More tech work could head overseas as the US allows fewer tech workers into the country.
President Trump’s immigration policies have made it harder for tech companies to bring highly skilled workers to the US, according to newly released immigration data.
That’s bad news for US tech companies as well as non-tech companies, which rely on third-party outsourcing companies to execute the growing technology sides of their businesses. It could also mean that more US tech jobs and tasks will head overseas.
One-fourth of new and continuing applications for H-1B visas — the permits that let companies bring highly skilled tech workers to the US — were declined in the last three months of 2018, according to new data from US Citizenship and Immigration Services. That’s down from just 5 percent for the same period in 2014, and follows on the heels of an executive order from Trump. The absolute number of new and continuing H-1B approvals has declined as well.
“I think they’re trying to restrict foreign nationals in general,” Stuart Anderson, the executive director of the free market think tank National Foundation for American Policy, told Recode. “Part of it is a lack of understanding of how important IT services is for the competitiveness of US companies.”
Not only have H-1B approval rates gone down, but the process has also become more onerous and uncertain — and, by extension, more expensive. Some 60 percent of applications required extra paperwork last quarter — double the rate it was two years earlier.
Previously, an inadequate supply of H-1B workers in the American labor market has resulted in fewer jobs and lower wages in the US for everyone, according to a study from New American Economy, a bipartisan business coalition launched by Michael Bloomberg and Rupert Murdoch. The report reasons that bringing in high-skilled workers would help businesses grow, innovate, and, by extension, employ more people in high-paying jobs and supporting jobs.
In the meantime, the tech employment situation has only been compounded by the growing tech industry and the tight job market.
“It’s treated as a zero-sum game, but if these companies don’t get someone with an H-1B, it’s not likely the job will be filled with an American,” said Jeremy Robbins, New American Economy’s executive director.
What’s more likely is that companies will send the work to where there are eligible employees: overseas.
For all the political attention it’s getting, it’s notable that the H-1B program is actually very small. Its annual new and continuing approvals account for just 0.2 percent of the total US workforce of 160 million.
“H-1Bs are not an enormous slice of the workforce,” according to Richard Burke, president and CEO of Envoy Global, a company that helps startups and Fortune 500 companies alike navigate immigration. “But it has become a flashpoint because of one or two instances of abuse,” he said, referring to high-profile cases in which Disney and Southern California Edison replaced their entire IT departments with outsourced H-1B workers. These were cases in which American talent was obviously available, so they shouldn’t have warranted H-1B workers.
In a survey of 400 US hiring managers with experience sourcing foreigner employees, Envoy found that 22 percent said their companies were relocating work overseas due to the current US immigration system. Some 26 percent said they were delaying projects altogether.
“We have a well-known consumer packaged goods company that needed engineers to design containers for their products,” Burke said. “All of their other manufacturing and distribution was in the US, and they very much preferred to hire in the US, but they couldn’t find sufficient candidates.”
The cap for new applications has basically been the same since the 1990s — way before the most recent tech boom in the US.
“The world is completely different now in terms of demand for types of labor,” said Anderson. “Back then there was barely an internet — there wasn’t a web you or I could use. There weren’t smartphones, online gaming, e-commerce — all the things we take for granted that have a lot of labor that requires IT skills barely existed.”
These changes mean the demand for high-tech workers has grown immensely, and the competition to get limited numbers of H-1B approvals has gotten tougher.
Outsourcing and consulting firms — which provide IT services for companies whose main business isn’t tech, and which tend to rely more heavily on H-1B visas as a share of their overall workforces — have received the brunt of the decline in approvals. The situation isn’t as bad for the biggest tech companies, like Google, Apple, and Amazon, which are seeing most of their applications approved. Still, both groups are advocating for more H-1Bs.
Outsourcing firms like Cognizant and Tata are politically unpopular due to the very nature of their work: They enable companies to grow without adding more people to their payroll, and many fear they are replacing American jobs. But outsourcing non-core tasks has been happening for years, in part because of a lack of trained US labor, so it’s not likely to be brought back in house on account of fewer H-1Bs.
“It’s trying to reverse a trend that’s formed over the past two decades in a huge and growing industry we all very much depend on,” said Sarah Pierce, a policy analyst at the Washington, DC-based think tank Migration Policy Institute. “Obviously, these companies find it in their best financial interests to hire outside consulting.” Ultimately, the US companies that use consulting companies will be hurt, she added.
Outsourcing companies have also been criticized for paying H-1B workers much less than the big tech companies like Apple and Google. Outsourcing companies are required to prove that they are paying market rate, and they are often employing more junior workers than at the major tech firms. Supporters of H-1B point out that the process is expensive and time-consuming — not something an employer would do if there wasn’t a real need.
Severe shortages in qualified computer science and engineering workers, compared to the number of open jobs in those fields, were seen in 2015, when the Bureau of Labor Statistics published a study about which STEM fields had surpluses or deficits. Since then, the job market has become a lot tighter, and technology jobs have proliferated, so the situation is likely much worse. As of January, tech skills — including web development, data science, and computer networking — had some of the highest gaps between labor supply and employment demand, according to LinkedIn data.
We have no idea how many companies in the US rely on outsourcing and consulting companies, according to Pierce. (A question was added to H-1B applications late last year as to where the contracts go, but it’s unclear whether that information will ever become public.)
What we do know is that nearly all companies have technology elements — automation, accounting, websites — regardless of whether they’re actually “tech companies.”
“You can assume it will impact almost every Fortune 500 company and lots of other companies below that size, because they all contract out for some type of work,” NFAP’s Anderson said. “It’s basically impossible to do everything in house.”
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Tech companies have already been expanding their international campuses. Canada, which has much more lenient immigration policies and has actively courted H-1B visa holders through billboards in Silicon Valley, has become a major beneficiary.
“They’re not making any case other than that the US government has put up immigration roadblocks,” New American Economy’s Robbins said. “The US is putting obstacles in front of people who want to come here and could help our companies grow and outcompete other companies around the world.”
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