Hiya,

Going back for – a while when CHARLES SCHUMER, senator from New York, thinks that companies like Indian software giant Infosys are “chop shops”, which he defines as companies that “outsource good, high-paying American technology jobs to lower wage, temporary immigrant workers from other countries”.

A chop shop, as Wikipedia informs me, is:

A slang phrase for an illegal location or business which disassembles stolen automobiles for the purpose of selling them as parts. It may also be used to refer to a location or business that is involved with the selling of stolen goods in general … Another common use refers to a business whose product, service, or equipment is of questionable quality.

I was only familiar with the phrase because of an excellent film I once watched by New York-based Iranian-origin director Ramin Bahrani, which, by he way, I highly recommend. I think Mr Schumer’s choice of rhetoric is very deliberate indeed: when you want to demonise someone, why not imply that what they do is somehow illegal or generally dodgy and suspect? But perhaps he could do with a small lesson in the way the commercial-services industry works. For one thing, the bulk of what Infosys does has nothing to do with “temporary immigrant workers from other countries”. Infosys employs just under 115,000 people worldwide, and the bulk of these are in India. True, it now gets some American interns from US universities, but I doubt that American computer-science students interning in Bangalore are the sorts of “temporary immigrant workers from other countries” that Mr Schumer is railing about. (Some of these workers, presumably, stay on with the company but return to America, making them among the 1,300 Americans or American permanent residents that the company’s head of HR, Mohandas Pai, says it employs in the US.)

What Mr Schumer is referring to, of course, is H-1B visa holders, engineers/coders on temporary work visas who are employed in the US by Infosys and lots of other companies, including many American ones.

If more than half of such a company’s US workforce is on a work visa, then Mr Schumer would have the company and others like it pay $2,000 more to get the work visa for each foreign worker when it gets or renews an H-1B visa for said worker than it had to earlier.

Mr Schumer also thundered that this measure “will not affect the high-tech companies such as Intel or Microsoft that play by the rules and recruit workers in America”. I’m not sure what “rules” he is referring to: he makes it sound as if companies who use legal methods to staff projects in the US, using a visa scheme that the American government has set up, are dodgy operators in some sort of grey market. I, for one, did not know that there were unwritten “rules” about the ratio of foreign workers to American ones that companies operating in the US had to follow. Neither, it seems, do the companies: Infosys’s head of HR, Mohandas Pai, gave an interview to the Economic Times, an Indian business paper, where he pointed out that, “We are a law-abiding company, we play by the rules and we have always played by the rules.”

Be that as it may, Infosys and others like it will now have to pay an extra $2,000-$2,500 per foreign temporary worker they want to use to staff projects in the US. According to the Wall Street Journal, “Som Mittal, president of Indian technology industry trade group National Association of Software and Services Companies said after the fee hike, companies could be spending $200 million to $250 million a year more in human resources costs annually.” This would imply 100,000 H-1B visas per year to these guys, which seems high—the yearly cap for the H-1B programme is 65,000 or thereabouts, and while Indian companies get a big chunk of them, they don’t use all the visas under the programme (companies that “play by the rules”, like IBM and Microsoft, also use the H-1B programme).

But this is probably an over-estimate of the eventual cost, even if it accurately multiplies the additional dollar cost per visa by the number of visas these companies currently use. That’s because Infosys and its peers could do something really radical in response to the increased cost of making some of its people work in the US: they could simply employ them in another place like…India. Seeing as they are primarily companies that do work contracted out by US companies, the idea might be familiar to them.

Indeed, the Journal reports that Mr Pai says that “the Indian software services exporter’s ability to move more work offshore and optimise other expenses will help mitigate the impact”. Presumably, if they were forced to do this, they might not need as many Americans to work in their US offices (my guess is at least some of these people work in administrative/support positions). That, I’m sure, is exactly the outcome Mr Schumer is hoping for.

What’s also funny about all this chest-thumping service-sector protectionism is that it comes from the world’s leading exporter of commercial services, who you’d think would understand the need for open markets in an industry where it is the world’s biggest player. In 2008, the last year for which the WTO has comprehensive worldwide data, America’s exports of commercial services were around 5 times India’s (and about 28% of its total exports). And while latecomers like India have been playing catch-up, America’s service-sector exports have not exactly done badly: they more than doubled in value between 1999 and 2008, when the US had a big surplus in its commercial-services trade.