April 2009

With remittances expected to fall in 2009 as the financial crisis unfolds, the primary mechanism through which origin countries recoup the efficiency increases achieved by skilled migration will dissipate.  But is there another mechanism, less direct but with long-term implications, through which migrants can benefit their home country.

The notion of the brain drain from developing to developed countries is not new. What is relatively new in the ’new brain drain’ or ’brain gain’ literature is its positive prognosis regarding the economic implications of labor market liberalization.  Yes there is a brain drain and on the whole it is bad for development.  But the migration of skilled workers need not be a zero sum game.  That is, the gain of the host country need not inevitably translate to the loss of the sending country. 

This is the first year that the H-1B visa cap has not been reached during the first 5 days of filing applications. The current cap is set at 65,000, with an additional 20,000 for holders of advanced degrees. It seems that the number of petitions for the H-1B visa this year will be far less than last year. The U.S. Citizenship and Immigration Services (USCIS) put out a statement that “it has received approximately 42,000 H-1B petitions counting toward the Congressionally-mandated 65,000 cap.”

Indian information technology companies have been the largest petitioners of H-1B visas in the past, and now these firms are applying for fewer H1-B visas. For example, Infosys Technologies will apply for less than 3,000 visas as opposed to the 4,500 visas that it requested in 2008.
 
Even Microsoft Corp has applied for fewer H-1B Visas. Brad Smith, Microsoft’s General Counsel said, “I think we’re going to see substantially fewer H-1B applications filed this year compared to last year,” He also mentioned that “the majority of applications will be to extend the stays of existing workers rather than for new hires.”

A major use of H-1B visas has been to facilitate offshore outsourcing. Is the financial crisis having an impact on outsourcing activities? Has the U.S. fiscal stimulus package or the Troubled Asset Recovery Program complicated the hiring of foreign workers for companies receiving federal bailout funds?