by Merlin Hernandez

Outsourcing has essentially been characterized as the transferring of US jobs to emerging economies like India, China, and The Philippines to take advantage of lower wages and taxes as well as environments that are less regulated. Outsourcing industries have spanned manufacturing, technology call centers, human resource administration, medical billing/coding, and health insurance benefit management to name a few.

But many of the tech jobs did not go overseas but were outsourced to overseas companies operating in the US. For example, some call centers remained in the US but the work was contracted to Indian companies and workers were brought in from India to do the work. With the level of unemployment in the US, it would seem bizarre for H1B visas to be granted to foreign workers. The argument in favor of the practice is that these “guest” workers are contract professionals brought in to fill shortages in the tech industry, and fast-tracked for US residency ostensibly to maintain the level of proficiency in the workforce.

Many analysts question whether there is a shortage of US technology workers. They suggest that firms operating in the industry prefer to hire younger foreign workers at lower wages while more experienced professionals are sidelined as being too expensive. Supporters maintain that H1B visas secure the best talent to keep US innovation alive and American business competitive in the global market. But it has been found that may visa workers were doing non-technical jobs that could have gone to the average US college graduate.

The obvious question is why this is allowed when there are USCIS stipulations that jobs under H1B can only be offered to a foreign worker if no US worker can be found to perform the job. The answer apparently lies in the fact that H1B workers are paid less than industry norms and come at a much lower overall cost. H1B legally mandated prevailing wages have not caught up with the realities of the tech industry and fall way below the market wage – sometimes more than 50% lower. Moreover, workers may not receive benefits like health insurance and pension plans, and employers do not have to pay into unemployment insurance. Foreign workers not only cost less but under the terms of their visas, they are not free to leave the contracting employer till the end of the contract, and longer if they are awaiting US residency status – a veritable modern day indentureship system to provide a stable body of cheap expertise.

With increasing numbers of foreign workers seeking H1B visas and sustained public outcry against outsourcing in general, the USCIS intensified its scrutiny of applications by US businesses to import workers, and imposed more stringent visa policies. The cost of visas almost doubled to $4,500 per application and the rate of H1B admissions dropped significantly. The vigilance is part of the government’s move to limit work visas to foreign nationals as a way of addressing domestic unemployment. At the same time there is a Senate proposal for tax incentives to businesses for repatriating outsourced services. Not to be left out in the cold, Indian outsourcing firms began to hire US workers for their US operations where their most lucrative customers are based. These firms have gone even one step further to network with universities to better prepare students for tech jobs.

As the US economic recovery gains momentum in 2013, it can be expected that the insourcing of previously outsourced American jobs will escalate. US investors, looking for opportunities in growth industries are likely to compete aggressively for a greater share of the outsourcing pie.