By Som Mittal - 09/15/09 08:41 PM EDT
The answer from industry executives and economists across the globe has remained the same: Consider the facts. Liberalized trade and the global movement of labor have resulted in an unprecedented growth of the global economy. In the last 30 years, total U.S. exports have increased more than 37 times, from nearly $50 billion to nearly $2 trillion. And as the International Monetary Fund summed up its recent study, “The integration of workers from emerging market and developing countries into the global workforce has produced important benefits for advanced economies.”
It was U.S. firms that initially led the way — and have benefited tremendously. Companies such as Ford, Chrysler and General Motors set up manufacturing plants in Mexico in the 1930s, capturing market share in a new region and diversifying their production model to offer more viable options to consumers. More recently, giants such as Wal-Mart, Dell and Boeing followed suit, growing at unprecedented rates. In fact, 34 of the top 100 companies on the Standard & Poor’s 500 list now have over 50 percent of their revenues generated abroad.
The decisive factor in the growth of these companies has been the ability to tap into the global talent pool. In the U.S., as in many developed countries, firms have often utilized “offshoring” as a strategy to reduce costs and increase efficiency, in turn enabling the creation of additional jobs. The benefits have far outweighed the costs: According to the IMF, only 5 percent of total production inputs in advanced countries are obtained offshore. In the U.S., offshoring comprised about 2-3 percent. Yet, as the IMF estimated, real labor compensation in the U.S. has grown nearly twofold from 1980-2005.
Rather than moving American jobs abroad, as critics contend, globalizing the U.S. economy has helped to continuously increase the average employment rate in the U.S. for the last 40 years.
The United States has long held a distinct competitive advantage in the crucial element of the global economy: high-skilled immigration. As the beacon of prosperity and opportunity for generations of immigrants, the United States has arguably reaped the highest rewards. U.S. entrepreneur and labor scholar Vivek Wadhwa has estimated that between 1995 and 2005, a quarter of all technology and engineering start-ups in the U.S. were started by immigrants, employing some 400,000 workers in 2005. In Silicon Valley, 52 percent of companies were founded by immigrants.
Moreover, immigrants have filled important gaps in the native labor force. In the U.S., for instance, there was a shortfall of 60,000 qualified engineers to fulfill growing industry demand in 2006. Because the global business model requires some of these positions to be filled immediately, one way the U.S. policymakers have sought to address the shortage is through the use of temporary work visas, or H-1Bs. Although the H-1B program has somewhat ameliorated the demand, it has recently come under fire from policymakers for alleged abuses by a small minority of company recipients.
We in the technology industry welcome efforts to streamline the U.S. temporary visa process but urge caution in trying to overhaul the entire system, especially in view of the overwhelming evidence of broad global benefits of free trade and movement of labor. There are certainly areas where sensible compromise can be reached. For instance, India’s largest technology industry body, the National Association of Software and Services Companies, the organization I lead, has recently proposed replacing the H-1B visa with a temporary work permit, such as that utilized for foreign workers in Europe. This proposal would help stem abuses and guarantee that firms continue to benefit from the advantages of the globalized workforce.
Lastly, it is perplexing to many industry executives that the U.S. debate over high-skilled workers is considered part of “comprehensive immigration reform,” whereas the evidence firmly places it as an issue of international commerce and trade. In the modern era, global business necessarily requires global solutions to grow and prosper.
Globalization has its faults and certainly does not benefit everyone equally, but as the great American economist Milton Friedman famously put it: “There is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.” That remains a wise and valid lesson to remember, even in these turbulent economic times.
Mittal is president of the National Association of Software and Services Companies, India’s leading software and technology trade group.