In our continuing coverage of the Backlash against outsourcing, we look behind the scenes–at issues more fundamental to nations than a few IT jobs lost. At how Indian IT pros are only a fraction of all Indians abroad. And how all Indians abroad are just a fraction of the immigrants that flock to the US, Europe and Australia. The Backlash isn’t about a few H1B visas (for Part I, see Dataquest’s 28 Feb 2003 issue). It’s about immigration–and about the new services economy–where people are more mobile than goods. It’s about a new world in the making–and the churn that goes with it...
This is the second of a two-part story.
This story first appeared in Dataquest Vol XXI No 10 pp 54-62
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Imagine this:
One in every 10 people you see, meet on the street or work with, is a foreigner.
That one of these foreigners–Arab, Bangladeshi, Malaysian–got your job and
moved into a plush new house while you were fired with a wife and two kids to
support.
That he got your job because he agreed to work for one-fourth your salary.
That there are a 100 million like him in India, all willing to work at quarter-wages...
Now imagine your reaction…
Man doesn’t live by bread alone,” Victor Hugo once said in context of the French Revolution. It was in many ways one of the most profound statements ever made on politics, popular sentiment and economics. Often, what drives popular sentiment and, therefore, politics and legislation, has little to do with the dictates of rational economics. There’s a lesson that every political party learns at the birth of its career — emotion is a more potent force than reason; perception more powerful than reality; the short-term a greater driving force than the long-term.
And that's a fundamental error Indian IT services companies are making as they survey–slightly bewildered – the growing resistance to outsourcing across Europe, the US and Australia. They look at the numbers and say “but we are so few–we can’t conceivably be a threat to local jobs”. When Dataquest did its last story on this growing Backlash, the more forward-looking companies believed that countries like the US, for instance, “are inherently liberal” … and that “the economics of outsourcing are too alluring to be resisted”.
But it isn’t about how many people a single company has in any country: i-Flex had only 20 in Netherlands when its CEO was arrested for allegedly encouraging illegal immigration. It isn’t even about how many Indians there are in a country — Indians form only 3% of the entire immigrant stock in the US but are the center of the Backlash debate.
It isn’t even about whether a people are inherently liberal.
Many American readers wrote back to us on the Backlash story, arguing that Americans weren’t racist, that the Backlash to outsourcing wasn’t about race and color. They were right–most Americans aren’t. The American nation has been built on the idea of immigration. But here’s another fundamental truth of political debate — it isn’t always the moderates who set the agenda.
But that’s getting ahead of ourselves.
The fundamental misjudgment by the IT services sector is the belief that because they are such a small pie of the big IT spend, they aren’t big enough to be seen as a threat...That the whole issue is really about competitive billing rates… That politics is irrelevant, the fringe far right even more so… That economic decisions are made in isolation of popular politics.
The Indian IT services sector does account for only a few billion dollars of outsourcing revenues. And there are only a few tens of thousands Indian IT professionals abroad on work visas. But these IT professionals have to be seen in the context of the total number of Indians abroad. And that has to be seen in context of largescale immigration that most of the developed world now faces.
It isn’t really about 20 i-Flex employees. Or a total of 8,265 Indians working in the Netherlands. It isn’t about 60 employees of Infosys Technologies in Australia. Nor about a total of 100,000 Indians in that country.
It is about the fact that one of every 10 people, living on Dutch or US or UK soil today is a foreigner. It is about the fact that one in every four people in Australia today is foreign-born. And it is about what this scale of immigration does to local sentiment, politics and perceived economic ills.
Old World Immigrants
Immigration isn’t a new phenomenon. There are entire nations made up of immigrant communities–the US and Australia being prime examples. But some things are different now–its scale for one, and its nature, for another.
Prior to the 1850s, the US imported a large number of immigrants as contract laborers to work in mines and railroads. Most of the Western world imported people during the severe labor shortages after World War II. Some permanently–like the United Kingdom. Some as temporary, contract laborers–like Germany. Australia had a total of 7.6 million people in 1947, of which only 2.7% were not of Anglo-Celtic origins. Post-war reconstruction required a lot more people and Australia set itself a target of adding an equivalent of 1% of its population every year. Few exceptions notwithstanding, that was the essence of it–low-cost, end-of-the-food-chain jobs that governments wanted immigrant labor for.
It’s only during the last few decades that both the scale and nature of immigration has changed.
Versus the New World Immigrants
By the end of last year, 10% of the population in the United States, or 28.4 million people, were foreign-born — a historical high. Add illegal immigrants and estimates are that about 33 million people on US soil today (or 11% of the total population) is foreign-born. They account for 13.5% of the working-age population, with a similar representation in the actual workforce.
