Perhaps the most controversial topic in any national political arena is Labor Economics. What is the right minimum wage? Should unearned income be taxed in the same manner as earned income? Should we solve for a) unemployment, or b) staff shortages? What should companies (and governments, NGOs, etc.) expect to pay, and what should an individual worker expect in terms of work conditions, compensation and mobility?
Labor economics was one of the biggest drivers of the last US election cycle, and probably a lot of other countries as well.
Meanwhile, collaboration and remote access tools keep getting better and better. 25 years ago, companies and tech teams were experimenting with AIM or MS chat, CVS repositories, and SSH, Citrix or RDP remote access tools. (Isn’t it interesting that more modern tools still use a lot of patterns or functions from this era, and even earlier Unix tools?) These tools allowed staff and consultants to work in more locations and powered a diffusion of tech knowledge and outsourcing business growth.
Some years ago, I saw a large company contract with a large offshore based staffing company, and bring in scores of low paid workers on B1 Visas (*illegally), only to rotate them out before they hit the 90 day limit of the visa. Wash, rinse, repeat, as they say. The customer company leadership could claim deniability, if they were pressed, or probably more likely, they would claim that there was a lack of qualified staff that they could draw on legally. There were likely shortages of skilled candidates in this part of the country, and the company certainly wanted to save money as well. The whole situation had a stench that was undeniable.
Let’s now weave the two topics of labor economics and improved connectivity tools.
The real choice isn’t between H-1B visa holders and native-born US citizens for a specific job.
For the near future, the choice is between anybody based in the US, OR highly connected offshore “consultants” existing in a spectrum of geographies, competencies, levels of integrity, business cultures, language competencies, and, ultimately, risks.
Staff based in the US (visa or not) is priced at a premium (compared to much of the rest of the world), for the conveniences of reliability, ease of communication, legal compliance and security, and improved productivity and effectiveness. (Yes, eventually, the choice will be between a human or an AI, but for our purposes right now we can leave that possibility alone.)
Individuals and companies that engage in the offshore, outsourced model claim that they can offer all of the benefits, but at a much lower costs. Pick an individual or team from a line up, and no visas, no hassles, same outcome. Time zone, education, language, culture, security and liability are all the same.
The debate about H-1B is an interesting discussion, but it’s really just a fraction of the issue, and given the US and international political climate I expect policy makers to pivot the debate to the relatively safer Onshore vs Offshore labor economics discussion. There are, after all, a lot of unhappy constituents and a volatile political mood.
It is unlikely that Offshore labor will be banned (and I don’t know how it could be done), but it is highly possible that tax penalties (labor tariffs?) or other economic sanctions could be considered and implemented. The mood of the US public is frosty towards the rest of the world right now, and the recent elections demonstrate a desire for a different approach. Also consider how much policy and technology has been implemented to bring banks in to assist with law enforcement. The systems have been developed to surveil business activities and monetary transactions, enabling the regulation of these relationships.
None of what I am saying is advocacy, although I will suggest that the argument about H-1B visas is kinda ridiculous, while the offshoring situation is completely unregulated and potentially has the bigger impact. Meanwhile, how do IT leaders like us navigate these staff sourcing situations?
Bob and I will tackle that topic next week.
To add another variable to the discussion, Return to Office.
This seems to be a trend.
And for on-shore workers, love it or hate it, “in office” is not something that can be off-shored.
You make an insightful point.
1. I have seen offshoring turn into a disaster multiple times. Seems to work OK if it’s managing a static operation, but the communication problems become insurmountable when flexibility is required, particularly if business processes are changing. Offshoring, or outsourcing, is problematic when any type of innovation is expected.
2. I have had extremely good luck with H1B visa holders. One of my clients has an H1B visa holder in a senior management position because of their “on the ground” knowledge of their native country, which exports a specific commodity to the U.S. That person provides a significant competitive edge!
3. BTO/WFH exemplifies and amplifies the issues with offshoring, due to language and timezone differences. I’ve sat in on too many Zoom calls where communication was difficult and ambiguous.
4. High performing technical talent is scarce and getting worse. H1B visas are an immediate method of dealing with that shortage. They aren’t replacing American workers! Long term, there’s an expectation that AI will somehow relieve this problem. Not gonna happen.