By guest author Kirk Laughlin
[Writer and video correspondent Kirk Laughlin is the newest contributor to my blog’s coverage of outsourcing, onshoring, and ways to create jobs and opportunities for people in the United States, India, and elsewhere. Kirk’s article, originally published on Nearshore Americas, explains why he thinks Senator Charles Schumer’s proposed immigration bill will fail to protect U.S. jobs, which is ostensibly its purpose. To get a sense of my thoughts on the many-sided debate over outsourcing and immigration, I encourage you to take a look at the recommended readings below. Tony Scott’s interviews, most recently with Sierra Atlantic’s Raju Reddy, add another dimension to the online discussion.]
In what could be one of the most extraordinary examples of the self-defeating consequences of slapdash, politically-inspired protectionism, the new congressional border bill, which partly takes aim at Indian outsourcers, is likely to trigger a nearshoring bonanza – with Mexico poised to become a major beneficiary. But wait, isn’t Chuck Schumer (D-NY) who is a key sponsor of the bill, going to protect U.S. jobs? Actually, no, and we’ll explain why.
First, let’s take a look at the bill itself, which is designed to strengthen the Southwest U.S. border by hiring more law enforcement and deploying more high-tech tools to monitor illegal immigration. In order to fund the $600 million project, Schumer and co-sponsor Senator Claire McCaskill (D-Mo.) are taking aim at companies like Wipro, TCS, and Infosys, which depend on nonimmigrant “H1B” visas to transfer highly skilled workers from countries such as India to come to work in the U.S. The bill would raise the visa processing fee by $2,000 per visa, a huge hike which has been called “discriminatory” by leaders from the India outsourcing industry.
The issue gets very interesting, however, when you take a step back to realize that Congress has basically exempted the TN visa (borne of the North American Free Trade Agreement, or NAFTA) from falling under the new levy, effectively emboldening the pursuit of highly skilled nearshore labor to supplant those inflicted with the onshore visa surcharge. The nonimmigrant TN visa enables Mexican [and Canadian] nationals to transit without hassle in and out of the United States. The TN visa stands out as one of the most compelling attractions of nearshoring to Mexico, in addition to the country’s proximity to the United States, and the visa continues to be an important value-enabler for companies such as TCS, Infosys, Dell, HP, and Accenture, among others.
An interesting side note: Infosys – which was directly embroiled in the Schumer bill controversy when Schumer referred to Infosys as a “chop shop” – recently told us that Mexico has a bright future for the firm. It appears that the firm now has every reason to further expand operations in Mexico given that it would effectively be penalized by bringing more workers onshore.
Unlike the H1 visa, which reaches a cap sometime during the year and restricts further visits during that year, or the L1, which requires sometimes complicated justification of domain expertise, the TN visa enables the free flow of employees to and from the United States. The NAFTA Professional TN visa has no cap, is good for three years and can be extended.
Adjusting Business Models
Further evidence that Mexico will win big when visa complications are put in place came two years ago when Phaneesh Murthy, president and CEO of IT services firm iGate. “We will probably utilize a higher growth in our Mexican center by having more people come from Mexico to the U.S., where they don’t need the H-1B because of being part of NAFTA.” said Murthy, according to a transcript of a conference call on the financial site Seeking Alpha. “So, I think our business models will change and we are ready for those changes in business model,” he said.
Mexico has somewhere between 500,000 and 600,000 IT professionals, and the country graduates approximately 65,000 IT students a year. Both Guadalajara and Monterrey landed on Nearshore Americas ranking of the Six Leading IT Cities in the Nearshore Region.
The other consequence of the Schumer bill (which received congressional approval on August 12) is that Indian outsourcers may think twice about bringing Indian nationals into the United States, which may result in the U.S. collecting far less that the $200 million–$250 million it is projecting to fund the border programs.
Finally, it is the U.S. companies themselves – which are battling to compete in a fiercely competitive global economy – that really hold the cards. The Schumer bill does nothing to inspire long-term strategies to compel U.S. companies to keep jobs in the United States. What it does do is pass along an increase to their operating costs in an assortment of mostly back-office, non-strategic functions – from application maintenance to business processing activities.
Of course, economic reality will trump the politically charged motivations of the bill – which conveniently is being pushed through Congress to maximize its impact during the fall election season. And economic reality will be the driving force behind what is likely to become a huge boost for nearshore outsourcing – what Schumer had least hoped for.