Wednesday, June 11, 2008

More H-1B Labor Economics

Debates about the H-1B visa program are useful for understanding talent issues facing tech companies. For example, why would a large Pittsburgh-based business seek foreign-born workers with so many US citizens graduating from CMU each year?

The company can't rely solely on finding new hires at CMU or the University of Pittsburgh, said iGate spokesman Christopher Evans.

"You've got to understand that we don't just serve the Pittsburgh market," Evans said. "Whereas there may be a glut of talent coming out of the Pittsburgh area, not all of those are looking for positions, say, in Minneapolis."

If Microsoft really wanted to benefit from the depressed wages that foreign-born workers allegedly cause, then why not move operations to where there is a "glut of talent"? Thus, I could envision a scenario that would place Pittsburgh in opposition to the H-1B visa program. Congress might be unwilling to consider geographically targeted visa cap increases and, ironically, still force IT giants to move where the talent is (as long as the cap isn't increased nationally).

Starved for software engineers in Minneapolis? Move your business to Pittsburgh. But don't worry about the parochial attitudes. The Creative Class will follow you.


Schultz said...

I'm okay with H1B's when they go to workers with skills that are not available here in the US, but when the big companies are using the H1B's to bring in cheap contractors to displace American IT professionals I do think its a problem that needs to be addressed.

Here is what happens. US based consultants for programming, data base administration, or ERP implementation are paid anywhere from $70k to $120k, or hourly rates starting at around $50/hour. The big IT firms will come to the big employers and say "hey, I can get you a guy with those same skills for $35 an hour."

Two problems here. First, the American worker is laid off in favor of a cheaper contractor. Second, the H1B that was awarded to a worker with skills that are possessed by the present labor pool here in the US.

Clearly, this helps the bottom lines of big employers, and it enriches the owners of the IT firms that have the H1bs. The American workers will either be out of a job or have to start taking significant pay cuts to compete with these H1bs. Some say this is the market at work. I disagree, since the government is basically using its visa program to help reduce the costs of the US companies that hire these from the big consulting firms.

If there are some skill sets that are in short supply domestically then the big tech companies (microsoft, Cisco, etc) should stop blaming Congress and start speaking out against using H1B's for the purpose I mentioned above.

If you look at the list of the firms that are receiving the H1B's then it should be clear that most of them are going to the consulting/IT firms I mentioned in the first scenario.

Shaji said...

In the whole debate over H1B, I think the argument of wage suppression is flawed.

If somebody is willing to work for a wage of $35ph (either through H1B or otherwise), the market will move towards hiring them. And that is free market at play.

Any regulations to curb that is only 'regulated' and will not be sustainable in the long run. I guess if laws are made to protect jobs where people (American or any other native) are paid $50ph when there are people (American or any other native) willing to work for $35ph, the work will slowly disappear because the companies who hire such resources will slowly but surely run out of business.

I do agree to the argument that H1B is misused to hire workers with skills already available in US. But that is because of the above fact - if American workers are willing to work for $35ph, then I don't think companies will hire foreign workers against H1B regulations.

Disclaimer - I am not an IT programmer nor a proponent of free market. Just my two cents.