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Indian-Americans and U.S. Politics Blog

Sequestration all set to squeeze the life out of Small Business

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We now face a make-or-break moment for the middle class and those trying to reach it. After decades of eroding middle-class security as those at the very top saw their incomes rise, it is time to construct an economy that is built to last. But the major roadblock ahead is facing the prospect of “sequestration“-or of the budget cuts that will be required to avoid it.

What is Sequestration?

Under the Budget Control Act of 2011 signed by President Obama as part of an agreement with Congress to resolve the debt-ceiling crisis, sequestration is the automatic reduction of spending which will trigger if the spending exceeds certain “caps” set out by the Act. Sequester originated when debates over deficit reduction saw the American government almost default on its debt payments. In order to avert that crisis, Democrats and Republicans agreed that unless they struck a deal on shrinking the country’s debt, cuts would be made to federal spending. The idea was that the prospect of cuts to social services would motivate the Democrats and hurting military spending would do the same for Republicans, issues important to respective parties.

Impact of Sequestration on Small Businesses

Many companies are already being affected by the cuts, particularly those working on federal contracts as government agencies have been holding back on signing new contracts. They’ve also held off approving funds for existing contracts — for example, multi-year contracts that require money to be approved periodically or in increments. This has caused uncertainty about what might happen and when once the cuts are made. Anxiety about budget cuts has been one reason why small businesses have been slow to hire in recent months. Economists warn that these cuts could push the country into another recession.
A study by researchers at George Mason University and the economic forecasting firm Chmura Economics and Analytics estimated that small businesses across the country would lose more than 950,000 jobs as a result of the budget cuts. More than 157,000 of those job losses would come from federal contractors, with the rest from subcontractors catering to contractors and their employees. The study was led by George Mason professor Stephen Fuller, who has studied the impact of public policy on the local economy.

It’s not known how many small businesses would be hurt, or how much revenue they would lose but according to The Small Business Administration there are about 130,000 small companies with federal contracts.

The 2014 budget proposes cutting nearly $10 million from the U.S. Small Business Administration’s signature Small Business Development Center program, and funneling about $40 million into new entrepreneurial development programs.

With over 12 million people unemployed, small business is critical to accelerating the economic recovery and creating the jobs America needs. According to the Bureau of Labor Statistics, small businesses have created about two out of every three jobs gained over the past 35 months and have added jobs in every quarter since early 2010. But since the recession began, U.S. commercial banks’ small business loan portfolios are down 17 percent. And loans under $100,000 have declined even more steeply, over 19 percent. During that same period, the Small Business Administration supported over $100 billion in new lending to over 218,000 small businesses. In better times considered the lender of last resort, the Small Business Administration, for many small businesses, has become the only option. The agency’s loans have become a lifeline for the franchise industry and other segments that weathered the recession better than most.
Limiting job creators’ access to capital at this critical point in the life of our nation’s economy is a profoundly bad idea. We are depending on our small businesses to grow and put our communities back to work. Eventually it rests with our elected leaders to put aside their risky, partisan gamesmanship and come together to pass legislation and enact the policy in a way that reflects our national needs and priorities.
What can be done?

It also doesn’t help small businesses or the economy as a whole when special tax treatment is given to hedge fund managers and Wall Street powerhouses. The controversial “carried interest loophole” lets finance titans pay a top tax rate of 20 percent on part of their earnings, only half of what they would pay at the top rate for normal wages and salaries.
The bottom line is that policymakers concerned about our economy should be leveling the playing field for small businesses, not perpetuating tax breaks for the big boys. The CBO estimates that ending subsidies to gas and oil companies would shore up $40 billion over 10 years and closing the carried interest loophole could raise $21 billion. Together, these measures would significantly offset cuts caused by the sequester.
However, finding short-term solutions to ongoing budget crises shouldn’t be the end goal. Small businesses want policymakers to resolve this problem for the long term so they and our economy have the sustained fiscal certainty they need to thrive.
The Time to Act is NOW

Alliance for U.S. India Business (AUSIB) is organizing a Government Contractors Session focusing on the “Sequestration, its short and long term impact on small business growth & regulatory relief” on Tuesday, July 23, 2013 at the Capitol Hill, Washington DC. The session will be graced by some of the most eminent speakers, the people who matter. They are:

