Thought

Last week, BusinessWeek published an article titled The Tech Worker Shortage Doesn’t Really Exist where they interviewed scholars who assert that instead of a tech worker shortage, companies like Facebook and Microsoft are actually just looking for cheap labor:

“There’s no evidence of any way, shape, or form that there’s a shortage in the conventional sense,” says Hal Salzman, a professor of planning and public policy at Rutgers University. “They may not be able to find them at the price they want. But I’m not sure that qualifies as a shortage, any more than my not being able to find a half-priced TV.”

“We don’t dispute the fact at all that Facebook and Microsoft would like to have more, cheaper workers,” says Salzman’s co-author Daniel Kuehn, now a research associate at the Urban Institute. “But that doesn’t constitute a shortage.”

Just a few hours later, Vox published an article titled These tech interns are probably making more than you are where they shared a tweet showcasing candid salaries at various tech companies, some larger, some smaller:

 

 

So much for the cheap high-tech labor argument.

 

We hire for talent, not costs

I am a founder who moved to the US to start their company, and for a long time I’ve stayed publicly quiet on the topic of immigration. However, recent events are once again rightfully putting immigration in the spotlight, and I think now is a good time to share my own perspective on it.

I came to the United States from Canada to start AeroFS with my co-founder. We’ve raised venture capital, hired employees (both domestic and foreign) and have built a thriving business here in California.

When we founded AeroFS, H-1B quotas were a non-issue. Traditionally, H-1B applications open in April of a given year for an October entry that same year. When I applied in 2010, I applied in Oct/2010 for a Oct/2010 entry. I was granted the visa in December, and successfully started working in the US in early 2011.

Over the next few years, we hired employees both foreign and domestic, with our only concern being hiring the best talent. Nowhere in that process was the topic of “cheaper” labor ever brought up. In fact, the restrictions on H-1B visas make that entire topic moot since highly skilled talent must meet strict wage requirements set by the US government based on prevailing wages in the county you’re hiring the person into, in the skill-level and profession of that person.

More often than not, foreign talent has been more expensive for us for various reasons:

  • Interviewing a foreign candidate is more expensive due to travel and accommodations costs that we reimburse
  • Immigration fees for a foreign candidate are expensive (~$8,000 in legal and federal fees)
  • Relocation help (transportation, moving expenses, and so on).

So you can be sure that all things being equal we would prefer to hire local talent for a position. But all engineers are not created equal, and great engineers are scarce worldwide, so when we find great engineers abroad we make them compelling offers and try to hire them.

Unfortunately, that changed last year. To understand why, we should first take a look at the H-1B quota and cap.

The History of the H-1B Cap

The H-1B cap of 65,000 visas was first introduced by Congress in 1990 as part of IMMACT, and took effect in FY 1992 (October 1, 1991). For the first five years of the cap, it wasn’t reached. Finally, the cap was first reached in FY 1997, as well as FY 1998 during the first tech boom.

In response to the demand on immigration, the US government passed the American Competitiveness and Workforce Improvement Act in 1998 (ACWIA). This temporarily increased the H-1B cap for FY 1999 and FY 2000 to 115,000.

A second act, the American Competitiveness in the 21st Century Act (AC21) was passed in 2000 which temporarily increased the number of available H-1B visas to 195,000 for FY 2001, FY 2002, and FY 2003.

This temporary increase expired in FY 2004, which suddenly brought the cap down from 195,000 to 65,000 once again.

What we had to do

With the economy recovering, we suddenly found ourselves competing in an H-1B coin flip lottery for candidates. In 2013 there were 124,000 applicants for 65,000 visas by the time the government stopped accepting applications (five days into April). In 2014, there were 172,000 applicants for 65,000 visas. Imagine spending the time and effort to recruit a candidate, only to suddenly realize when push comes to shove that hiring them is completely outside of your control.

In one particular case, we lost the lottery. Our H-1B petition was returned to us, unopened, and we were left with an amazing candidate who had deep expertise in our field but who could not legally work at our company.

Not willing to sacrifice the candidate, we began exploring alternative options. Could they qualify for an O-1? No, not enough credentials. Green-card lottery? Too much uncertainty. Are there any other visa options for the candidate? Alas, no, they’re French. No equivalent of the Canadian TN or Australian E3 exists.

Finally, we came to the realization that the only way we could retain this candidate was by opening a branch in another country and hiring the candidate there.

And that’s what we did. In an interest to keep the new hire as close to us as possible, we created a Canadian subsidiary. Although he is the first person at the office, he is likely not going to be the last.

Over the history of the company, zero of our hiring decisions have been made on a cost-savings basis. When we make a decision to hire someone, we hire them because they bring a special skill set to the table, regardless of where they are from.

Preventing companies from hiring highly skilled foreign workers into the US simply means that they will contribute to another country’s economy instead of ours.

The competition for tech talent is real.

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