In the United Kingdom, 8% of the of the total population–or 4.8 million people, were foreign-born legal immigrants in 2001. France, Germany and the Netherlands have similar proportions.
In Australia, the Migration Policy Institute estimates that by 2000, “over 40% of the population was either foreign-born themselves (23.6%) or had a foreign-born parent (19%)”.
There’s no dependable count of the high number of illegal immigrants in any of these countries.
By themselves, the numbers are mind-boggling.
For perspective — India, with a population of over one billion, is struggling with a less than 2% influx of Bangladeshi immigrants on the Assam border. The government is in a tussle with Bangladeshi authorities, complaining of job losses, crime, security and national identity issues. And it is threatening deportation.
Desirable vs the Un
Most of Europe, the US and Australia have, at different points of time, tried to restrict immigration by origin. The 'White Australia Policy'; the National Origins Act of 1924 in the United States; and the Immigration Acts of 1962 and 1971 in the United Kingdom–all were attempts to get what countries believed were “desired” immigrants. That changed late last century–for numerous reasons.
British immigrants alone could not fill the labor shortage in Australia, for instance. Political upheavals around the world prompted the UK, Australia and the US to open up their gates to asylum-seekers. More recently, countries have looked at “skill-based immigrants”–the US being among the first to do so in 1952 when it first introduced the H1 visa.
In UK, even today, EU countries account for a more than 40% of the foreign workforce (the primary reason being that under EU law, people of EU origin have a right to residency in the UK); followed by India (estimated at 141,000), America (61,000), Australia (54,000) and West Africa.
Elsewhere, the picture has changed. The dominant migrant community in Germany is still the Turks. In the US, it’s Mexicans, the Filipinos, Indians and Chinese–in that order. In Australia, Asians are the fastest-growing migrant community, accounting for 24% of the foreign-born population.
Nations Constantly in the Making
These nations–most specially the US, Australia and the UK–have traditionally been immigrant-friendly, with more liberal asylum policies than any other country in the world.
However, these are unsettling changes in difficult times. The scale of foreigners moving in every year has turned them into nations constantly in the making. And there’s only so much constant change that people and countries can digest without some kind of a reaction setting in.
Typically, the reaction is showing up in two forms–in perceived economic problems of migration and in politics.
For one, the economy isn’t in great shape just now–with sub-5% GDP growth rates almost everywhere (see country profiles).
For another, the percentage of immigrants in all countries–without exception–is higher than the percentage of unemployment.
There’s a growing and palpable fear, therefore, that immigrants are taking away local jobs. When the jobs threatened are also high-profile, high-paying ones–like in the technology sector–the fear is significantly heightened.
Add to that the growing security concerns post-9/11 and you have a brew of issues waiting to boil over. As NASSCOM president Kiran Karnik said in a recent column:” There’s little doubt that the general ambience of insecurity, engendered post-September 11, is contributing to a suspicion of the ‘other’ and leading to some excesses with regard to checking of visas, etc. In many countries, this is further accentuated by increasing unemployment rates and concerns that immigrants are taking away local jobs.”
Security concerns may well pass away. Immigration won’t.
The Crib List
Karnik also believes that the immigration issue is big enough to have called for the setting up of an International Migration Organization. “As trade increasingly moves from goods to services, mobility of people is going to be a critical–and probably contentious–issue,” he adds.
The Politics of the Economy
But the economy is only half of that picture. Politics is the other. It is here that fears–real or perceived–are articulated and acted upon. It is also a realm of activity the IT services sector and the Indian government like to steer clear of.
The US government, on the other hand, tracks political activity all over the world–from Burkina Faso to India and Somalia. It regularly issues travel advisories to its citizens about nations that are believed to be “high risk”. The Indian government and trade bodies fight shy of doing that.
It is a mistake to believe, however, that the IT sector works in splendid isolation from politics. It is also a mistake to believe that extremist political organizations are reactionary and, therefore, irrelevant. The Backlash is not about the money.
Extremist leaders who lose elections nevertheless play an important role–they bring extremist debate into the political mainstream. They also force mainstream parties to take a more hardline stance (see later, It’s the Politics, Stupid). Just look at the transformation of political discourse in India in the last decade.
The far-right argument may or may not be borne out by facts. But that is irrelevant. These are not just nations in the making. It is a New World in the making, with the Indian IT services sector–willy-nilly–dead-center of that churn.
At the very least, what we need to do to turn the tide is take our blinkers off.
