Saturday, February 7, 2009

H1B VISA Program etal.

Senate approves 'strict' rules on hiring H-1B workers and there has been a growing controversy whether H1B VISA Program should be stopped completely or at least regulated. Let me first start with the disclaimer that I am a beneficiary of H1B VISA program and continuation of this program will be good for my career. Said that I will try to access the effects of this program on American Economy and also the World Economy in general.

H1B program was created to supplement American workforce with foreign workers having highly specialized knowledge in Business or Technology on a temporary basis. It was designed to help American business to source global talent to remain competitive. And I think this program helped US in many ways to achieve that goal. Best talents of the world are still attracted to study and then work in US making it a hub of continuous innovation. And I believe that is the most important competitive advantage US Economy enjoys over other economies.

It is true that many of the times H1B program(or for that reason any worker VISA Program like L1 etc.) has been exploited by different organizations. Companies have hired foreign workers with skills available in the US mainland. They were paid lower wages than the standard prevailing rates mentioned in the program. These temporary workers have been used as onsite coordinators to move jobs offshore. US corporations and Offshoring companies used this process to increase their profitability. Because of this Nobel laureate Economist like Milton Friedman think H1B is just another government subsidy .

Truth to be told all these are true but stopping H1B VISA program will not help US or world economy in any way. Protectionist view have never been successful in a Free-trade world where companies look for value. Let me explain why this will not work and what we can do to make things better:

  1. Offshoring work to low cost countries will continue to grow even if H1B programs are stopped. The latest trend in Offshoring is not the use Onsite H1B and Offshore Contractors model. Instead US companies themselves are moving their own operations to low cost companies(For US this means american job loss and Income tax loss, in H1B model at least Income tax revenue was not lost). In this model you can have some key employees(US nationals) in US and a huge back office operations in low cost countries like India or China. That means even without H1B program american jobs(which does not need local presence) will be lost. If the US government even tries to stop offshoring completely the effect will be worse. US companies will lose their competitive advantage and Foreign companies with access to cheap labor will rule US and world economy. In that way much more US jobs will be destroyed. In a hypothetical situation if US stops Free-trade contracts with its partners it will become a country like North Korea(enough said I believe).
  2. I think the only way US and the world economy can prosper is through free-trade and more wealth distribution. For decades US has been living in enormous excess. US consumers have continued to spend by taking loans from developing economics. On the other hand workers from poor countries have continued to work harder to create products, services and finance options to their American sisters and brothers. They saved that money and sent to America so that their US friends can fund their offerings. I believe this model is not sustainable in the long term. We need to acknowledge that the value created needs to be redistributed or at least balanced. That means we need to see a lower consumption and more savings by Americans and less saving and more consumptions by emerging countries. That is the one of the way US and world can maximize economic prosperity and continue business operations. For this we need have more free-trade and growth of american business for world consumption. If implemented properly US can have more high end jobs(thus low unemployment), more balanced budgets and more sustainable economics. On the other hand developing countries can see less dependence on US economy(we have seen huge job losses throughout the world because most of depended on US consumer),better lifestyle and better infrastructure and prosperity. It may sound socialist, but a capitalist economy can not sustain with massive wealth accumulation in the hand of few fortunate people and the rest of the crowd left behind. We need to see money in the hand of common people(bottom of the pyramid) so that they have ability to spend and purchase products and services. Some ideal scenarios for future? An investment banker from NYC happily accepts a job in a micro-finance company in Bangladesh(because he or she will be able to maintain almost similar lifestyle and also do more satisfying job of helping people with money rather than creating synthetic derivative products) or a Indian banker can afford a honeymoon in Mediterranean cruise.
  3. The basic difference between the US and any other coutries is that US is the country of immigrants. No other country in this world has so many hard-working, talented opportunity finders and innovators. US has always been the hub of innovation for new technologies and new ideas and the only way it can continue to survive as a prosperous country is to continue that trend. For that US should keep the border open for truly high quality foreign sudent and workers. Here quality is the keyword. I think what we need to have is a right gating process which is enough comprehensive and clear in its directions so that the exploitations can be minimized. We should ensure that only the very best gets a chance to enter the country. At the same time I think we need to increase the number of intake of foreign students and workers because we are not really doing a good job in global sourcing. I believe that there will a lot of fantastic talent available throughout the world who do not get opportunity or don't have enough information on US immigration. US can do better campaign on those counties to invite right talents by showing opportunities and also change the immigration laws to ease this gating process for the right people(today H1B Visa can only be obtained by a sponsoring company and many of the times right talents do not get those sponsors or are exploited by those sponsoring companies). At the same time US should concentrate on educating its own workforce with latest technology and skills(job skills as well as basic money management skills) needed for the next economy. US should effectively invest in higher education and research(should make affordable higher education) and work on creating a new economy( may be green technolgy, energy technology, bio-technology, space-technolgy,geo-engineering, computer science, business etc.) which will create millions of new jobs save the world from our most pressing issues.

This is the high time that we be ready for the new rules of the new economy. We can not(and should not) artificially stop companies from improving their operational efficiencies. Hence we can not save amrican jobs by stopping H1B Visa programs or offshoring. What we need to think is to create new economy, new technology and new ways we do business. That is the only way we can save american jobs(for that reason jobs all over the world) and see a prosperous world.

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