US policy wise : Visa, Free Trade and WTO

Lay-off Indian techies scrambling for options to stay in US

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NA

Mains level : Lay-off impact on Indian techies

Thousands of Indian IT professionals in the US, who have lost their jobs due to the series of recent layoffs at companies like Google, Microsoft and Amazon, are now struggling to find new employment within the stipulated period under their work visas.

Recent layoff is US

  • Nearly 200,000 IT workers have been laid off since November last year, including some record numbers in companies like Google, Microsoft, Facebook and Amazon.
  • As per some industry insiders, between 30 to 40 per cent of them are Indian IT professionals, a significant number of whom are on H-1B and L1 visas.

What one means by Lay-Off?

  • A layoff is the temporary or permanent termination of employment by an employer for reasons unrelated to the employee’s performance.
  • Employees may be laid off when companies aim to cut costs, due to a decline in demand for their products or services, seasonal closure, or during an economic downturn.
  • When laid off, employees lose all wages and company benefits but qualify for unemployment insurance or compensation (typically in USA).

Why do companies resort to layoffs?

  • Cost reduction: One of the main reasons why workers get laid off is because the company decides to cut back on costs in some way. The need can arise from the fact that the company is not making enough profits to cover its expenses or because it needs substantial extra cash to address paying off debt.
  • Staffing redundancies: Layoffs also occur when a company needs to eliminate some positions due to over-staffing, outsourcing, or a modification to the roles.  A company may want to eliminate redundant positions in order to make its operations more efficient.
  • Relocation: Moving the company’s operations from one area to another can also bring about the need to let go of some workers. Shutting down the initial location will not only affect the workers who get laid off but the surrounding community’s economy as well.
  • Merger or buyout: If a business is bought out or decides to merge with another, the change might lead to a change in the company’s leadership and corporate direction. If there’s new management, the chances are that they’ll come up with new goals and plans, and this can lead to layoffs.

Immediate triggers of Lay-Off

  • Pandemic Boom: During the pandemic, there was a surge in demand as people were in lockdown and they were spending a lot of time on the internet. The overall consumption saw an upsurge following which the companies went to increase their output to meet the market requirements.
  • Over hiring during pandemic: In order to meet the demands, many tech companies went on a hiring spree anticipating the boom to continue even after the pandemic. However, as the curbs were eased and people started stepping out of their homes, consumption fell, resulting in heavy losses to these big tech companies. Some of these resources were hired at a higher cost because of the sudden upsurge in demand.
  • Fear of recession: As the demand is coming back to pre-Covid levels and seeing the debt bubble almost about to burst and fearing recession, these companies are cutting down their costs by closing down low-performing projects and laying off the excess and high-cost resources they hired to accelerate growth.
  • Russia-Ukraine War: The war has also contributed to these layoffs as it has made the market more volatile. This is clearly visible from stock market volatility.
  • Inflation: Rising inflation has also impacted several world economies severely leading to a crisis in the job market as well. The world is currently hitting a reset button to overcome all these ups and downs.

Various US Visa Programs

1) H-1B visa

  • What is it: The H-1B visa category covers individuals who “work in a speciality occupation, engage in cooperative research and development projects administered by the US Department of Defense or are fashion models that have national or international acclaim and recognition.”
  • Who’s covered: The H-1B is most well known as a visa for skilled tech workers, but other industries, like health care and the media, also use these visas.

2) H-2B visa

  • What it is: According to USCIS, the H-2B program allows US employers or agents “to bring foreign nationals to the United States to fill temporary non-agricultural jobs.”
  • Who’s covered: They generally apply to seasonal workers in industries like landscaping, forestry, hospitality and construction.

3) J-1 visa

  • What it is: The J-1 visa is an exchange visitor visa for individuals approved to participate in work-and-study-based exchange visitor programs in the United States.

    Who’s covered:
    The impacted people include interns, trainees, teachers, camp counsellors, au pairs and participants in summer work travel programs.

4) L-1 visa

  • What it is: The L1 Visa is reserved for managerial or executive professionals transferring to the US from within the same company, or a subsidiary of it. The L1 Visa can also be used for a foreign company opening up US operations.
  • Who’s covered: Within the L1 Visa, there are two subsidiary types of visas
  1. L1A visa for managers and executives.
  2. L1B visa for those with specialized knowledge.

Why these matters?

  • A significantly large number of Indian IT professionals, who are on non-immigrant work visas like H-1B are L1.
  • They are now scrambling for options to stay in the US to find a new job in the stipulated few months’ time that they get under these foreign work visas after losing their jobs and change their visa status as well.

Impacts of Lay-offs

  • Cut-throat market competition: Layoffs are a painful but expected fact of life in a market economy exposed to competition and trade.
  • Immense loss to the workers: Layoffs can be damaging psychologically as well as financially to the affected workers as well as their families, communities, colleagues, and other businesses.
  • Decreased customer loyalty: When a company lays off its employees it sends out a message to customers that it is undergoing some sort of crisis.
  • Emotional Distress: The person who is laid off suffers the most distress, but remaining employees suffer emotionally as well. The productivity level of employees who work in fear is likely to go down.

Lessons for India

  • Indian startups grew at a notoriously faster pace than its neighboring regions.
  • But the layoffs are a sobering reminder that the bigger the startups became, the harder they fell.
  • Just because a startup had touched a sky-high valuation did not immediately mean its employees’ jobs were insured.

Way forward

  • Voluntary retirement program: This enables individuals to transition to retirement smoothly.
  • Cut back on the extras: If a company is laying off workers to reduce costs, it can look for other avenues of saving money. For example, the company managers can freeze additional hiring, reduce or remove bonuses.
  • Consider a virtual office: Another way to cut down on costs is to keep only the most important staff onsite and send the rest of the workers home to work remotely.
  • Offer more unpaid time off: A company owner can also save money by offering more unpaid time off rather than eliminating workers’ positions.

 

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