The latest executive order by US President Donald Trump that bans technology workers on H-1B visas from replacing US citizens in federal government contracts is expected to force IT companies to rejig their projects in the US and they may even go slow on project implementation. The order has been aimed at ensuring that more US workers are hired for technology projects, and not outsiders. This order has come at a time when the US federal government has made significant investments in technology areas such as cloud computing, application development and automation. New or ongoing projects may receive a setback.
“Many Indian technology workers are working on projects of federal government contracts. With this executive order from the US president, the IT service providers have to revamp their work, where permissible, by the contract and involve offshore employees. In cases where they have to use on-shore workers, they will have to use local workers. In some cases, they may not be able to find local workers and hence will have to go slow on project implementation,” remarked Aditya Narayan Mishra, the director and CEO of CIEL HR Services.
It needs to be observed the US government is one among the biggest spenders on IT globally. For instance, the US federal government’s IT budget is in the range of $87 billion on an annual basis versus $67 billion for the banking industry in the US and this move can slow down work in many federal IT projects.
“Off late, the largest share of federal IT spend has been acquired by the US companies owing to various reasons including legacy issues. Many Indian IT firms have emerged as sub-contractors of these level-1 players and this sub-contracting business led by Indian firms will experience an eclipse with Trump's new diktat. There is also a chance that many Indians who came on board from body shoppers and who are working in an individual capacity in different federal government projects may experience job loss scenarios,” pointed out Alok Shende of Ascentius Consulting.
For some experts, the move was on expected lines as Trump had been stressing a lot on hiring local workers, particularly with this being the US election year. “We were expecting this and this will probably not be the last of its sort. From an Indian talent perspective, a lot of skilled professionals were previously being deployed onsite to work on projects that may have involved some federal agencies, either directly or indirectly. Usually long term, these would have been excellent projects for IT services companies. This move will broadly prevent flight of talent overseas and definitely impact the IT services industry. From our perspective, this augurs well for growth and consolidation of offshore models,” Vikram Ahuja, co-founder, Talent500 by ANSR, told THE WEEK.
As per the industry body NASSCOM, President Trump’s executive order appears to have been made based on misperceptions, and misinformation. As per a NASSCOM statement, the part of the executive order focuses on federal contracting, and part of the executive order focuses on the H-1B visa programme in general. Both elements of the executive order mandate reviews, reports and development of policy and practice and recommendations rather than mandating any immediate changes. The NASSCOM statement also says that the order is particularly coming at a time when there is a huge shortage of STEM skills in the US and that workers on short-term, non-immigrant visas like H-1B and L-1 help bridge.
The statement also highlights that the unemployment rate for computer occupations (those most common among H-1B visa holders) has declined in the US from 3 per cent in January 2020 to 2.5 per cent in May 2020, while unemployment rate for all other occupations grew from 4.1 per cent in January 2020 to 13.5 per cent in May 2020. Further, in the 30-day period ending May 13, 2020, there were over 625,000 active job vacancy postings advertised online for jobs in common computer occupations, including those most common to H-1B visa holders.
NASSCOM says that as the world opens up post the COVID-19 induced lockdowns, it is important for the US to be able to access talent critical to the recovery phase. Measures that restrict access to talent will in turn slow down the recovery phase of the US economy, jobs, innovation and R&D.