 "Trump rhetoric revives IT sector uncertainty")
More trouble might be brewing for the Indian information technology (IT) services players, with US President-Elect Donald Trump reiterating to his supporters that he will not allow Americans to be replaced by foreign workers. This time, he was referring to people hired on H1-B visa.
“During the campaign, I also spent time with American workers who were laid off and forced to train. The foreign workers were brought in to replace them. We won’t let this happen anymore,” Trump said, amidst cheers and applause from an audience of his supporters at Iowa. This is the first time since he won the election that Trump has spoken directly about jobs going away because of H1-B visas.
This is bad news for the Indian IT service providers, who have been sending employees to the US on H1-B and L1 visas. This will also ring warning bells for industry body Nasscom, which was hoping that the anti-outsourcing comments from Trump were just election rhetoric.
Analysts and industry experts have pointed out that in the short-term, the industry might have to brace for another visa fee hike. There are also fears that companies may have to face stricter and harsher scrutiny.
Analysts believe the US government can increase application fees at any time by publishing a notice in the Federal Register. The next round of application fee increase, which includes the Form I-129 petition for the H-1B visa, will be on December 23. The fees will go up from $325 to $450.
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However, if any special fees have to be levied, they have to be effected through the US Congress. Last December, the US Congress imposed super fees on certain companies that employed more than 50 per cent of their workforce on H-1B and L visas. These companies, which include mainly Indian IT firms, have to pay $4,000 when filing for an H-1B visa and $4,500 for an L visa, said an analyst. Attempts made to get comments from Nasscom were unsuccessful.
“I see a lot more change than just an increase in fees. Trump announced that he would ask the Labor Department to investigate visa abuses in his first hundred days of taking office. This implies that companies that have heavily used the H-1B visa program that has resulted in the displacement of US workers at client sites may be subject to further investigation,” said Cyrus Mehta, the founder of New York-based immigration law firm Cyrus D Mehta & Partners LLC
He added, “There is also a good possibility that the [US] Congress can pass legislation that will make it harder for H-1B- and L-dependent employers to access the H-1B and L visa programs, and the new law may also prohibit displacement of US workers at client companies in order to prevent the Disney sort of layoffs. There is also a possibility that the Trump administration will tweak the existing regulations that would make it easier for the government agencies to investigate users of the H-1B program and to impose sanctions on them.”
In January this year, Disney World and two IT firms, HCL Technologies and Cognizant, have been slapped with federal lawsuits by two former employees. These employees alleged that Disney replaced its American workers for cheaper foreign labour.
Pareekh Jain, research head of HfS Research India, is of the opinion though the short-term impact will not be huge, there might be long-term changes.
“This is the first time since he got elected he has made this remark. It’s a signal that he will do something. The question is what can he do and what are his legal options? He may look at legal options such as raising the entry barriers, but in the long run, IT firms will have to take a relook at their business model which has been in existence for more than a decade now,” added Jain.
Mehta points out that the Congress is likely to pass legislation that is likely to alter both the H-1B and the L visa program after Trump is sworn in as President. There may be wage requirements for L-1 visa holders, and also anti-displacement provisions protecting US workers.
Indian firms are the largest users of H1-B and L1 visas. According to a Reuters report, Indian IT majors such as Tata Consultancy Services (TCS), Infosys and Wipro alone accounted for 86,000 new H1-B visas between 2005 and 2014.
“Jobs of US people are not replaced by H1B visa holders. What Trump is saying is I will not allow knowledge transfer to replace existing workers and offshore more which may be 10-15 per cent of the total work. It is not a very large part. That happens only when you try to cut existing cost. We will wait and see what happens,” said Mohandas Pai, former Infosys board member.
He added, “America is a land where employment is at will. So it is not easy to tell people you cannot fire and you cannot hire. The good news is whatever Trumps says is getting narrower and narrower. In Silicon Valley, no jobs are being replaced, jobs are created but there are no people. In old established industries, which are not growing, yes jobs are being replaced. Now, you are shifting to a new technology and you cannot train the person. What will you do with such a person?”
Jain said the current model of Indian IT players, where 75 per cent of the work force is in India or offshore destinations, might have to be reduced to 50 per cent at least.
The key is for IT consulting firms to tell the story that they provide value to America.
“Every large Fortune 100 company relies on IT firms that employ people on H-1B and L visas for their backup support. Without such support, ATM machines will no longer run effectively and there could be other problems in providing services to consumers. Therefore, depriving IT consulting firms access to the H-1B and L visa will ultimately hurt the American economy,” added Mehta.