India: Worries Grow About Obama Outsourcing Policies

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A WORLDWIDE TREND

The U.S. is not alone in this increasing aversion to foreign labor and to outsourcing. As the pain of the global economic crisis intensifies, countries all around the world are adopting policies that make it tougher for foreigners to get jobs. In the Gulf countries, where several million Indians are employed in jobs ranging from construction to banking, governments have cut down on work visas and sent unemployed Indians home by the planeload. A Dubai-based official with an airline (who asked not to be named) says construction companies chartered more than 30 flights in January alone to fly workers back to India. In Malaysia, 43 Indian workers who have overstayed their visas expect to be deported this week, as thousands more leave voluntarily. On Mar. 2, the British government started an inquiry into whether immigrant workers should be restricted to sectors of the economy that have documented worker shortages.

In India, these decisions have raised hackles. India's IT sector is seen as a source of national pride—an area where Indians see themselves as competing successfully on the global scene. Moreover, the millions of Indians living overseas send back more than $30 billion a year in remittances, making up 3% of the country's GDP, according to estimates by the International Labor Organization. Political groups, parlaying for support in upcoming elections, have grasped the issue, threatening boycotts and asking the Indian government to intervene on behalf of its expatriates. "We feel that in the current economic environment it is imperative for global corporations to collaborate on technology and innovation," says Suresh Senapaty, the chief financial officer of Wipro (WIT), one of India's largest IT services companies. "Policies of protectionism will only hinder the revival of the world economy."

While the change in rules for H-1B hires may be popular in the U.S., it could have a long-term impact that policymakers are not foreseeing, according to a report released Mar. 2 by researchers at Duke and Harvard universities. Disheartened by the change in visa rules, nearly 100,000 foreign workers could leave the U.S. and return to their home countries, researchers concluded. The two-year study asked those who had returned why they left the U.S., and found that increased opportunities in India and China made it easier for these highly trained workers to leave jobs in Silicon Valley and start businesses back in their home countries. "Short term, this will have no impact on the U.S., but long term this could spell disaster," says Vivek Wadhwa, the lead researcher on the study and a research associate at Harvard's law school. "When we start recovering, then the people we need are going to be in India and China."

Since 1990, the H-1B program has allowed foreigners holding at least a bachelor's degree to work for six-year spells at U.S. companies and to have a chance to apply for a green card. Companies such as Microsoft (MSFT) and Google (GOOG) have hired thousands of foreign workers on H-1B visas. It is unclear how many of them applied for—or received—green cards, but the green card backlog in the U.S. in 2006, the last year for which data are available, was more than 1 million.

At the same time, Labor Dept. and U.S. immigration statistics indicate that just a little more than half of the allotted H-1B visas went to the high-tech sector; others included workers in fields as diverse as academia, medicine, and the nonprofit world. Several studies have shown that while there is documented fraud in the H-1B visa system and that H-1B workers often depress the local wages for similar U.S. workers, these highly trained immigrants do fuel a disproportionate portion of U.S. innovation. Wadhwa points out that nearly half of Silicon Valley startups—including Google—were started by immigrants, and nearly a quarter of U.S. global patent applications are from foreigners. "Without doubt, these H-1B workers are adding to the innovation pool in the U.S.," says Wadhwa.

With Moira Herbst in New York.
Srivastava reports for BusinessWeek from New Delhi.