Vince Cable Gets His Way On Intra-Company Transfers

[_w_]

that advanced Asian economies have pretty free flow of skilled labour (and other things of value) don't they?

I must admit I don't know, although judging by their numerous and extensive protectionist policies, I would be surprised if there was free movement of people.

[Si1]

I must admit I don't know, although judging by their numerous and extensive protectionist policies, I would be surprised if there was free movement of people.

it's just a cultural interpretation - I see films, read articles, with frequent examples of international skilled labour mobility between places like Japan, South Korea, Taiwan, Hong Kong, even Australia, but i don't have a formal reference to justify this, don't know if there are any treaties in place

as to coalminers - my old man said in the 60s (he thinks) lots of people would leave Liverpool and go off to work in the Lancashire pits, those at least were considered to pay well. Not sure many of them did it for many years, as I'm sure it was very hard risk-premium work in return for the money, but my experience is 2nd hand so there may be embellishment to this, I on't know. I was making the implicit comparison that a lot of IT work has a low barrier to entry and pays well only because of the demand for workers, which can easily, as with coalmining thru the 1980s, be out-competed by foreigners doing it cheaper - ie South African coal.

[cheesypeas]

Read Bastiat's chapter on Restriction

By restricting the movement of goods or labour all you do is make IT services more expensive for us. So if you're asking me to pay over the odds to give someone a job, I say no. For selfish reasons, and economic. If it would cost me £100 less to use imported labour/goods, I have £100 to spend on something else I want, and by buying it I give someone a job that he or she wouldn't otherwise have.

As Bastiat says, you looking at that which is seen, not that which is not seen!

You might look at it the otherway round for a moment. The government has chosen certain jobs for wage deflation ( nurses, dancers and programmers). It has not chosen other jobs for wage deflation. This amounts to a subsidy for those people who aren't targeted by the government. (retired people, business leaders, politicians, estate agents, accountants, train drivers etc ).

I don't want to be subsidising your lifestyle by having my wages artificially lowered by targeted immigration.

Secondly the effect of targeted immigration is to create a permanent 'shortage' of workers in the targeted jobs. The more that wages are reduced in the targeted jobs the less likely it is that native inhabitants will want to work in these jobs. Leading to more calls for yet more immigration...

How do you think the quality of live of the average inhabitant of these isles will be affected? Ever smaller Barrat's boxes to live in? More crowded roads and schools. Less natural resources per person...

You don't seem to have thought this one through.

[cheesypeas]

Many British IT workers have been well paid over the last 15 years, and not because of their spectacular talents but because demand has significantly outstripped supply. That situation was never going to last. The most successful people I know who work in IT are always fighting to learn new skills rather than whining about increased competition. They're still paid a fortune and are worth every penny. The mediocre ones need to improve their skills or drop their prices. Market forces cuts both ways - as do tax arrangements. about the tax avoidance ruse of setting themselves up as a company and so avoiding income tax.

"not because of their spectacular talents" - Silly value judgement. If you want to work in IT you can. Its very easy to get into.

"demand has significantly outstripped supply." - How do you measure this?

"I don't remember any IT contractors complaining..." - I've been permanent and contracting. I think the tax arrangements are a scandal ( as are most small businesses ). OK?

[Tiger Woods?]

Oh so simple yet so misleading a propaganda tool for ideologues.

How the US did in 1910 with a top income tax rate of 77% I know not :-)

And what deep depression they must have gone through with a top tax rate of 90% in the 1950s :-)

But that shouldn't get in the way of cutting public services and helping our wealthy friends now should it.

The Laffer curve (and its obvious multidimensional extensions) is a simple statement of mathematical fact. You can argue what the optimal taxation levels are, but you cannot argue that there isn't one. That nations have over or under taxed in the past is neither here nor there.

Edited November 8, 2010 by Tiger Woods?

[aussieboy]

Comparative advantage is a great tool for static analysis. It tells you where an economy may be competitive or uncompetitive at a given point in time and therein lies a fundamental weakness - it encourages the search for short term efficiencies. It doesn't consider the long term impact of making those efficiencies and in fact assumes that a short term efficiency will result in long term growth. Hmmmmmm. And ICT visas blow a fundamental of it out the window anyway - the assumption that skilled labour is not mobile across nations. Any decent entry level economics book and a little thought will quickly expose all the fundamental flaws in 'Ye Olde Theory of Comparative Advantage'.

My dad was a coal miner too. Underground locomotive driver at a pit that was 600ft deep and mined a seam under the sea bed. That was the 60s. He hated it and got paid naff all.

I'll take your dad and raise you my grandfather's 18" seams in the thirties

I think the initial coal mining comment was more to do with miners actually having a job rather than it being well paid. Once coal was cheaper to import, that was that.