Ends
Major Immigrant Hubs - GDP, Population, Immigrant Data & Unemployment
First Time is Coincidence, Third Time is...State Action
It’s no longer about isolated incidents. They can no longer be dismissed as unconnected. Across Europe, the US and Australia, there’s growing umbrage against offshore Outsourcing. And some local governments are responding with legislative backtracking…
This story first appeared in Dataquest Vol XXI No 10 pp 60.
Here's a timeline of some recent events:
United Kingdom
February 2002: Soon after the fast-track work permit system is introduced, Mastek comes under fire for getting Indian workers “on the cheap” at lower than market rates. Company denies the claim saying Indian programmers are willing to do work that British workers don’t want to — base level coding for instance.
August 2002: UK takes IT off the list of occupations that have a workforce shortage. IT Visas to UK now more difficult to come by.
March 2003: British Telecom comes under flak for plans to open two call centers in India with 2,200 seats. Employees threaten strike though BT says no UK jobs will be lost. One of the call centers is at Infosys’s BPO subsidiary Progeon.
May 2003: BT faces union ire again for employing Indian programmers from Mahindra BT (MBT) at “quarter rates” (one-fourth the going billing rates). BT fobs off the attack, but BPO outsourcers now more secretive about deals in India.
Australia
July 2002: Despite a skills shortage problem, the government suspends priority visa processing arrangements for Information and Communications Technology workers.
September 2002: Infosys chief Narayana NR Murthy goes to Melbourne to inaugurate the company’s new development center. He's confronted by a hostile media and a series of tough questions on how many “locals” the company would employ.
Same month–the Australian Computer Society (ACS) issues new guidelines for a skills test, making it tougher for IT professionals to immigrate.
March 2003: In the midst of continuing acrimonious debate on immigration, law amended to make Temporary Business–Long Stay–visas more difficult to come by. Students visa laws also become tougher.
April 2003: Australian telecom major Telstra faces a storm of accusations for hiring Indian programmers from Infosys and Satyam at what are alleged to be “sweatshop wages.” All three companies deny the charges, but it is clear that outsourcing deals are now under closer scrutiny than ever before.
Germany
April 2002: A new Immigration Law aimed at getting foreign high skilled students and workers is approved by the Bundesrat (the Upper House of the German parliament), leading to a constitutional crisis. Six of Germany’s conservative-run states challenge the bill in a constitutional court.
December 2002: Court declares the Law void after it has been passed.
February 2003: Gerhard Schroeder’s government back tracks a little. Withdraws the Green Card scheme for IT professionals introduced two years ago.
May 2003: However, the government sticks to its guns on the immigration bill. Re-Introduces it in parliament — unchanged. Fresh trouble expected.
United States
October 2001: President George W Bush signs the USA Patriot Act, which, among other things, establishes new guidelines for monitoring international students and migrants. It also Allows foreigners to be detained for a week before the government decides what to do with them. This has more to do with 911 than outsourcing, but the impact will be felt across industries and the country.
November 2001: Guy Santiglia, former Sun Micro employee, files a complaint with the Labor Department accusing Sun of replacing U.S. workers with H1B non-immigrant workers. He says Sun discriminated in favor of H1Bs, even hiring them for “non-specialty occupations.”
December 2002: The New Jersey State Senate unanimously passes a bill to prevent the government from outsourcing IT jobs outside the US. Bill is sent to the NJ State Assembly for consideration. Other states like Connecticut, Missouri, Maryland and Wisconsin are considering similar bills.
March 2003: Though the Santiglia case is thrown out, Walter Kruz, another former Sun employee files a class action suit, claiming the company violated age and race discrimination laws by keeping younger Indian workers while firing him and other American workers.
The suit sought class action status on behalf of all “non-East Indian” employees that were affected by Sun’s work force reduction policies–an estimated 2,400 of them.
April 2003: The New Jersey Department of Human Services renegotiates its contract with a private company Efunds and forces it to move its customer call center from Mumbai to Camden, NJ.
May 2003: State department officials propose face-to-face interviews for all Visa applicants and fingerprinting of all entrants to the US. Florida Congressman John Mica introduces a Bill in the House of Representatives to stop perceived abuse of L1 visas by Indian IT services companies. His contention–L1s are a backdoor to cheap labor, because of which “Americans have found themselves in the unemployment line.”
The Netherlands
March 2003: i-Flex Netherlands chief executive officer V Senthil Kumar is arrested in London, UK at the behest of the Dutch government. The Dutch ask for Kumar’s extradition accusing him of conspiring to get Indians into Netherlands illegally.
