Indian software guys no cheaper than American

Are foreign information technology (IT) professionals cheaper than American IT professionals in the US market?
No, says a study.

“Contrary to the popular belief that foreign workers are a cheap source of labour for US firms, we find that after controlling for their human capital attributes, foreign IT professionals (those with H-1B or other work visas) earn a salary premium when compared with IT professionals with US citizenship,” Prof Henry Lucas and Prof Sunil Mithas of the University of Maryland said in a report brought out recently.   

The study explodes the myth that American engineers are exorbitant in comparison to their counterparts from other parts of the world working in the US.

Lucas and Mithas have used data on skills and compensation of more than 50,000 IT professionals in the US over 2000-2005 to study patterns in compensation of foreign and American IT
professionals.

The two professors said the salary premiums for non-US citizens and for those on work visas fluctuate in response to supply shocks created by the annual caps on new H-1B visas. “Setting lower and fully utilised annual caps results in higher salary premiums for non-US citizens and those with work visas.”

Som Mittal, president of IT industry lobby National Association of Software and Services Companies (Nasscom), endorsed the outcome of the survey by Maryland University professors saying once the cost of settling the Indian engineers on H-1B visa in the US was factored in, they worked out to be more expensive.

Subhas Dhar, executive council member and head, sales, marketing and communication at Infosys Technologies Ltd, added that there were many instances lately of their US customers being approached by American citizens who are ready to drop their salary demands below those of IT workers on H-1B visas. He said this was twisting the interpretation of the US employment data.   

“At such times, many of our clients have turned down the proposal saying that we (Infosys) provide better quality and flexibility. But at times, they have recruited those locals at much lesser cost,” said Dhar.

Rajendra Shreemal, head of investor relationship and treasury at Wipro Technologies, attributed the erosion in American “resources” to a drop in demand. “This is making (IT) skill sets available at same price as that of Indians brought on work visas to the US onsite centres,” he said.

Shreemal, however, said the price of IT workers was based on skills and a host of other factors and so could not be painted with a “broad brush.”

B Ramaswamy, president and managing director of Sonata Software, also believes the relative costs of American and foreign IT professionals in the US would depend on skills, geographic area and demand-supply equation, among other factors.

“So, say, you may be able to get a Cobol programmer in certain
areas of US at very low wages because of low demand, but in some other areas, they (Cobol programmers) may cost more because they are in demand and their supply is limited. For instance, a professional with SAP skills will, any day, be cheaper from India than the US,” he said.