Government regulations & H1-B visas: Is the USA facing a looming hi-tech crisis?
October 28, 2010
Fast Company and CNET have both noted a recent speech by Intel’s Paul Otellini at the Technology Policy Institute’s Aspen Forum where he had dire warnings about the state of the hi-tech industry in the USA. In the speech, he pointed out that at one time, American research centers were without peer and no other country in the world was more attractive for start-up venture capital. Moreover, the USA was at least a generation ahead of the world in IT. However, he believes now that this is no longer the case.
The reasons? The legal, tax and financial hoops that the IT industry and start-ups in particular must jump through in order to operate in the USA. Otellini pointed out that it costs US$1 billion more to build and operate a semiconductor manufacturing facility in the USA and this money is largely spent to comply with US taxes and government regulations while other nations, especially those in Asia, offer tax breaks to start-ups or for MNCs to set-up new factories. Meanwhile and in another interview with CNET, Cypress Semiconductor CEO T.J. Rodgers pointed out that the problem in the USA is not higher wages but anti-business laws. He mentioned that in California, the main obstacle for creating one thousand blue-collar jobs is the hostile state government that makes it clear that it does not want a manufacturing business there. In addition, Otellini noted that US corporate taxes are the second highest in the industrial world – making the USA a less attractive place to invest and create jobs than Asia and even Europe where countries are “clamoring” for Intel’s business. Moreover, Otellini pointed out that the recent skirmishes over H1-B visas continues to show that the USA is hostile to foreign nationals who choose to study there and then want to remain in order to work and he added that there is little interest or intention to change the current status quo regarding immigration.
However, there seems to be little interest to change the status quo regarding a number of issues the IT industry faces. For example:
- In 2009, Fast Company had an article which noted that Microsoft’s cost-cutting move to cut 5,000 jobs had attracted the attention of Republican senator Charles Grassley from Iowa who wanted the job cuts to target the foreigners holding H1-B visas.
- In 2005 during the the Bush administration, Microsoft’s Bill Gates warned a Washington DC audience that curbing immigration and the number of foreign guest workers allowed in the USA would provide a boost to research institutions located in emerging superpowers like China and India.
- In 2004, then-Intel CEO Craig Barrett warned that the USA must take steps to dramatically improve its education system and decide whether or not to compete with the rest of the world or to become protectionist. He also bluntly added that the USA seems to think it has a “god-given right to be the world’s No. 1 economy forever.”
- Earlier that year, Dell, Hewlett-Packard, IBM, Intel, Motorola and other hi-tech companies wrote a report that warned of growing US protectionism and cited China, Indonesia, Malaysia and the Philippines as being growing exporters of computer hardware.
At the end of the recent CNET article, Chris Marangi, an associate portfolio manager at Gamco Investors, pointed out that capital is agnostic. In other words, capital does not have a religion nor a philosophy and it will flow wherever it finds the highest returns – including to countries that have more friendly regulatory regimes. We can further add that it can be the same with people. In other words, in this globalization era, the best and brightest will go where they are wanted or invited to go. Hence, we can only conclude that if America’s IT status quo remains the same, America’s “god-given right to be the world’s No. 1 economy forever” may soon change.