Impact of non-immigrant workers on the developing nation

Earlier, I mentioned how a healthy influx of non-immigrant works can actually be beneficial to a developed nation. So, how does this impact the nation on the other end - the developing nation?

Once again, it has its benefits and drawbacks, and I feel that the drawbacks this time outweigh the benefits. The benefit is mainly two fold: One, as most developing countries tend to have a population growth higher than what they can sustain, the reduction in the population can help reduce the burden a bit. However, this is not necessarily entirely beneficial, as the population that is going out is one that can help improve the economy of the nation than be a burden, as most tend to be the law-abiding, tax-paying kind. Second, those who do decide to make their fortunes abroad tend to send back quite a bit of cash back to their families back home, there by increasing the foreign currency reserves of the country and also improving the purchase power of the families, which in turn, can improve the economy.

However, the downside is fairly significant. As I mentioned earlier, most of those who do go out to find better opportunities tend to be more law-abiding and tax-paying and hence, the nation tends to lose the tax income from them. Moreover, they also tend to be better educated than the average citizen and the nation as a result, loses good leaders and entrepreneurs who would've otherwise helped improve indigenous companies.

So, what can a nation do to prevent this 'brain drain'? To answer this, we must first understand why people tend to move outside their home country in the first place and take steps to fix those issues. While there is a percent of folks who want to go to another country due to some connections they already have or just because of plain curiosity, the following, I believe, are the more common reasons:

1. Perception of better social infrastructure (aka quality of living) - be it roads, houses, basic facilities, or government interactions, the developed countries have a better system than the developing nations. While corruption and mismanagement is there in every nation, it tends to be less when it is the closest to the typical citizen in most cases. Police do their job regardless of the stature of the person or his connections; electricity and water is available without having to run to multiple government branches; work generally gets done without bribery.
   
2. Perception of better education - while the school system in many developed countries are no better than those of developing nations, the higher education is significantly better. This could primarily be due to the healthy interaction between companies and universities. Most professors get grants from companies/government to do research and even develop some projects. Such a mechanism is not there in developing countries, where universities are essentially seen as extension to schools.
3. Perception of better freedom - both men and women tend to feel that there is generally better freedom to say and do things in developed nations. This could be politics such as criticizing the government for inaction or social behavior such as morality, dress code, etc.
   
4. Perception of better opportunities - the capitalist nature of developed countries tends to foster competition. The growth of IT also has made it easy for someone with one background to easily switch to another. Till a decade or so back, it was very difficult for an Mechanical Engineer to become an Electronics Major. People were typically put in silos and it was increasingly hard for them to break the mold. Thanks to IT in part, this has changed in the recent years, and more and more opportunities are coming up for fresh graduates. However, the issue still persists outside the IT industry.

In order to stem the 'brain drain', I feel that a nation that is truly interested in protecting its intellectual property must address these concerns.

While the purchasing power of the middle class citizens has increased enabling them to buy cars that they could only dream of in the past, the transport infrastructure has not caught up, resulting in major gridlocks, which in turn, is affecting the overall health of the nation. While IT has made leaps and bounds, the network is still significantly inadequate. One of the pleasant surprises that I got when I went back to India a few years back (first time after the Globalization) was the ease at which one could get a gas connection or a telephone. What used to take a year or two is now happening in a week. Things definitely have improved, but the road is still very long.

While there are way more universities and colleges than used to be a decade back, the quality of education has not improved significantly. In fact, it has gone down, thanks to numerous 'wealthy' individuals opening a college for making more money than for imparting better education. The evil of 'management quota' and 'reservation' still exists. What is urgently needed is a merit system (with economic support - such as scholarships) and a healthy involvement of businesses. This would not only bring the much needed cash to the education system, but also better prepare the students for job opportunities once they graduate.

India has always prided in being a democratic and secular country, where every citizen has fundamental rights of speech and worship. However, in the recent years, fundamental groups of all religions have cropped up and taken the role of 'moral' police. This is a very dangerous trend, which, if not cropped at the bud, would only lead more people to leave the country than stay back. A strong action needs to be taken to ensure that moral policing does not happen. India has survived for centuries without requiring moral policing and has withstood invasions from Mughal and British empires without losing its core values and without a need for a moral police.