Hard to see the difference between IT and other products / services. The argument put forward relating to keeping people in work onshore so they can pay more tax smells dangerously of socialism (ugh).

When IT skills were scarce, you could charge a premium. Now you have plenty of mobile / remote Indian perfect subsitutes, the market won't stand for that.

[Xurbia]

The British government has a duty to protect the British people and British jobs. They won't. Give it another decade and all programmers will be foreigners and all information will belong to them. Indians aren't superior just cheaper. You might get one good one on site whilst the offshore team are amateurs. Britain isn't diverse enough yet after Labour's multicultural experiement. Let the lot in and let them bring their extended families with them. Britain seems intent on self-destruction, so there's little point in trying to fight it.

[Xurbia]

Hard to see the difference between IT and other products / services. The argument put forward relating to keeping people in work onshore so they can pay more tax smells dangerously of socialism (ugh).

When IT skills were scarce, you could charge a premium. Now you have plenty of mobile / remote Indian perfect subsitutes, the market won't stand for that.

I disagree. IT is vastly different from other services. IT is the company. Many companies cannot survive even a week without systems.

What do you think will happen when code cannot be understood because it's in a foreign language? Britain will be held hostage by foreigners.

Eventually we will ask "What does Britain do?". The answer will be "nothing".

[aussieboy]

I disagree. IT is vastly different from other services. IT is the company. Many companies cannot survive even a week without systems.

What do you think will happen when code cannot be understood because it's in a foreign language? Britain will be held hostage by foreigners.

Eventually we will ask "What does Britain do?". The answer will be "nothing".

Without electricity the IT is nothing. Without ships, shipping is nothing. Where has the UK sourced its coal for Drax etc for the last 20 years? Where have shipping companies bought their ships from for the last 20 years? Have those companies collapsed because their essential supplier is no longer in the UK?

Don't get me wrong, I'm all for giving industry a hand. There just seems to be lack of insight with regard to consistency.

Having seen primary industry thrown to the wolves, and having lived in a northern industrial city during the miners strike where those unaffected cheered on as focal social effects destroyed skill specialised communities, and having seen a longer and similar spectacle of British Steel dismantled, to be replaced by a number of services industries which in turn where left to offshore, I'm struggling to understand what is so special about IT. Am I missing some kind of ethical superiority intrinsic to working in computing?

As far as I can see, it's following the same old cycle. Good luck getting the ex-miners, ship builders, steel workers etc who were made redundant due to economic change to show any sympathy. Their products were vital to their customers too... until they bought them cheaper somewhere else. IT is already struggling from what I've read of graduate unemployment rates: it isn't as if anyone is being duped into studying the subject of tomorrow or anything.

Your last question is a good one. The UK used to dig stuff up and sell it, or dig it up, add value and sell it. This is true adding value, wealth creation. You take an asset, invest it with human capital, then sell it for more.

God knows what's left, but don't expect anyone to care as this particular industry suffers: history isn't on your side.

[Britney's Piers]

At least I don't insult people.

Please read some economics. Protectionism will put us into depression, as it did in the 1930s.

Scaremongering propaganda. This oft repeated meme needs to be chucked out ASAP.

The depression was (like all depressions) the effect of a collapsing credit bubble. Protectionism is always response to this, not the cause of it.

Thanks to this propaganda we are now entering unchartered territory, where we have abandoned this natural response, and the undercutting of lower and middle classes that ALREADY happened in boom years, is now speeding up. This is going to have very dire consequences, not just economic but social also.

Edited November 8, 2010 by Britney's Piers

[aussieboy]

SNIP

Thanks to this propaganda we are now entering unchartered territory, where we have abandoned this natural response, and the undercutting of lower and middle classes that ALREADY happened in boom years, is now speeding up. This is going to have very dire consequences, not just economic but social also.

Doesn't look uncharted to me.

[ZeroSumGame]

Hard to see the difference between IT and other products / services.

When IT skills were scarce, you could charge a premium. Now you have plenty of mobile / remote Indian perfect substitutes, the market won't stand for that.

The difference between IT and other services and shipbuilding,steel etc as you mentioned, is that shipbuilding, steel, mining etc floundered because these industries could be sourced cheaper elsewhere.

No-one came into Britain and displaced steelworkers, miners etc with cheaper labour. This is a fairly novel concept. Apart from I.T. there was an example upthread from the petrochemical industry too.

Having seen primary industry thrown to the wolves, and having lived in a northern industrial city during the miners strike where those unaffected cheered on as focal social effects destroyed skill specialised communities

Indeed. Perhaps one or two may care to think this whole argument through.

