The US Congress showed unusual unity in unanimously passing a US border security bill this month. The fine print of the bill, once it becomes law, will also increase the H-1B and L-1 visa fees for companies that import temporary workers to the US. At present, the only firms that will be affected would be the largest Indian IT firms. New Delhi has protested the bill and rightly so. But its impact on Indian outsourcing will not be dramatic — the business has largely moved beyond body-shopping. The US action is striking for two other reasons. One was the consensus among the legislators. Not even Republicans, supporters of corporations and free markets, opposed the Bill. Two was the determination of the legislators to get the Bill passed before the November mid-term elections. By passing it almost clandestinely, they blindsided lobbyists and, it seems, the White House. The reason for this can be summed up in one word: jobs.
The Western economies have been affected by the financial crisis and they continue to register weak growth. The real devastation has been in the area of jobs. The US unemployment rate in 2009 was the highest since 1983. Doubts about European sovereign debt and fears of a Chinese slowdown have drawn a veil of uncertainty over the future and made firms unwilling to hire. In the run-up to the US elections, polls show voters placing jobs well ahead of all other concerns, including terrorism and the Afghan war. Promising not to stop jobs going to China and India has become a fixed plank in President Barack Obama’s stump speech. Putting up barriers to skilled migrants is becoming part of the political firmament in other immigrant-friendly economies as well. The present coalition government in Britain was elected promising to place curbs on such visas.
All evidence indicates such barriers, ultimately, retard economic recovery. Companies in recessionary times like to outsource because it allows them cut costs. If they cannot hire cheaply, they often will not hire at all. Heavily-indebted governments are trying to balance their books while retaining public services. Again, outsourcing is the best means to accomplish both goals. The hope is that once the election cycle has passed in places like the US, the recognition that saving jobs at the cost of recovery is a self-defeating policy will reassert itself. Obama can continue to say what he wants about India, but his party will refrain from shutting what used to be called “the golden door” of US immigration.