• Congressman Sam Graves: Chairman, Small Business Subcommittee
• Jordan Valdes: Senior Advisor, SBA Office of International Trade
• CIO and OSDBU*s from some key agencies
• Congresswoman Yvette D. Clarke: Small Business and subcommittee of contracting and work force
• Senator James Risch: Small business and Entrepreneurship subcommittee
As our lawmakers debate, spending sequestration, healthcare, and immigration reform will have long-lasting impact on businesses across the country. In other words it will decide how quickly we can put our unemployed back to work. The AUSIB Small Business Forum will provide a unique insight on these key issues. The one-day session will feature lawmakers and agency officials who will be responsible for crafting and implementing programs that will determine how business interacts with government.
Do not miss this opportunity to get access and information that can provide you with an edge over your competition!

RSVP: events@usinpac.com, Call: 202-276-7946.
*Office of Small and Disadvantaged Business Utilization

 

Immigration Blog

Responsible Ways to Increase Compliance with H-1B Visas

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While critics often overstate problems with H-1B temporary visas, it is good policy to eliminate H-1B visa fraud in a practical manner. Perhaps the best way is to empower the potential victims of such fraud – H-1B visa holders. To the extent the current legal regime is insufficient to protect H-1B professionals it can result in individuals being taken advantage of, which harms the H-1B visa holder and, potentially, American workers.

Even if the typical H-1B visa holder is not an indentured servant, as critics allege, situations can arise that leave an individual vulnerable to exploitation. For example, one type of case is when a professional enters the United States but goes a number of months without working or being paid. Such an employer has acted illegally, since it is explicitly against the law to “bench” or place someone in a nonproductive capacity and not pay the individual.

Recommendations

To address these and other situations a number of measures can be taken that would enhance protections for H-1B visa holders and, indirectly, U.S. professionals.

First, Congress, USCIS and DOL should explicitly protect the immigration status of any H-1B visa holder who files a complaint alleging a violation by his employer. Whistleblower protections exist under current law. However, these provisions are not widely known, carry a degree of ambiguity, and are virtually unpublicized by the Department of Labor and U.S. Citizenship and Immigration Services.

More explicit language by Congress can be combined with effective action by government agencies to protect the immigration status of whistleblowers. This should not require an employer to pay a salary to an individual simply because he or she filed a complaint that is pending, since that can easily be abused. And there should be discouragement in the law or regulations regarding the filing of frivolous claims. However, making it clear that an H-1B visa holder who files a complaint can stay in the United States in H-1B status (and seek other employment) while a complaint is adjudicated would increase protections for the individuals and the integrity of the H-1B visa process.

Second, a process should be in place for an H-1B visa holder to file for private arbitration, if necessary, to retrieve disputed wages owed. Such a dispute may not rise to the level of a formal complaint or perhaps an individual feels uncomfortable contacting federal authorities over a private wage issue. While government bureaucrats are not universally loved in America, they are loathed in other nations. The right to arbitration of a wage dispute, which could also carry protection of immigration status, would help provide greater employee-employer balance for a group of people concerned with their immigration status in the United States.

Third, increase employment-based green card quotas and eliminate the per country limit for skilled immigrants. The possibility one would need to re-start the process with a new employer can limit the mobility of someone in H-1B status, which would make them less likely to complain. While most employers only want people to work for them who wish to be there, some employers could take advantage of a situation created by Congress not increasing the quotas for employment-based green cards.

Fourth, all H-1B visa holders should receive the key documents relevant to their case and H-1B status. This includes a copy of the labor condition application, which carries wage information and, for example, the I-797 approval notice. USCIS and the Department of Labor should seek to ensure H-1B visa holders are receiving the documentation they are entitled to, as well as information related to protection of immigration status and how to file complaints.

Finally, Congress should avoid enacting measures that would be so restrictive as to encourage U.S. employers to hire skilled foreign nationals abroad rather than in the United States. Two such actions would be to apply “recruitment” and “nondisplacement” attestations to all U.S. employers. There is no evidence of a need to expand the scope or application of these attestations. In the days of flexible job functions and multiple locations such provisions can cause a General Counsel to conclude his or her company may be unlikely to be in compliance if they hire any H-1B professionals. The safer alternative would be to expand outside the United States rather than risk such legal liability.

