Wednesday, July 31, 2013

High skill visas and offshoring

The other day, Current made an interesting comment:
"Here's what I've been wondering about immigration recently....

Big silicon valley companies are lobbying for an increase high skills quotas. What nobody seems interested in is the simple question "Why do they care?" In the old days if US companies thought their home state was getting too expensive they would start branches in different states and countries. I work for the Irish branch of a US company which also has branches in many other countries. Why doesn't Zuckerberg just get Facebook to make branches in lots of other countries and pay staff the going rate in those places, which is certain to be less than in the US.

I think that something hiding behind this whole debate is the "buzz" of silicon valley. Recently start-ups have become very centralized there. Y-combinator (for example) seem to want everyone they invest in to move there no matter where they're from. I have a feeling this fad will disappear."
Of course the answer to the point is that they do move overseas, all the time. This bothers a lot of high-skill visa skeptics, but as you might imagine it doesn't bother me as much. My co-author, too, has been pretty open about the point that offshoring is inevitable and that we've got to succeed in a world with offshoring rather than fight it. But there is an interesting relationship between offshoring and high skill visas. In his field work, Hal actually learned that a large number of H-1Bs in tech firms are broad on specifically to be the onshore contact points managing the offshore operations, so that in a lot of ways offshoring has been accelerated by the high skill visa program.

The second point that Current makes is important too - geography matters a lot, and high skill visa users are not evenly distributed across the country. This is a point we make strongly in a hopefully forthcoming analysis of the wage structure of high skill immigrants.

1 comment:

  1. "This bothers a lot of high-skill visa skeptics..."

    I keep hearing the argument from the "high-skill visa skeptics" that Zuckerberg and co are importing cheap labour. They're attempting to keep down their costs by paying staff less. Offshoring challenges this argument, if Facebook can't get more high-skill visas in the US then it could start operations in other countries and pay even lower wages. So it doesn't seem a very clever argument. You can argue that offshoring and immigration are keeping down the pay of Americans and benefiting large corporations, and that's probably true. But you can't argue about one without the other. Get rid of offshoring and immigration will be used instead, and vice versa.

    I agree that high-tech companies do offshore things. But, some are doing this much less than they have in the past. If you work on engineering Apple computers (for example) then you work in Cupertino. Similarly, Facebook's coders are mostly in California. Both companies are still offshoring support services and customer support to India though. This is what I find odd. In many ways rather than being self-interested Zuckerberg's comments have been romantically patriotic. He believes that there's something special about America which allows Facebook to get more out of it's employees, more than it could employing them at much lower wages in their home countries. He's not alone in this lots of the talk in Start-up culture these days is about the mystical zeitgeist of Silicon Valley which makes things possible that aren't possible elsewhere. Perhaps agglomeration economics means this is true, or perhaps it's a fad.


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