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U.S. grappling with temporary foreign worker issue too: Erica Alini

Attracting or exporting talent?

“I can’t count the number of times I heard from CEOs or venture capitalists in Silicon Valley that they had just lost a promising, innovative employee because the authorities didn’t issue enough visas,” former California governor and illustrious Austrian immigrant Arnold Schwarzenegger recalled in a recent Politico op-ed urging America to be more welcoming to the current generation of newcomers.

And here’s Mother Jones, in an another article on immigration reform a couple of months earlier:

A few years ago, the pharmaceutical giant Pfizer informed hundreds of tech workers at its Connecticut R&D facilities that they’d soon be laid off. Before getting their final paychecks, however, they’d need to train their replacements: guest workers from India who’d come to the United States on H-1B visas.

As America sets out to overhaul its mangled immigration system, it is grappling with much the same question Canadians have been pondering of late: Do temporary work visas alleviate domestic skills shortages or facilitate outsourcing?

There are plenty of numbers and anecdotes to substantiate both claims. On the one hand, Silicon Valley’s heavyweights insist that the wheels of innovation have been caught in the web of America’s Byzantine immigration rules. Nearly half of U.S. employers surveyed by McKinsey say the main cause of unfilled entry-level positions is a skills shortage; meanwhile, according to another study (tip o’ the hat to Time‘s Sam Gustin here), the number of immigrant-founded tech start-ups has fallen to 43.9% from from 52.4% since 2005; and according to Mark Zuckerberg’s new immigration advocacy group, 40% of foreign math and science students, reportedly the most sought-after by U.S. employers, have to leave the country after graduation.

On the other side, others have long been pointing out that the vast majority of H1B visas, the most popular permit for temporary foreign workers, has consistently been going to Indian offshoring companies like Cognizant, Infosys, Tata and Wipro, which use them to train their workforce. Meanwhile, a recent report found that only about half of U.S. graduates in science, technology, engineering, and mathematics (STEM) manage to find a job in their field.

The latter set of evidence has led some to suggest that, far from promoting “the knowledge economy” as Zuckerberg claims, tech companies are out to obtain permission to hire more cheap foreign workers who’ll displace the locals. But there’s a much more benign—and far more convincing—explanation: The offshoring vendors have been crowding out Silicon Valley firms, competing with them for the 65,000 H1B visas the U.S. gives out every year.

The proponents of the current Senate immigration bill are well aware of this. Thus, the draft legislation seeks to “rebalance the system away from temporary visas and more on permanent visas,” Madeleine Sumption, a senior policy analyst at the Migration Policy Institute told Politico“The thrust of this bill is to heavily penalize the heavy user of H-1B. It is explicitly designed to attack specific business models,” she noted. The bill forbids companies from having more than half of their workforce on H1B visas and imposes penalties on those who use the permits for 30% of their employees. Instead, it favours work permits that would lead to permanent residency, with the idea that the best and brightest should stay and settle.

There’s little doubt that these provisions would be a considerable improvement from the current situation, but the senators’ approach overlooks a much simpler and better solution. The current bill is effectively trying to repress a certain business model—that of offshoring companies—which obviously exist and serve perfectly acceptable economic purposes. But the government could have simply raised or lifted the cap on temporary work visas entirely. That way, both IT and tech companies would have been allowed to have what they wanted.

What the U.S.’s experience—and Canada’s too—seem to indicate is that temporary worker programs address both skills shortages and to facilitate offshoring. Without distortions such as mandated caps (or, worse still, provisions that allow foreign workers to be paid less) they would likely satisfy both needs. Eliminating the program altogether would likely do little to stop companies from outsourcing certain kinds of jobs to jurisdictions where they can be done more cheaply. When foreign workers can’t come into the country temporarily for training, local workers are usually sent abroad to train them.

In any case, there’s evidence that the trend toward offshoring is petering out. Happily for U.S. STEM graduates, the wage gap between American and Indian IT wages has been rapidly shrinking—not because Indians depressed U.S. salaries but because the two are converging: Americans are getting cheaper and Indians more expensive. That’s what happens in an open market economy. IT was a profession particularly prone to the equalizing effects of globalization because the job can be easily done remotely—despite governments’ best efforts to set up barriers.