Experts slam ban on bailed-out firms hiring H1-B holders

February 17th, 2009 - 10:10 am ICT by IANS  

Barack ObamaWashington, Feb (IANS) Economic experts have slammed a provision in the $787 bailout package that President Barack Obama signs into law Tuesday barring banks and other financial institutions receiving government funds from hiring foreign workers.

But analysts also suggest that the impact of the provision in American Recovery and Reinvestment Act barring such firms from hiring foreigners through HI-B visa programme, largely cornered by Indian techies, may not be as severe as some prophets of doom fear.

The measure, as finally approved by the Congress, would require the bailed-out banks to hire only Americans for two years unless they could prove they were not replacing laid-off Americans with guest workers, according to Bernie Sanders one of its sponsors.

However, the bar affects only firms receiving bailout funds hiring new workers to replace laid off US citizens. The ban does not affect existing workers. Nor does it bar the bailed out firms from continuing to outsource their work to firms hiring H-1 B holders.

In any case with or without the controversial provision, there are far fewer new jobs on offer. As Obama pointed out in selling the stimulus package, US has lost more than 3.6 million jobs since this recession began, 600,000 of them in January alone, the worst in more than 30 years.

According to estimates, Indians are part of almost 200,000 people across the world who had applied for the skilled worker visa in 2009. Of the 65,000 H1-B visa issued annually, some 70 per cent go to Indian professionals, mostly from the IT industry.

Nevertheless the provision has come in for criticism from experts. New York Times columnist Thomas L. Friedman called it a “Bad signal.”

“In an age when attracting the first-round intellectual draft choices from around the world is the most important competitive advantage a knowledge economy can have, why would we add barriers against such brainpower -anywhere? That’s called ‘Old Europe.’ That’s spelled: S-T-U-P-I-D,” he said.

According to research by Vivek Wadhwa, a senior research associate at the Labour and Worklife Programme at Harvard Law School, more than half of Silicon Valley start-ups were founded by immigrants over the last decade.

These immigrant-founded tech companies employed 450,000 workers and had sales of $52 billion in 2005, said Wadhwa in an essay published on

He also cited a recent study by William R. Kerr of Harvard Business School and William F. Lincoln of the University of Michigan that “found that in periods when H-1B visa numbers went down, so did patent applications filed by immigrants [in the US]. And when H-1B visa numbers went up, patent applications followed suit.”

Cutting visas for high-skilled immigrants is not the answer to the country’s rising unemployment rate and may undermine efforts to spur technological innovation, Wadhwa said.

Jagdish Bhagwati, Indian-born Professor of Economics at the Columbia University, has also argued that the provision to restrict hiring of H1-B visa holders would deprive the US of the best global talent which comes in the form of highly trained and talented people.

(Arun Kumar can be contacted at

Related Stories

    Posted in Uncategorized |