US President-elect Donald Trump’s threat to open scrutiny of the H1-B visa regime, under which American corporations hire Indian information technology (IT) professionals, apparently at the cost of their US counterparts, played well with the constituency that believes in his campaign promise of bringing back jobs to the US. The Indian IT industry, however, needs to find new ways of addressing a concern that, however shaky the premise, has been part of the mainstream American discourse for over a decade. It is easy to mobilise familiar arguments such as those that highlight the misalignment of skill sets between the average Indian IT professional and the mainly white working-class voters in Middle America, who form Mr Trump’s core support base. Or that, as Nasscom President R Chandrasekhar pointed out in response to Mr Trump’s statement over the weekend in Iowa, it is Indian IT sector that makes American businesses cost-competitive.
This much is well known, has been skillfully communicated by lobbying firms Nasscom hired in the US, and has been internalised by regimes since George W Bush’s first term. The problem with the standard justifications is that they play out well on the beltway but do nothing to address the popular apprehensions of wage arbitrage that lie at the core of this controversy. This should not be considered a trivial concern; the bogey of outsourcing-related job losses has indelibly entered the mainstream discourse through movies and books, and could well impact policy under a president as maverick as Mr Trump. Nor are the accusations of wage arbitrage entirely misplaced. Although the example of Disney World forcing American employees to train Indian IT professionals as their replacements cannot be conflated into a nation-wide trend, the fact is that wage differentials do count. Depending on the nature of the work and whether the contract is onsite or offshore, wage differentials between Indian and US IT professionals can range from three to eight times. The flexibility that hiring overseas professionals provides in terms of up- or downsizing is another factor.
This was something to which Infosys founder N R Narayana Murthy alluded in a speech this year when he spoke about Indian IT firms acting as “immigration agents” for their employees, guaranteeing visas and green cards. Companies with global aspirations, he added, must be fair to their global employees, which could be interpreted to mean a little more focus on job creation within Indian IT’s largest market. The Indian IT conglomerates realise this: The more reputed ones such as Wipro, Infosys and TCS have increased their US hiring and also invested in training facilities to upgrade skills there. To make a visible difference, many more companies need to do much more of the same. Equally, it is also true that domestic firms need to move up the value chain of IT skill sets. Like the global reputation German engineering has acquired, Indian IT needs to work towards providing a value proposition so compelling as to override the cost-arbitrage argument. The move has begun, but urgently needs to gather momentum. This may raise costs initially, but the sustainable gains will be worth the expense.