While the IT industry has helped significantly in enabling fresh graduates to get better opportunities not just in IT but also in related industries such as commerce, there are still other areas like arts and literature that are languishing due to lack of support. While most political parties take up a language issue in one form or the other, none seem to be genuinely interested in protecting and promoting the indigenous languages and cultures. This must change for arts and literature to flourish along with technology and provide the much needed balance to the system.

These measures, I feel, would greatly help a developing nation, be it India or China, to compete fairly and healthily with developed nations such as USA and UK, and hopefully make the world a better place.

Impact of non-immigrant visas on a developed nation

In the last post, I showed the most common path that is taken by a non-immigrant worker (typically in the skilled jobs category such as IT) towards better life and opportunity in USA. The question then, is "How does this impact the country - Is it good or bad?" The question gets raised pretty much on a frequent basis, not surprisingly coinciding either with an election or with an economic downturn.

I feel that there are more benefits than risks, especially in this specific segment (temporary visas for skilled workers), and contrary to popular belief, I would argue that it actually benefits the economy than hurt it. Here's how.

B1 Visas
In case of B1 visas, where people come in for a short assignment, typically lasting no more than 3 months, there is some benefit and no real loss. While those folks tend to spend some money by buying gifts, they tend to conserve as much money as possible. It's mainly because the exchange rate is quite high ($1 = Rs. 48).

H1 Visas
The real benefit comes in H1 and to an extent, L1 visas. People in these visas tend to stay for a longer term - typically 3-6 years for a H1 visa and 2 or more years for an L1 visa. When a person comes in for a such a relatively long-period, he needs to set up a base here.

Accommodation and Travel
That means getting an apartment, furnishing it, buying essentials, getting a car, etc. All this contributes to the country's economy. Moreover, now that he is staying for a longer term, the tendency is to travel and explore the country with his friends/colleagues/family. This has a fairly significant impact on the American tourism, as can be seen at crowds gathered at Niagara Falls around national holidays! There is a joke that an Indian can find his long-lost friend or cousin if he visits Niagara Falls on Independence Day!

Marriage and Travel
This inclination for tourism only increases when the person gets married. This happens more often than not because people who tend to come in to USA on an F1 or sometimes even an H1 are young adults aged 20 - 30, and tend to get married around 25-35, when they get staffed in a relatively stable project. This change in the lifestyle once again contributes fairly to the American economy.

Child Birth
The next big expense comes few more years down the road when the family size increases. A new kid comes with its own expenses, often more than their parents! This again contributes to the economy.

Note that the typical downside of immigration such as potential increase in crime, uninsured medical expenses, etc. are not applicable here, as most tend to fall under the middle to upper-middle class with an average annual income of around $60,000 - $100,000 and they are all insured by their employers for the most part.

I have seen that a typical non-immigrant family tends to save less or at most same as what they would have, had they been back home. While the material possessions to tend to increase significantly compared to their counterparts back home, the overall savings remains the same.

On top of all this, one thing that I find most interesting is that H1 visa holders have to pay Social Security Tax. As you know, SS tax is intended for care post-retirement, which H1 holders are not eligible for, unless they stay here and get citizenship. Moreover, a country such as India does not have a bilateral agreement to convert the SS tax contributions to a PF (Provident Fund) contribution - the Indian equivalent of an SS tax. So, if the person decides to head back after the H1 term ends, their contribution goes to the SS pool, benefiting the rest of the citizens (or at least that's how I understand it).

There are a number of other intangible benefits as well. For example, as most H1s have kids no more than 3 years old, they do not place a burden on the educational system. Rather, they contribute to the economy of the day-care agencies. Also, most families tend to fly-in their parents and in-laws to see the newborn and to generally show them around the country. This in turn, increases the tourism as well.

So far, there are only positive. So, where's the negative? The biggest complaint is that an influx of non-immigrant workers will deprive the citizens off their opportunities for same jobs. However, I do not believe this is true. The same hue and cry existed when offshore development started. People feared that all IT work will go to developing countries. 5 years down the road, we are yet to see that happen. I believe that more than depriving people of their opportunities for jobs, I see this as a shift in the type of skill set needed within the country.

