If the measure passed by the United States Senate to virtually double the fees for issuing visas to temporary skilled workers eventually passes into law, it will be harmful to virtually everyone concerned.
The first and most obvious section to be hit will be Indian IT firms which have a large exposure to the US market and which temporarily station a section of their engineers to offer near-shore services to their clients.
According to one estimate, Indian IT firms can end up paying $200-250 million more per year, which will affect their margins.
But this is not all. The move, initiated by senators with an eye to the coming mid-term elections when incumbents will be facing the wrath of the high numbers of unemployed, will harm US interests also.
Through the better part of the last two decades, US firms have been able to maintain a global competitive edge by accessing cost-effective information technology delivered in good part by the Indian IT sector.
This has been a win-win situation for both. The short-term impact of the new visa rates will be to make Indian IT deliverers seek higher prices which they are likely to be able to do as global demand for IT services is reviving.
What is worse for the US is that in the longer term, US firms will not start using less IT (that will deliver a crippling blow to them) but urge vendors to offer more offshore services, that is not post engineers at client sites but at delivery centres around the world.
As a result, the US government will miss out on the $1 billion that Indian firms pay as social security contributions for their skilled workers temporarily stationed in the US.
This is a massive net gain for the US as most of the workers in question do not stay back to enjoy the benefits of the social security payments made for them by their employers.
There is nothing finite in the total proportion of IT professionals who have to be placed at client sites.
In the age of cloud computing when virtually every IT resources is accessed via the Internet and plummeting video conferencing costs allow you to easily see and talk to the person delivering your IT solution from thousands of miles away, raising the incentive to offshore functions is foolhardy.
There is also something glaringly discriminatory about the way the measure has been worked out. In effect, the higher visa rates will be payable by an Infosys if it wants to bring in an engineer but not by an IBM if it wishes to act similarly.
This is because the higher rates will be payable by those firms in the US which have more than 50 per cent non-US workers.
A US headquartered firm which perforce will have more than 50 per cent US workers on its rolls will be able to bring in significant numbers of temporary IT workers (and such firms do this) from India at half the visa costs.
Finally, if H1B visa fee is to be raised, the least the US government can do is to stop the forced contribution to US social security funds.