Current Law Addresses Key Concerns

Current law already addresses the main concerns of critics. Under Section 413 of the American Competitiveness and Workforce Improvement Act (passed in 1998), a company found committing a “willful” violation of the law regulating the proper wages for H-1B visa holders and displacing a U.S. worker is barred for three years from hiring any foreign nationals in the United States and faces up to a $35,000 fine per violation.

The problem is that the solutions proposed by some critics are essentially thinly disguised efforts to prevent employers from obtaining H-1B visas for any skilled foreign nationals, not really an attempt to address abuse. If one were concerned with companies committing fraud, then strict new requirements would not impact businesses that already ignore the current rules but rather would affect those who obey the law.

Immigration Blog

Will Improved Tech Job Market Help Change Immigration Policy?

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Even when making policy that might last years, elected officials tend to look to the moment. That’s particularly true in the case of immigration, where the unemployment rate at a particular time influences whether or not to relax or restrict immigration quotas. It’s happened before on skilled immigration.

In 1998 and 2000, unemployment rates were around 4 percent nationally. That made it possible, though still not easy, to increase the quotas for high skilled foreign nationals on H-1B visas. Many of those individuals come from India.

Today, H-1B applications are down when compared to earlier years, but it is still likely the quota of 65,000 (plus a 20,000 exemption for recipients of a master’s degree from a U.S. university) will be reached before the end of the 2012 fiscal year.

There are several changes that could be made to improve U.S. immigration policy, particularly for high skilled professionals: increase the H-1B quota or exemptions from the annual cap, increase the quota or exemptions from the annually 140,000 limit for employment-based green cards, eliminate the per country limit, and exempt more individuals from the burdensome requirements of labor certification when applying for a green card. Yet the fate of such reforms rests as much on perceptions of the current job market as to whether they represent good long-term policy.

New Report on the Tech Job Market

Contrary to popular perceptions, a new report from the tech job website Dice.com finds that the job market is good for people with talent in technology fields. (The report can be found here.)

The report cites Dr. Tim Lindquist, a professor of computer science and engineering, Arizona State University’s Polytechnic College. “I can’t tell you the last time I had a student, even some of our poorer students, tell me they had trouble finding a job,” says Lindquist. “None of our graduates have trouble getting jobs, and we have weekly requests, very consistent, looking for people.”

The report states that “Incredible . . . describes well the challenge facing American businesses in need of tech skilled new hires in 2011. From coast to coast and metro to metro, companies in need of tech help say they’re struggling mightily to match open positions with qualified people and state-of-the-marketplace skill sets.”

Anne Hunter, with the Massachusetts Institute of Technology, estimates, “There are easily two or three jobs for every computer science grad.”

Dice.com found a 60 percent increase in the number of tech jobs posted on its site from a low of two years ago. In other words, the job market for high skilled workers in tech-related fields has picked up substantially.

What’s Most in Demand?

In analyzing the job postings, Dice.com has determined that the most frequently requested skills today are Oracle, followed by J3EE/Java, C,C++, C#, and Project Management and SQL. (See Table 1)

Table 1

Most Frequently Requested Skills on Dice.com

Skills Number of Job Postings Requesting Skill on Dice.com Percentage Growth from 2010
Oracle 16,895 25%
J2EE/Java 16,683 21%
C, C++,C# 16,033 16%
Project Management 14,795 14%
SQL 13,554 21%

                                      Source: America’s Tech Talent Crunch, Dice.com, May 2011.

Products demanded by consumers are helping to drive the tech job market. The fastest growing skills requested in job postings in the first quarter of 2011 compared to the first quarter of 2010 are Android, Cloud, iPhone, JavaScript and Peoplesoft. (See Table 2)

Table 2

Fastest Growing Skills Requested on Dice.com

Skills Percentage Growth from 2010 to 2011
Android 302%
Cloud 221%
iPhone 220%
JavaScript 88%
Peoplesoft 83%

                                               Source: America’s Tech Talent Crunch, Dice.com, May 2011.

Conclusion

Even though there is no evidence immigration affects the unemployment rate over time, perceptions about the job market figure into the calculations made by elected officeholders. The reality of an improved job market in high tech jobs could help tip the balance favorably if smaller scale reforms on employment-based immigration are proposed in Congress. That would improve the situation faced by employers and high skilled foreign nationals.