Wednesday, March 27, 2013

Visa Reform: Cutting Back on H-1B and L-1 Body Shops

Does your workforce depend upon foreign labor? If so your workforce planning may suddenly be changed.

On March 18, 2013, Senator Charles Grassley (Republican, Iowa) introduced a “50-50” visa bill to promote hiring local U.S. workers.  One section would require companies with more than 50 employees to limit their number of U.S. employees on H-1B or L-1 visas to 50% of its workforce.  This would apply to both domestic and foreign companies with American subsidiaries.  In short, 50% of the workers employed in the U.S. would need to be American citizens or green-card holders. 

Such visa legislation would attack foreign “body shops” that rotate contractors to the U.S. in support of global sourcing.  Aside from targeting India, a 50-50 quota bill would also hurt foreign businesses from Western Europe and Latin America that send technical staff in management consulting and business change management to the U.S.  It would hurt smaller foreign companies that depend on foreign staff as they grow into the US market.

Will a 50-50 quota really increase U.S. employment levels for technical workers?  I see several scenarios:

  • Yes, it promotes local hiring to replace foreign contractors.  (This assumes you can find the right talent here.)

  • No, it encourages U.S. companies to set up foreign “vendor management” teams to manage foreign workers in offshore service delivery centers.

  • No change.  In the short run, it will reduce utilization rates and operating profits of foreign service providers.  Over time, nothing will stop globalization.  Businesses will find a way to deal with this by more video conferencing and online collaboration tools.  Affected foreign service providers will hire more U.S. sales people (as well as technical personnel) to meet this quota.

  • It’s irrelevant.  Foreign countries with existing “friendship, commerce and navigation” treaties are entitled to “most favored nation” treatment.  So they will lobby to eliminate such rules, or they could threaten retaliatory visa action against U.S. expatriate employees in foreign subsidiaries. 

In my view, this measure would not survive long, and it highlights the need for a comprehensive immigration reform that invites foreign technical workers (“STEM” – science, tech, engineering and math) to become residents and citizens.   

What do you think?

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