Change in skill set
In most developing countries, the educational system emphasizes rote learning and analytic work as opposed to creative work. As a result, people from these countries are excellent in analytical skills and task-oriented jobs. However, the same advantage also makes them poor leaders. The lack of emphasis on creativity makes them less effective managers, leaders, and entrepreneurs. This is where the American workforce shines, and this is where they can continue to get more work.

The exceptional few who are good leaders use the free market in this country to set up shop, which in turn, provides opportunities for a number of citizens.

So, in all, I think it is in fact, advantageous to have H1 workers at a constant rate than not have any. It bodes well for the country's economy, tourism, and development.

Green Card
The penultimate step in the quest for citizenship is permanent residence (or Green Card). This makes the non-immigrant worker effectively an immigrant and helps them in getting some of the benefits enjoyed by citizens. The children also would have grown up by now and get incorporated into the educational system. The influx of the analytic-oriented kids into a creative system can help bring a better balance to the overall educational system as well and foster healthy competition.

Moreover, most green card holders now have to upgrade their lifestyle and tend to buy a house (and spend more money on house maintenance!), which again is a boon to the economy.

Bottomline: Having a reasonable influx of non-immigrant workers can be healthy for a developed nation both in terms of economy and in terms of keeping it in its toes. This influx should be considered as a shift in the work force and not as a replacement.

Now that we have seen how a developed country actually gains a lot more than it loses due to non-immigrant workers, you may wonder "Who loses?" After all, nature is more or less balanced and if one wins, someone else must lose - and that would be the developing nation! In my next blog, I hope to explain what the developing nation loses, and how it can potentially avoid the loss.

American dream for the non-immigrant worker

This is a slightly longer post - so much so that I am splitting it across three posts, all related.

Heated debates about worker visas tend to appear typically during times of trouble and during election. While the demand for H1-B (temporary worker) visas in USA seem to have slowed down (at last count, there are still 20,000 visas up for grabs this year), I think the current economic crisis and even job downturn seems like a good time to think about the impact of these visas on the US economy.

As a foreigner from a developing nation who came to USA for better opportunities and growth, I can relate to the standard (sometimes even stereotypical) path that a non-immigrant worker takes in search of a better life. While I focus on India and US, as I relate to them personally, I believe the same applies to the visa relationship between any developing nation and developed nation.

I have tried to depict the typical road taken by a non-immigrant worker to achieve the elusive 'American Dream' in the picture below.


The journey typically begins with a (hopefully) bright, young individual who wants better education and career that he does not believe might be available in his home country. As a result he applies for an F1 (education) visa, hopefully gets a grant or scholarship, and comes to USA.

After 2 years of studies, he gets a Master's degree, gets an EAD (Employment Authorization Document) to work in the country for up to a year. In this time period, he gets a job and gets the company to sponsor his H1-B (temporary worker) visa, which would allow him to work for a minimum of 3 and a maximum of 6 years.

After a few years, some may opt to get back to their home country for personal reasons, which may include caring for aging parents, personal choice, or a stronger social group in the home country. Others continue down the road.

The willingness to stay on course may be strengthened by marriage (want to have some quality time with the wife and show her around the natural and artificial beauties in the country). Another boost might be the birth of a child.

Eventually, the individual may apply for a Green Card through his company. While the card is being processed, there may be other boosts such as buying a house which would further extend the willingness to pursue the eventual dream.

The Green Card (permanent residence) eventually arrives, giving more flexibility to the individual in terms of career growth, which may extend his stay for a few more years. In the meanwhile, the kid(s) may grow up to be young adults. At this point, another reality check happens. Torn between the comfort of the new life and the culture in which he lived (which often may conflict with the culture he currently experiences), he may decide to go back after all. Factors such as economic prosperity in the home country may aid in this decision.

Another check might be the perception (or reality) of a glass ceiling in the work environment - he may feel that he is not getting anywhere in his career and may opt to move back, hopefully getting a more senior position based on his experience in USA.

Alternately, he may decide to stay on and after 5 years, may opt for citizenship. At this point, his 'American Dream' has come true - he has a home, kids, and good income... or, has it?

All this sounds great; some might even say, obvious. However, what about this path hampering the citizens of the developed country, who are otherwise robbed off their own dream because of these newcomers? Does it really hurt them? Why the perception? That's for the next post.