May 2003: After two months of back and forth, the UK court rejects the extradition order. Kumar is a free man but the Dutch investigations to continue.
Sarita Rani & TV Mahalingam
Ends
Backlash - It’s not the Money, it's the Politics Stupid! The Far-Right Rises
Through most of Europe the far right is either setting the agenda for mainstream political debate or actually in power. In the US and Australia, the conservatives are taking a more hardline stance. The menu of issues is the same: corruption, immigration, crime and national identity. The argument also similar: Immigrants threaten civil order (crime, riots, corruption); they take away local jobs; and they threaten national identity.
All of them leading up to one common refrain–Stop Immigration. Here’s a rundown on the politics of immigration in some countries key to the Indian IT services sector…
This story first appeared in Dataquest Vol XXI No 10 p62.
France
France shocked itself and Europe by almost voting Jean-Marie Le Pen to power in 2002. His far-right party — The National Front — promised an end to all immigration, set up camps for illegal foreigners awaiting deportation and withdrawal from the EU. An agenda on which Frenchmen voted him the second most popular person in the country.
Le Pen did not become president finally but his 20% of popular vote sent a powerful message to Europe. BBC’s comment on the event: “Europe’s far right made its single biggest advance in 50 years.”
Germany
Ten years ago, it was the Turks who came under attack from mushrooming neo-Nazi parties. One of them won close to 10% of the vote in the German Parliament, raising the spectre of pre-war Germany.
Two years ago–it was the Indians. When the government decided to allow
faster visa processing for IT professionals, the opposition slogan was–” Children,
not Indians”.
In the last few years mainstream parties like the Christian Democratic Union and the Christian Social Union have moved further into what was earlier considered the extremist fringe. Among the most radical of them – Edmund Stoiber who fought the 2001 elections promising an end to all immigration.
Stoiber and the Christian Democrats lost the elections but forced the new government of Chancellor Gerhard Schroeder into a more conservative position. Germany recently withdrew the green card scheme for IT professionals saying there was already too much unemployment in the country.
United Kingdom
In 2001 Asian and British youth rioted against each other for a week on the streets of Oldham, Burnley and Bradford. In elections later that year, Tory leaders like William Hague made immigration their main election issue. Hague promised an end to illegal immigration, and deportation camps — Germany style. Labor policies on immigration he said, had turned Britain into a “soft touch” not just a “safe haven.” More ominously, the mainstream Tories found support from the far-right British National Party. The BNP sowed a minefield — fielding and winning 3 seats from the riot ravaged constituencies.
Labor won the elections finally but has since gone tough on immigration. It also recently removed IT from the list of occupations with a skills shortage. A growing and more often vocalized sentiment these days — immigrants lead to more crime.
The Netherlands
Within a year of being formed, the far-right List party came to power as part of a coalition on a strident anti-immigrant agenda. Started by a former sociology professor called Pim Fortuyn the party promised an end to immigration and demanded that “anti-discrimination” laws should be reconsidered.
When Fortuyn was assassinated last year, 40,000 people came for his funeral and a 100,000 to sign the condolence register. It was an outpouring of grief in Europe not seen since the death of Princess Diana.
Though the party lost some steam after the assassination of Fortuyn, his anti-immigrant agenda is now firmly on the windscreen of mainstream political parties.
Austria
A far-right party is now the dominant party in power. When Joerg Haider’s Freedom Party won 30% of the vote and first entered the government as a coalition partner three years ago, Europe was shocked.
So shocked in fact that the EU slapped sanctions against Austria and boycotted it for several months.
That hasn’t hurt Haider’s fortunes. Since the mid-90s he has built his career on crime and immigration issues and is now in power with the promise that he will put a stop to both.
Italy
At the moment, a center-right coalition is in power led by Silvio Berlusconi who was elected on an anti-immigration plank (Read: The Man Who Would Be King). His coalition partners from the far right include Gianfranco Fini’s National Alliance with roots in Mussolini’s fascists and the Northern League whose Umberto Bossi demanded deportation of all illegal or unemployed immigrants.
Australia
Traditionally open to asylum-seekers and immigrants, Australia has had immigration problems in the last three years of a rather extreme nature. Asylum camps and the refusal to take in boat people even moved the UN once to warn the country. Not surprisingly, it has also had troubles with its own version of the far right. The One Nation Party came to the forefront in 1998, with a call for immigration policy changes–the shift to fewer and more skilled immigrants.
Among the mainstream parties, New South Wales Premier Bob Carr has over the last
year been an increasingly vocal critic of both immigration and outsourcing–specifically
to India.
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Sarita Rani and TV Mahalingam
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