Hard to see the difference between IT and other products / services.

Nope. It's only the first.

[ExecutiveSlaveBox]

you're missing the other side - the opportunity to trade with OUR advantages with other nations

skills that India CAN'T yet replicate are required for decent salaries, IT and accounting are NOT amongst those now or in the near term to a significant (tho not total) degree

coal miners in some parts of the country used to get paid very well in the 1960s

what goes around comes around

I think your missing something, we have NO advantage, there is NOTHING we can do that can't be done in India cheaper. However my argument isn't about putting up barriers to trade with India, it is the direct importation of workers into our country who don't have the burden of our costs.

If you think your job isn't at risk to this process, that your some unique and special snow flake then you are a fool.

[aussieboy]

The difference between IT and other services and shipbuilding,steel etc as you mentioned, is that shipbuilding, steel, mining etc floundered because these industries could be sourced cheaper elsewhere.

No-one came into Britain and displaced steelworkers, miners etc with cheaper labour. This is a fairly novel concept. Apart from I.T. there was an example upthread from the petrochemical industry too.

Indeed. Perhaps one or two may care to think this whole argument through.

Nope. It's only the first.

It's a stretch to consider foreign worker influx to be novel.

The Uk has imported, then resented, cheap labour skilled or otherwise for decades. Windrush generation, 70s Asian influx from Africa driving the buses, running the shops through to the more skilled labour today of Polish plumbers and building (any idea what a shutterer's hourly rate has dropped to), not to mention European dentists and the rest.

BTW not sure I understand your penultimate comment. Are you looking for elucidation?

[ZeroSumGame]

It's a stretch to consider foreign worker influx to be novel.

The Uk has imported, then resented, cheap labour skilled or otherwise for decades. Windrush generation, 70s Asian influx from Africa driving the buses, running the shops through to the more skilled labour today of Polish plumbers and building (any idea what a shutterer's hourly rate has dropped to), not to mention European dentists and the rest.

Point taken - but these refer to individual movements. Never before has a whole industry been subjected to mass organised replacement. Some of these onshorers are taking then in by the thousand.

I've had first hand experience of that 1,000 at a time displacement.

Whole UK projects exist where Johnny Brit is shut out.

BTW not sure I understand your penultimate comment. Are you looking for elucidation?

No mate, I'm in agreement with your sentiment there. It's pointed at the 'I'm-allright-Jack' s in earlier comments from third parties. IMHO Jack will get a wee lesson, that's all.

[Agentimmo]

It's a stretch to consider foreign worker influx to be novel.

The Uk has imported, then resented, cheap labour skilled or otherwise for decades. Windrush generation, 70s Asian influx from Africa driving the buses, running the shops through to the more skilled labour today of Polish plumbers and building (any idea what a shutterer's hourly rate has dropped to), not to mention European dentists and the rest.

BTW not sure I understand your penultimate comment. Are you looking for elucidation?

I've no issue with any of the above. For the most part, these immigrants came to the UK to work, better themselves and stay. The type of worker that VC wants to "invite" will be offski after 1-2 years. Having contributed little to the country or its coffers. Shouldn't the much vaunted Universities be working with govt to plug the percieved skills gap for IT staff? And other areas? What have all these Uni's being doing for the last 15 years? Oh, I remember....they've been enroling and training foreign students , because they got 3-5 times more cash per student than they got for a UK undergraduate.

Fantastic. All in the national interest, no doubt....

Vince, why don't you "invite" 500,000 chinese and indians over to work as policemen, prison staff etc for a couple of years. Would be 80% cheaper than the current incumbents.

[goldbug9999]

I admit it sounds dispassionate,. but we can't afford to waste money paying people to do jobs can could be done cheaper. It amounts to subsidy for some people.

If we amortise wage costs globally then we will all be working for $1 a week so that simply isn't workable for our high cost economy - we NEED labour protectionism in order to survive, this is true for all countries with social welfare programs.

Anyway the stated aim of the policy is not to reduce costs so any use specifically for that purpose IS an abuse. The move by the gov could be mitigated though if they raise the minimum required to salary to a reasonable level (i've hear 40k mooted) and then you will see just how much of a "skills shortage" there really is.

[aussieboy]

Point taken - but these refer to individual movements. Never before has a whole industry been subjected to mass organised replacement. Some of these onshorers are taking then in by the thousand.

I've had first hand experience of that 1,000 at a time displacement.

Whole UK projects exist where Johnny Brit is shut out.

No mate, I'm in agreement with your sentiment there. It's pointed at the 'I'm-allright-Jack' s in earlier comments from third parties. IMHO Jack will get a wee lesson, that's all.

