What the New Staffing Rules in the United States mean for the Global IT Sector

The New Rules: What they mean

The recent decision of the United States government to restrict the entry of skilled IT professionals impacts the operations of the global IT sector, both of the domestic US based companies and the IT outsourcing industry across the world.

The US government has mandated that firms in the country must hire IT professionals who come to the US on H1B Visas (a category of visas that caters to highly skilled professionals) only if the firm has met the requirements for 75 percent of its workforce being Americans.

Along with other stipulations like restricting American companies from hiring too many guest or foreign workers and imposing taxes on American firms that ship jobs overseas, these rules are being viewed as an impediment to the free flow of people across borders.

Since globalization and outsourcing are all about the unregulated movement of people and services across the global economy without regulatory constraints, these measures are widely seen as being protectionist in nature and if implemented seriously would be a setback to the domestic and foreign firms in the IT sector.

The US Economy and the H1B Professionals

This is because the US economy is highly dependent on the entry of the H1B professionals who form a sizeable component of the IT workforce in the country. Given the fact that every year nearly 65,000 H1B visas are granted and IT professionals garner a bulk of them, it would be difficult for the American IT firms to maintain their competitive advantage if such measures are implemented.

Further, considering the fact that a majority of the H1B professionals are from Asian countries like China and India, the IT sector in these countries would be hit as well. This is the reason why the IT firms in India are protesting against this move, which they see as being detrimental to the concept of outsourcing.

Of course, the fact that the ongoing recession has made countries protectionist and has made governments pander to local sentiments instead of taking a global view has to be considered as well. These moves fit in with the overall trend in the US where local jobs and regaining local workers’ trust has become paramount which when contrasted with the stand in the previous decade where foreign workers (especially the highly skilled professionals) were welcomed with open arms.

Reactions from US Firms

This is not to say that the domestic firms in the US are supportive of this move. Rather, the reactions to this move have been mixed with some firms like Google and Microsoft expressing apprehensions whereas other firms (the medium sized ones) welcoming the decision. This is in line with the behavior of these firms where Google and Microsoft have benefited hugely because of the H1B professionals whereas smaller firms have often been at the receiving end.

However, one senior executive of Microsoft hailed the move in a Senate hearing about possible violations of the H1B visa rules by Asian firms.

The point here is that the Asian firms need to change their behavior too as most of them fragrantly violate the provisions of the H1B and the B1 (the business visitor visa) rules.

For instance, it is common for many Asian firms to send employees on B1 visas to work on shorter duration assignments though the rules explicitly prohibit B1 visa holders to work and only provide for business meetings and other forms of activities.

Apart from this, the fact that some employees in the US have sued Indian IT behemoths like TCS and Infosys for possible malpractice as far as work permits are concerned adds to the clamor among business groups in the US wanting the government to take action.

Closing Thoughts

Finally, while it is a bit premature to say whether the impact of these rules on the IT outsourcing industry would be severe, the point needs to be made that all stakeholders must act responsibly instead of catering to narrow objectives and aims.

❮❮   Previous Next   ❯❯

Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.

International Business