The Hindu Business Line : US' concern over job outsourcing

There is continuing debate in the US on how liberal it should be with visas for foreign workers and the effects of job outsourcing. For India, a major issue of concern is the US' moves through law to cap the number of visas for foreign workers and impose other restrictions on expatriate employment. S. Sethuraman assesses the US' fears.

GLOBALISATION, whether viewed as delivering economic freedom to the poor or stifling the domestic levers of growth in low-income countries, is certainly not spawning job opportunities on the scale the world's employable workforce demands.

On the other hand, it seems to revel in achieving productivity and growth with technology and reduced labour costs. It has certainly not become a force that facilitates international labour mobility when economies are integrating.

Indeed, for developing countries increasingly coming under pressure to open up and grow, the mantra of international competitiveness downgrades social equity.

The structural reforms relentlessly enjoined on them call for achieving greater efficiency at lower levels of employment, deregulation of labour market and fiscal tightening and restructuring of government enterprises in which downsizing is one of the principal components.

It is against this background that one should look at the global employment scene and the distance we have traversed from the era of placing full employment at the centre of economic development and growth.

Nevertheless, new forces have emerged, especially with information technology, and many developing countries, especially India, have reaped the benefits of this explosive development in the global economy.

For India, the IT sector still is a ray of hope in an otherwise dismal employment scene. But there are market rigidities that prevent the free flow of labour, particularly of skilled persons, and each country — advanced or developing — will naturally take into account the gains and losses for its economy.

There is a lively debate going on in the US on how far it should be liberal with visas for foreign workers, the impact thereof on domestic employment and the wage structure, and the benefits and harm from outsourcing of jobs. This is an area of considerable importance to India, which has already carved a niche for itself as an emerging software super-power and, with its vast technical manpower, is eyeing the growing opportunities in distant lands, chiefly the US.

In the qualitatively transformed Indo-US relations, a major issue of concern is the moves through law to cap the number of visas for foreign workers and impose other restrictions on expatriate employment to "save" American jobs and wages.

A number of laws introduced in such American States as New Jersey, Washington, Connecticut, and Maryland seek a ban on outsourcing of "New Economy" jobs by American firms.

Even in US Congress, a few Senators and Congressmen are trying to promote legislative limits on L-1 and H-1B visas issued to foreign workers. All this, if enacted, would hit hard countries such as India, China and the Philippines.

The US Administration has not so far clarified in definite terms its own approach to the problem beyond assurances to India that it would try to ensure that there are no legislative curbs. India, on its part, is pressing hard for the right of "movement of natural persons" (service-providers).

Though leading personalities including Dr Henry Kissinger have joined the chorus against outsourcing of jobs, which could extend to the point of "stripping the US of its industrial base", as he put it, any ban of a sweeping nature is discounted in both official and business circles.

Any legislation of this type would smack of protectionism of the old-world style, an analyst in Business Week wrote.

The other view in the debate is that the US will not lose its cutting edge as the best-educated workforce and more innovations (telecom, biotech or energy) would be there down the road. The motivation for companies to outsource is to get jobs done at lower cost with the ease of Internet exchanges and to enhance their own profits.

Some see this could become an "unstoppable force" in the competitive drive for profit-making. The fears widely expressed, and reflected in business magazines, are that this poses a serious threat to the American "white collar" workers in a country where unemployment is peaking at well above six per cent with no halt in job-shedding.

Projects funded by tax dollars should not be passed on overseas, it is said. Such outsourcing extending to several categories of professional jobs could "devastate" jobs in the new economy, similar to what happened in clothing, auto parts and other manufacturing segments in the past.

The rising concern followed thousands of jobs already outsourced by US firms, and in the case of India by IBM, Microsoft and others, which see enormous savings in labour costs. At this trend, Forrester Research estimates that over the next fifteen years, US employers might be moving overseas over three million white-collar jobs and $136 billion in wages as against $4 billion in 2000.

It is the growing loss of employment and "jobless recovery" under way that has made the issue of visas a hot subject. One estimate puts the visa holders (H-1 B and L-1) at 700,000, though it might be closer to one million.

The visa system has been under reform for some years — from liberalisation to restriction — especially in the aftermath of the 9/11 terror attacks. US companies needing foreign technical personnel are reportedly lobbying against curbs on numbers of H-1B visas, though it is likely that the limit enhanced to 195,000 in 2000 for a three-year period could revert to the earlier 65,000 visas a year from October next, unless Congress intervenes.

There are some 57,700 holders of L-1 visas, including Indians sent by such companies as Wipro, Infosys, and Tata Consultancy Services. One of the bills in US Congress suggests a cap of 35,000 L-1 visas but stipulates such visas should not be available to companies where American workers have been laid off six months before or after filing the visa application. L-1 visas allow companies to bring workers from overseas offices to the US for up to seven years.

India, as a highly interested country, has conveyed to the US its concern over all these trends and pointed out that restrictions would be "contrary to the spirit of market access".

A Ficci estimate is that outsourcing resulted in savings for US companies of the order of $16 billion. In recent years, countries such as the UK and Germany also liberalised the issue of visas to foreign workers, especially Indians, to meet skill shortages.

Studies quoted by the World Bank say there would be income gain of more than $150 billion for the world economy if developed countries increase their quotas of international temporary workers to three per cent of their workforce.

Meanwhile, the US Census Bureau and other study reports depict labour shortages within ten years. One estimate is that in seven years, there will be only 158 million people in the labour market against 168 million jobs, or a shortage of 10 million jobs.

This could well be the situation in developed countries facing the prospect of "under-population". The suggested ways of meeting this include raising the retirement age from 65 to 75. Even so, the lack of skilled workers in technology-related and other services would weaken the ability of companies to compete in world markets. This would, therefore, keep issues such as grant of visas and immigration policies very much alive in the days to come.

According to the International Organisation for Migration (IOM), about one million people enter the US legally and half a million illegally, with similar numbers in Europe.

Migration has been fuelled by globalisation, the wide gap in living standards between the rich and poor countries, and ageing societies and will only increase, according to the IOM, which says Governments must respond with policies that would manage rather than repress them.

(The author, a former Chief Editor, PTI, is a freelance writer.)

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