Want a Fix to the H-1B Mess? Look to Canada

In a previous post, I argued that the advertised drought in the American high-tech talent pool isn’t nearly as bad as what Microsoft and others claim it to be. I also said American companies ought to look first to small-town America before filing the paperwork to import foreign talent on worker visas.

Here’s another solution: Instead of debating an arbitrary number such as how many H-1B visa immigrants should be allowed into the country – who really knows whether the 65,000-person cap is too high or low? – instead of artificial caps of any kind, reward those companies that perform their research and development here in the United States.

Congress can introduce legislation that would give tax credits and other incentives to companies that choose to do the right thing by employing Americans to perform high-tech tasks that have recently gone to foreigners in India, China, Eastern Europe and elsewhere.

Canada has its collective head screwed on tightly concerning this issue. More on that shortly.

Governments should not be in the business of telling private companies who they should and should not be hiring. But they should be in the business of encouraging – even rewarding – responsible behavior. With an R&D tax credit program, it would be in a company’s best interest to look first at small, hard-hit towns in America. With such a system, free-market principles would be at work. If credits were compelling enough, those companies that choose to go overseas for talent would likely be the ones that really need it, as opposed to those just looking for cheap labor. And let’s face it, a big benefit of the H-1B visa system as well as off-shoring is cheap labor.

For years, Congress has debated the merits of liberalizing the worker visa system. Much of the debate has been centered around the H-1B program, which allows foreigners to temporarily work in the United States to fulfill mostly specialized, high-tech positions. The system is currently capped at 65,000 new visas per year, with an additional 20,000 for foreigners who have earned advanced degrees in the United States. Efforts to raise this cap have gone back and forth for years, with no clear outcome in sight.

In April, the Bush Administration extended the amount of time foreign nationals can work here on student visas from one year to 29 months. The move was in response to the increasing demand for foreign talent. Many students, some argued, didn’t get their chance to work here under H-1B status because of that demand.Now, that decision is being challenged by a number of groups including the American Engineering Association, the Immigration Reform Law Institute and The Programmers Guild. They argue that the administration overstepped its boundaries.

I think these arguments could be lessened substantially – even settled – if there is a real program aimed at both helping American workers and keeping American corporations competitive in the global marketplace.

Canada could be a fine example. The federal government of Canada and many of its provinces make remarkable efforts to keep R&D in the country. One such initiative is called the Scientific Research and Experimental Development program and it offers substantial federal and provincial tax credits for wages, materials, machinery, equipment and contracts. Here’s how it works:

A privately held Canadian-controlled corporation that performs qualified R&D in the country can earn a 35 percent tax credit up to the first $2 million of qualified expenditures and 20 percent for any excess amount. There are similar programs in certain provinces such as Quebec that provide additional tax credits. Qualified work includes experimental development, research and support work in areas such as bio-tech, pharmaceuticals, engineering, operations and computer software. This is a refundable tax credit, which means that even if your business makes no profit, you will get the appropriate refund back in cash.

To take advantage of these programs, hundreds, if not thousands, of multi-national corporations including Wyeth, Compuware, IBM have setup large R&D centers in Canada employing hundreds of thousands of Canadians. The huge positive economic impact of these programs on the prosperity of Canadians is quite visible everywhere you go. These are high paying local jobs for highly qualified resources that stay put and contribute to their own communities.

I don’t see any downside to having such a system, even a stronger one. Let’s eliminate the silly cap program. Let the free market reign.

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