USCIS confirmed last week that the H-1B cap was reached on January 26, 2011. The H-1B visa, created through the Immigration Act of 1990 became a staple of the tech industry in the early oughts. Studying the demand and speed of consumption of H-1B visa numbers gives insights into long term trends in US job markets from offshore labor to real demand for IT workers.
Below is a table showing the H-1B cap for each USCIS fiscal year from 1992 to 2011 and the speed with which it was consumed for that year. The data appear to validate Nandan Nilekani's quote "the world is flat" (later borrowed by Thomas Friedman for his book of the same name). Technology is rendering the location of many sorts of workers irrelevant and that means multinationals and US companies are increasingly hiring workers abroad rather than in the United States and therefore the demand for importing workers into the United States is waning.
Date Cap Reached
Total Numbers Available Total Cap Petitions Filed 2011 01/26/2011 85,000 85,000 2010 12/21/2009 85,000 85,000 2009 04/08/2008 85,000 85,000 2008 04/01/2007 85,000 85,000 2007 05/26/2006 85,000 85,000 2006 08/10/2005 85,000 85,000 2005 10/01/2004 85,000 85,000 2004 02/17/2004 65,000 65,000 2003 Cap Not Reached 195,000 105,314 2002 Cap Not Reached 195,000 109,576 2001 Cap Not Reached 195,000 163,600 2000 03/20/2000 115,000 164,814 1999 06/11/1999 115,000 138,000 1998 05/10/1998 65,000 65,000 1997 09/01/1997 65,000 65,000 1996 Cap Not Reached 65,000 55,141 1995 Cap Not Reached 65,000 54,178 1994 Cap Not Reached 65,000 60,279 1993 Cap Not Reached 65,000 61,591 1992 Cap Not Reached 65,000 48,645
Companies seeking to bring foreign workers to the United States have other options once the H-1B cap is reached including using the E-3, TN-1, E-1, E-2, L-1 and several other categories. While these alternatives are not open to every petitioner, they are available to many companies.
The last time that the cap took this long to fill was in 2004, when it was reached on 02/27 instead of this year's fill date of 01/26. Beyond that, we must travel back to 1998 before we see fewer H-1B petitions consumed in a single year.
As the world flattens, the need to move workers to the US may wane. As telecommunications technology improves, knowledge workers like IT consultants, business consultants, scientists, accountants, and many others who work in fields where it is easy to collaborate using messaging, file sharing, shared databases, video conferencing and other technologies to work from where they are.
Although President Obama's State of the Union speech emphasized education in his vision of competitiveness, the unmentionable essence of competition was never uttered. That word is price. Competition is about receiving value and value is composed of two elements, the product or service and its price. Labor remains the most expensive component of capitalist production and from a profit maximization perspective, wages are where you get the most savings in cost cutting.
To talk about competitiveness without mentioning wages is like talking about which LCD TV you will buy based on how close the store is to your home rather than how much the set costs. If one store near your home is selling a set for $6,500 and another store that's a half hour or an hour drive is selling the same or a similar set for $700, most people are going to take that drive. Quality is important, but only within the context of price.
To be competitive, American labor is going to have to compete on price with Chinese, Indian, Bangladeshi, German, Mexican and Taiwanese labor. It will have to compete based on skill, education and productivity as well as price.
My guess is that as the world flattens further, it will seem more logical to limit flows of immigrant workers because of the additional costs and political problems such flows engender.
It is unclear how many companies have shifted to the L-1 visa program to circumvent the problems presented generally by H-1B visa regulations including minimum salaries, worksite location restrictions and other regulations. But the requirement that the US company be related to a foreign parent, subsidiary, or affiliate likely limits to some extent the ability of many companies to hire L-1 workers.
And indeed today, the H-1B program is at least close to returning to its pre-IT boom consumption levels of less than 65,000 new H-1B workers per year. It will take time for that to work its way through the system because H-1B workers often remain in the United States for six years or longer and many pursue residence. But after a few years of reduced H-1B inflows, the employment profile of US knowledge-based industries could very well permanently return to pre-IT boom era numbers.