H1B Changes for IT

With the current administration’s intent to revamp the H1B program, this is a good time to have a look at what is in play.
The IT industry claims a need for H1B workers due to labor shortages. However, other views see the industry simply abusing opportunities for cheap labor at the expense of domestic works. This issue has been around for a while and not of much interest in the scope of this blog, so we will leave it alone.

What are of interest are the influences affecting the US IT industry for the longer term. Domestically we have an administration driving an “America First” policy focused on training and employing domestic workers. On the other side is a large 3+ million army of foreign H1B workers thriving and living well for their standards. Both movements will be limited by the ability to train and supply workers.
Let’s look at the domestic perspective first. Since the beginning of the dot-com age, American IT workers face ever tighter criteria to land a decent paying job. As a result, younger American’s are faced with fewer options to get into the IT industry. Of course there are options, like degrees, certifications, intern work and similar, but the youth entering the job market today is looking for a short and direct path to the labor force. Hence the MOOC, and coder camp like industries are born. Online courses, lasting only a few months can give you IT knowledge which traditionally requires a degree and years of experience. Although the placement rate is considerable low for such programs, they, none the less, are great training centers for those interested in beginning a career in IT. Coder camps and similar and are so much recognized as potential training centers that the current Department of Education has begun a pilot program (EQUIP) to allow Title IV financing to students of these “Tech Trade” programs. Enrolling into a coder camp, millennials can finance a 3 month course on software programming and pursue a career in the field. So we have a solution. Affordable training and supply is not federally supported. The need has always been there so the demand is ready to absorb these youngsters and help them pay their student loans back.

Let us travel to the other side of the world. Millions of IT workers are coming to the US on the H1B program. As of 2012 the IT outsourcing industry contributed 7.5% to the Indian GDP (http://www.nasscom.in/indian-itbpo-industry). India has certainly many great schools and institutions to train its workers for industry. India no doubt has the population to supply the US IT demand. Many of these workers are living higher than average standards in their country and are driven to continue their success.

Of course the issue is not that straight forward. As with all industries there are lobbies, business agreements, contracts and other tools designed to promote the interest of whoever is behind the signatures. So, fundamental economics, at this point, is probably out the door. What is certain is that there is a need for about 4 million additional IT workers whose average salary is way above the US average. The question is who will those jobs go to? The current administration would like US citizens to fill those jobs. India is benefitting greatly from all of those jobs and would like to continue doing so. As the Department of Education under the Trump administration develops its EQUIP program to allow domestic training centers to put US citizens into those millions of jobs, India has an interesting counter plan.

How can there be a plan to counter such a federally supported movement? Simple, do what has worked so far. Underprice the domestic supply. This is what the major India IT companies are planning. Using the same H1B program they will send the same people as educators to train domestic workers to do what they would have done under the current H1B program. The brilliance is phenomenal! The plan is absolute genius! How so? First, the US IT industry has a low wage addiction. Outpacing inflation with lower waged workers is business strategy. This will not easily change. Second, MOOCS and coder camps have notorious low placement. India is betting that even if the federal programs work and short term training with financing creates huge interest, the likelihood of those who complete the programs finding jobs is low. So, the volume of H1B workers will not be affected.

Two things for sure will come of the H1B program changes. A domestic IT training industry will mature. Second, the demand for IT works will continue. India will try to underprice the IT training industry and take that over, while maintaining the current H1B volume, in essence expanding market share. The Trump administration will try to create programs to help US citizens get trained and find work in the IT industry. If India does it right a huge increase in its GDP will be its reward. However, if things go wrong for India, the US middle class will see a consumer boom minus the Butter Chicken dinners.

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