Paul Kuttikadan, CS Solutions’ COO, will have to hire four or five more recruiters this year because searching for candidates has become an extraordinarily time-consuming task. The IT labor shortage has pushed the company’s recruiting and wage costs higher; Kuttikadan has been forced to renegotiate contracts with clients to cover the increase.
"I am frustrated," he says. "Our recruiters and account managers are frustrated. Our business is expanding rapidly, but we can’t hire the people we need. Employee turnover is rising because our engineers are well aware of the power they wield in the marketplace. Clients are demanding that we push more work out to our offshore facility in Chennai, India."
When U.S. recruiters go out to buy technical talent, they shop in domestic markets that are highly protected by restrictive immigration policies, voluminous and ever-changing rules and a cumbersome visa process. The prime example of this regulatory nightmare is the H-1B visa program. The current cap on the number of H-1B visas issued annually is 65,000, or about 1 percent of the total U.S. science and engineering workforce.
"The cap on H1-B visas has limited the high-tech industry’s ability to attract and retain the best and the brightest workers," says Jack Krumholtz, managing director for federal government affairs at Microsoft. "This harms our ability to innovate and has negative consequences for U.S. global competitiveness. This challenge is only increasing. In 2005, the H-1B cap was reached two months before the fiscal year even began."
Legislation to raise the cap to 115,000 is part of a huge package of immigration law reforms now before Congress, but experts agree that there is no guarantee that the higher cap will pass. If Congress does not raise the cap substantially, recruiting sufficient numbers of skilled science and engineering workers will become impossible.
Looking in the Haystack
Steve Swanson recruits technology workers for the semiconductor industry as part of the Princeton Search Group, a search firm with 150 recruiters specializing in managerial and technical employees. Even with his years of recruiting experience and a database of 200,000 names, Swanson has 30 open positions.
"I could fill all of them tomorrow if I could get H-1B visas," Swanson says. On April 1, companies can begin the application process to obtain H-1B visas for the federal fiscal year beginning October 1, but Swanson and other experts believe that the supply will be exhausted by midsummer unless the cap is raised.
The visa cap has put Swanson under enormous pressure. "When a company can’t fill a position with a H-1B employee, they tell me to go find the needle in the haystack," he says. "Without the ability to look abroad, a U.S. company that wants to fill a position in 30 days will have to settle for a less experienced worker or make a substantial increase in the starting offer." He notes that companies are facing dramatic labor cost increases because less experienced candidates may require six months of training.
Demand for H-1B candidates continues to climb. Eighty-five percent of the companies that used H-1B visas in 2005 plan to do so in 2006, according to salary survey firm Culpepper and Associates. Ten percent of companies that did not use H-1B visas in 2005 plan to use them this year.
The jobs that H-1B employees fill stretch far beyond IT positions. "Large U.S. companies often need H-1B employees to work with clients and customers based in other countries or to handle international logistics," says Kathleen M. Hanenburg, partner and chair of the immigration law group at Warner Norcross & Judd in Grand Rapids, Michigan. "The language skills and knowledge required for these jobs are in short supply among U.S. workers."
Her clients report that they are turning down contracts and offshoring more work to Asia because they can’t fill positions here.
Killing the Feeder System
The difficulties recruiters face will only grow worse as the visa cap continues to damage the U.S. university feeder system for foreign talent. "We have foreign students educated here for semiconductor work who must then return home when their student visa expires," Swanson says. "I try to recruit that intellectual capital back here under H-1B visas, but then the cap kicks in and I can’t. There is a finite international talent pool, and U.S. employers are at a disadvantage."
Microsoft is feeling the pinch. "While Microsoft actively recruits from top U.S. campuses, the reality is that the majority of advanced degrees awarded by U.S. universities in engineering, mathematics and computer sciences are to foreign nationals," the company’s Krumholtz says. Current visa limits preclude Microsoft and other companies from hiring many of these graduates."
Microsoft chairman Bill Gates has called on Congress to eliminate the H-1B caps entirely.
Foreign students account for 55 percent of all doctoral candidates and 41 percent of all master’s degree candidates in U.S. engineering graduate schools, according to the National Science Foundation. For most of its history, the United States has not produced enough U.S.-born scientists and engineers to meet domestic demand.
"The H-1B visa caps are ill considered because they push U.S. companies to send work abroad and kill the feeder system," says Angelo A. Paparelli, a partner at Paparelli & Partners, a law firm specializing in immigration law. "The feeder system is interrupted from the start because foreign students who might have entered U.S. universities go elsewhere because of the uncertainty surrounding their ability to move from a U.S. student visa to a H-1B visa."
Although the common perception is that most H-1B visa holders are from India, that nation accounts for only 22 percent of the 387,000 H-1B employees now working at U.S. companies, according to data from the U.S. Citizenship and Immigration Services. The Americas account for 109,000, or 28 percent; Europe accounts for 112,000, including 32,000 from the United Kingdom.
Even when U.S. recruiters can secure an H-1B visa for a valuable foreign employee, extending the stay beyond the six-year visa limit is extremely difficult and the company often loses the employee. "The green card process takes so long now that foreign workers return home or leave for Europe or Australia," CS Solutions’ Kuttikadan says.
"Because they can’t get H-1B visas, U.S. employers are fit to be tied," Paparelli says. "My clients have been forced to suspend projects and turn away business because they can’t hire the employees they need." He believes that employer attempts to raise the caps have been thwarted by disinformation from those who oppose immigration in general and from alliances of U.S. high-tech workers.
"The H-1B visa issue is an example of government by anecdote," Paparelli says. "Some U.S. workers who failed to maintain crucial skills were displaced by H-1B workers, and Congress seized on the issue, which is always popular in an election year."
Because bringing in an employee under an H-1B visa is expensive and time-consuming, many recruiters pursue H-1B employees only as a last resort. "Employers are bearing up under the burden of the H-1B process because they need these employees," Paparelli says.
Kuttikadan reports that CS Solutions turns to foreign workers only when it cannot find U.S. candidates. "To fill a position, we search our own database, look locally and then go to the job boards," he says. "It costs much more to bring in H-1B workers, and the risk is much higher."
In April, CS Solutions will file the paperwork to secure new H-1B visas, but it is likely to come up short unless the cap is raised. "Our other options are limited," Kuttikadan says. "We can try to use other types of visas, but these provide only a temporary solution, and our clients want a more long-term relationship."
At a minimum, the H-1B visa process adds $3,000-$5,000 to recruiting costs per candidate, according to Hanenburg at Warner Norcross & Judd. Costs are much higher if complex legal issues arise or relocation expenses are included. But with the domestic labor markets growing tighter and the number of U.S.-born science and engineering students declining, U.S. recruiters will run through the 65,000 H-1B visa quota quickly.
"If the cap is not raised, there is no real alternative for most U.S. companies," Hanenburg says. "Removing the cap will not happen until business mobilizes to a much higher degree. The problem is that Congress has not been able to distinguish between low-skill illegal immigrants and the highly skilled H-1B visa employees."
Kuttikadan believes that the shortage of highly skilled workers will last for at least three to five years, and companies will be forced to offshore more work. "The only lasting solution is for the U.S. government to recognize the problem in the educational system," he says. "In particular, it must recognize that people cannot afford the college education that they need to fill these jobs."
If U.S. trade policies for importing high-tech equipment mirrored immigration policies for high-tech labor, the U.S. economy would come to a screeching halt. "The U.S. must understand that globalization is a two-way street," Kuttikadan says. Unless Congress loosens the protectionist stranglehold, recruiters will be in for another extraordinarily tough year.