fee hike mean?
A $2000 fee hike equates to approximately $0.35/hour over the 3-year term of the visa – not too much to create a genuine issue with legal immigration of valuable global talent, probably not enough to seriously bother even the H1-B visa abusers, and something that can be easily absorbed by offshore firms in their operating margins. On the other hand, if the US issues 85,000 new H1-B visas (which is the current combined quota of capped and advanced degree visas), and renews another 85,000 (assuming many visa holders from 3 years ago will extend their visas) and conservatively, half those are requested by companies with less than 50% US citizen or permanent residents in their employee base, it increases revenues to USCIS by about $200 million that can be used to cover the additional border security expenditures.
So yes, from Systems In Motion’s perspective this bill is generally a good one. Brings in additional revenues without seriously hurting the ability to bring in appropriate global talent.The net of it is that this bill gets an additional $200 million in government revenues, from an area with low elasticity, without making any fundamental changes to demand/supply dynamics.
The bigger picture point is much bigger!
Let’s start by stating that we believe that Andy Grove is absolutely right. Rebuilding America’s IT leadership will not come simply by investing in R&D and innovation, and then transferring that knowledge offshore to build the scale necessary to actually leverage the fruits of that investment. America needs to retain the ability to create scale and execute on the actual business value potentially generated by technology innovation. To that extent, government polices need to encourage more development, not only of innovation, but of organizations that create scalability in executing programs that leverage the innovation. That means bringing global talent into the US and making sure that the talent is retained here, helping build operations, and jobs! It also means investing in programs that develop the local workforce.
Over the last 10 years, US enterprises (including US IT services companies) have created few, if any, net new IT jobs in the US. All the investment in developing the large scale execution capability has happened overseas on the promise of cheaper available talent. The refrain that the US does not have enough qualified resources has, in the end, become a self fulfilling prophecy. Today, after years of neglecting the American IT worker and American CS and Engineering Graduates, we really do find ourselves in a situation where experienced talent for most types of technology implementation needs to come from offshore.
There are many prescriptions we could propose, but if we started with one change for each stakeholder trying to solve the large problem, we’ll have taken several strides toward ensuring American IT competitiveness and leadership well into the next few decades.
1. For technology workers – realize that standard skills are becoming commoditized and you face competition from around the globe. That’s not to say that it’s a race to the bottom. Just that you need to stop expecting to be able to afford to drive around in a BMW on your Java Developer salary like you did in 2001. We still need your skills and experience, though.
2. For US enterprises – it’s important to understand the short term and long term implications of the sourcing choices you make. An offshore sourcing model, while cost-efficient for ‘keep the lights on’ work, can quickly become cost-prohibitive when implementing business technology initiatives. Instead of increasing investment in offshore talent development, program management and governance to achieve innovation and business-alignment, turn your attention back to the American labor force.
3. For institutions of higher learning – develop curricula in partnership with enterprises and technology organizations to develop more readily productive talent in areas of new technology innovation that will create the scale necessary for the next generation execution leadership. And finally,
4. For public policy leaders – focus on creating greater incentives for retaining and investing in a local pool of talent. Start with creating equity in Tax and Trade policies that favor global distribution of execution talent. And fix immigration policies to attract the best talent from around the world, while stopping abusive practices that undermine the true value of the work visa programs.
So, yes to that extent the visa fee hike was probably a good idea.