June 25, 2003

MY TECHCENTRALSTATION COLUMN on outsourcing in the Information Technology area is getting a lot of feedback. There’s an interesting debate going on in the comments. There’s also this email:

A certain large laser printer company started outsourcing to India not because of costs, but because, when they started this project, it was IMPOSSIBLE to hire engineers here. Intel was leasing cars for college hires as an incentive to get them to come to work; trying to hire anyone in a place where you can buy houses for $100,000 was nearly impossible.

The savings from outsourcing turn out to be smaller than you might expect considering wage rates in India). The net effect will probably not be dramatic losses of jobs, but reducing upward pressure on salaries of engineers.

I have great sympathy for the engineers out of work, but this was mostly the collapse of the 1990s bubble, and foreign outsourcing is probably not a significant part of it. It does mean that some of these jobs may not come back after the economy recovers, and when they do come back, the wages won’t be quite so spectacular for recent college grads.

At least my employer is still doing H1B visas–because they claim that they can’t find people willing to work for $65-75K–and they probably can’t. Lots of engineers won’t leave California to work in Idaho. The H1B visas need to stop, however, to encourage employers to raise pay scales enough to get people to move.

I don’t know much about the H1B program, but I keep hearing that it’s being abused. Reader Yann A. Le Gouellec says it’s not true:

Re: your TCS column about immigration and outsourcing … While I agree with you about outsourcing, I would like, however, to debunk the fallacy (as reported by the Boston Globe) about H1-B holders taking jobs from “good americans”.

Having been one H1-B holder (now with a green card) and having recently hired one, I can tell you that the minimum requirements include: high degree (usually Ph.D.), publications, and agreement from the Labor Commission that this job could not be filled by a US Citizen, and salary in the level prescribed by the State. So enough with whinings that US citizen can’t compete …

Jayakrishnan Nair, meanwhile, notes that it’s not just tech jobs, but cartoons that are moving to India. And reader Daryl Biberdorf sends this:

Speaking as as a worker in the technical trenches, though, the REAL impact of the continued flood of H1B/L-1 visa workers coupled with the mass exodus of information technology (IT) jobs to India and other places, is that I expect a strong trend to unionization in these fields within the next five years. Every day, the American IT worker sees entire organizations moved to India, thousands of jobs at a time. The logical arguments lose their attraction when you’re the guy wondering how the mortgage is going to get paid. The unionizers are going to appeal to this. Then, the question is, how does the AFL-CIO vote?

Yes, I suppose it’s possible that the AFL-CIO will (on issues outside its core) move right in response to a different crop of union members.

UPDATE: Many, many readers wrote to say that Le Gouellec is overstating the requirements for an H1B visa. and they appear to be right — as reader Kevin McKinley notes, this site says a 4-year degree is all that is required, and missing years of college can be replaced by work experience. One reader wrote:

Your reader Yann A. Le Gouellec is, I think, incorrect.

My last experience dealing with the H-1B visa bureaucracy was 1986, when I hired a software engineer from South Africa. I tried, very hard, to find an American, but several weeks of advertising gave us about 40 nominally qualified applicants–of whom more than half were fresh graduates, who needed H-1B visas to start work. This guy was the only of the 40 applicants who actually had work experience, along with two bachelor’s degrees (electrical engineering and computer sciences). No publication history, and only about three years of work experience.

The Dept. of Labor made it a laborious process, and seemed to be making a serious effort to make sure that we hired an American if at all possible–but it was longer on process than intelligence, and I suspect it would have been possible to work around their process, if we had been so inclined.

The current situation is quite different. On the bulletin board here at work are three H-1B visa applications, one for a software engineer (salary described as $55,000 to $65,000, so apparently someone with 2-3 years experience and a CS degree), and two for electrical engineers, one at $80,000 a year, and another at $100,000 a year, so these are probably people with at least five and ten years experience, respecitvely. (These are good salaries, in southwestern Idaho.) None of these positions should be hard to fill, since so many engineers in this field are out of work.

Reader Davis King writes:

The big abuse behind H1B’s and L-1′s, though, is not whether they take away “American” jobs, but that people who are brought here on H1B’s and 1L’s face legal restrictions on their ability to switch employers. If they could compete in the job market on equal terms, their wages would quickly rise to match the wages of US citizens, and any economic incentive to replace existing workers with new visa holders would disappear.

In other words, this is one of those cases where the press blames free-market competition, greedy corporations, and globalization, while the real culprit is a government regulation that restricts labor market competition. A simple, libertarian solution — granting every H1B holder a green card and the right to compete freely for any job he/she chooses — would be much more effective than a union-led effort to cut visa numbers and expel immigrant engineers from
the country.

I will never understand why the people who created the H1B program thought it was a good idea for us to single out the highest-educated, most tech-savvy, hardest-working immigrants for a “temporary” worker program that can force them to leave the United States if they lose their jobs.

Interesting.

ONE FINAL UPDATE, to this too-long post: Reader Scott Wood sends this:

I have worked in the IT department of a very large manufacturing company for most of the last 7 years, and I can’t remember a single (technical) meeting in which American’s weren’t greatly outnumbered by Indians, Mexicans and Filipinos. (In other departments China is the country du jour.) And everyone in my department (I am a short term interloper, so the skin in the game is a little different for me) is due to be replaced by an Indian contingent by September. So here are my somewhat knowledgeable but not at all unbiased observations:

1) I’m skeptical about it being cheaper. Our experience is that for all the talk about their vaunted education, the Indian replacements are, by and large, just not very qualified. Managers who say otherwise are, well, managers, and probably have bonuses linked to short term budgetary savings, and want to curry favor which higher level managers. However.

2) They are probably not very qualified as much for lack of experience as anything else. I wonder if the outsourcing firms aren’t going to create a bad reputation for themselves by growing more quickly then they can handle. This is complicated by sheer distance and the nature of the outsourcing contract itself making seriously judging individual qualifications before hiring pretty much impossible. Lots of people have paper qualifications that were probably acquired through book cramming. Finally,

3) Here, anyway, the daily work environment is so poisoned that coming to work is drudgery for me for pretty much the first time in my life. This is exceptionally ironic since I am working with pretty much my entire corps of best friends that I have made since moving to this area. I can’t help but assume that the large contingent of on-site Indians, including some personal friends, feel the hostility. I’ve never experienced anything like it, and hope, after I leave in September, never to experience it again.

–sw

ps-For the record, I agree with your correspondent who criticizes the H1B program for making the most qualified people leave the country. After years of arguing that the political clout of auto and textile workers shouldn’t be able to everyone else poorer, I can’t very easily carve out an exception for myself. It’s hard to maintain that position in the face of my (local) friends who have always been much more protectionist, trade-unionist types.

Well, I don’t know where I come down on this exactly — I’m generally pro-immigration and pro-free trade, but H1B isn’t exactly either, though outsourcing more or less is — but it seems that this is a hot-button issue that’s likely to generate some heat unless the economy recovers sufficiently to take the pressure off here.

Interestingly, another (Indian) reader emailed that Indian companies are starting to outsource low-cost work to China. Sooner or later, I suppose, they’ll run out of low-cost places. . . .