Immigration Reform Could Roil IT Workforce

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Proposed changes to the immigration laws could be a boon to talent-starved American tech companies, but could punish foreign firms – particularly the large Indian service providers with operations in the U.S. -- who currently employ large numbers of foreign IT specialists.

A proposed immigration reform bill, set to be unveiled tomorrow, will likely contain a significant increase in the number of skilled workers allowed into the U.S. The move would be a boon to talent-starved American tech companies, but could punish foreign firms – particularly the large Indian service providers with operations in the U.S. -- who currently employ large numbers of foreign IT specialists.

The bipartisan legislation is said to include a nearly 70 percent increase in the number of H1-B visas. If approved, the bill would boost the number of skilled foreigners allowed to work in the U.S. for up to six years, many of whom employed by the IT industry, from 65,000 to 110,000 annually. That number would gradually climb to 180,000 in the coming years, if the bill is approved in its current form.

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The immigration reform measure comes with some caveats for employers, however. U.S.-based companies will need to prove that they have advertised open positions in an attempt to attract American workers before applying for H1-B visas. When they are allowed to bring in foreign help, they must pay the foreign workers salaries commensurate with the typically higher U.S. pay scale, something previous work visa rules did not address.

The proposed legislation is the work of eight U.S. senators: Michael Bennet (D-Colo.), Richard Durbin (D-Ill.), Jeff Flake (R-Ariz.), Lindsey Graham (R-S.C.), John McCain (R-Ariz.), Robert Menendez (D-N.J.), Marco Rubio (R-Fla.) and Charles Schumer (D-N.Y.).

Struggling with a growing skills gap and bogged down with unfilled IT jobs, technology companies have lobbied hard for several years for an increase in the H1-B visa quota. The proposed changes come at a critical time for technology-dependent U.S. businesses and the IT services providers that serve them.

A recent study by CompTIA found that eight out of 10 say the lack of or shortcomings in IT skills of their staff are hurting operations and their ability to capitalize on new revenue opportunities. Forty-one percent say IT skill gaps are impeding staff productivity. One-third of the participants say customer service and engagements are hurt. And 34 percent say their time-to-market with new products and services is impaired. The impact is felt in businesses’ wallets, with 23 percent of SMBs and 15 percent of mid-market and enterprise businesses reporting their profits suffering.

Not everyone is so thrilled with the proposed immigration changes, however. In addition to its requirements for higher wages for what had traditionally been seen as a ready source of skilled tech workers willing to accept low pay, the senate bill also includes dramatic restrictions on H1-B visas for companies that employ too many temporary foreign workers.

Under the new rules, companies with workforces made up of more than 30 percent H-1B visa holders would be forced to pay new fees. Moreover, starting next year, any company with a workforce of more than 75 percent H1-B workers will be banned from applying for new work visas. That number drops to 65 percent in 2015 and 50 percent in 2016, according to sources familiar with the contents of the draft bill.

Such restrictions would hit the large Indian IT outsourcers hardest. Lower wages and a ready pool of skilled workers has traditionally motivated firms like Tata Consultancy Services, Infosys and Wipro to hire large numbers of workers from their home country to work in the U.S.

In a letter to the eight senators signed onto the immigration reform bill, Ron Somers, president of the U.S. India Business Council said his organization’s greatest concern “centers on proposals that would preclude access to visas or impose unworkable visa-related restrictions and fees on a company's ability to sponsor H-1B … visas based upon their business model or the composition of its local workforce.”

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