Thought so - just thought I'd check

WRT no Brits, I've heard the Olympic park is similarly carved up.

I've no issue with any of the above. For the most part, these immigrants came to the UK to work, better themselves and stay. The type of worker that VC wants to "invite" will be offski after 1-2 years. Having contributed little to the country or its coffers.

SNIP

They'll have contributed to a reduced cost for IT services which benefits those using IT services.

Again, not saying it's a good thing. It's just a thing.

[ExecutiveSlaveBox]

They'll have contributed to a reduced cost for IT services which benefits those using IT services.

Again, not saying it's a good thing. It's just a thing.

I think that point is debatable, just because the cost of workers is cheap it doesn't necessarily follow the overall cost is lower. I've lost count of the number of disastrous offshore projects or ITC sourced projects I've seen brought back into departments to be fixed and delivered. At far greater overall cost to those companies than if built in house in the first place.

[pl1]

With inflation in India stubbornly running around 9% mark, and I believe the average Indian programmer making from £5k to £10k per annum as of 2010 with large annual salary increases the norm (correct me if I'm wrong here!) does anybody know when it will not be worthwhile outsourcing to India or onshoring more expensive Indians? A thought unthinkable even a few years ago, must now surely be a dot on the horizon?

[Orsino]

I disagree. IT is vastly different from other services. IT is the company. Many companies cannot survive even a week without systems.

What do you think will happen when code cannot be understood because it's in a foreign language? Britain will be held hostage by foreigners.

Eventually we will ask "What does Britain do?". The answer will be "nothing".

Wow. Do I recognise this mentality or what? Some IT workers need to get over themselves. Many mediocre IT workers expect to continue to command premium wages for what have often become commodity services. They better get real and accept that they are not more important than the company or their colleagues. The fact that similar services can be provided at rock bottom prices by Indians should make that pretty obvious. These Indians may not have exactly the same IT skills but I bet they've got a much better attitude.

Britain is not being held hostage by foreigners. We are being told by a small section of our own workforce that they are a special case and that we should pay over the odds so that they don't have to adapt or develop. Britain remains one of the worlds most successful economies precisely because it realises that change, development and open competition are what creates opportunity. 15 years ago the vast majority of these IT jobs didn't even exist. Today the UK is an important play in the global digital economy and we didn't get to that position by trying to maintain the status quo.

[aussieboy]

I think that point is debatable, just because the cost of workers is cheap it doesn't necessarily follow the overall cost is lower. I've lost count of the number of disastrous offshore projects or ITC sourced projects I've seen brought back into departments to be fixed and delivered. At far greater overall cost to those companies than if built in house in the first place.

Thing is, this discsusion is about staff transferring from India to the Uk, not offshoring.

WRT to offshoring, sounds like your firm were early adopters. Next time, it should run more smoothly, or less roughly. Then the 100th time it will be fine.

A couple of banks I've worked for have offshored. Neither took the work back onshore. It's much easier to measure a reduced IT wage bill than it is a missed deal due to the guy in Malaysia not getting a computer up and running in time.

[EUBanana]

IT is particularly vulnerable as it's not fully professionalised. Mainly because it's very young, and doesn't have the gravitas and age of things like law and accountancy and even engineering, who still enjoy what is in effect a feudal guild structure that limits supply and drives up prices.

Indians will find it hard to replace British solicitors, but only due to the innate protectionism of the legal profession.

Remember when lawyers were screeching about the deprofessionalisation of some of their services? Tesco selling legal services in their supermarkets, that sort of thing? That is their own form of protectionism at work there.

[madpenguin]

Sigh.... I 'm getting so fed up with stating and restating the bleeding obvious (we just did this subject to death on the other post mentioned), it's not about immigration, it's not about Indians being better than UK IT workers, it's about large foreign multinationals scamming tax and jobs to maximise corporate profits, oh and by the way they are now starting to do this with Law and accountancy:

http://www.techeye.net/business/uk-big-business-exploits-visa-loophole-to-decimate-it-jobs

Since the initial boom there has been tremendous and rapid growth. TCS, for example, had 6,000 employees 12 years ago and now runs at roughly 174,000 - typically making 25 percent profits on revenue. Wipro is well rooted in the UK and its chairman, Azim Premji, has become a billionaire off the back of on-shoring.

The usual suspects quickly sub-contracted to Indian IT services to provide resources, adding their mark-up, and so have built their Indian businesses to work both offshore and on-shore. Some are IBM, CapGemini, Capita and Xansa, now part of Steria.

It can be substantially cheaper and more flexible for businesses to rely on on-shore resources rather than hiring permanent staff or using contractors. Approximately, the price of off-shoring from an Indian IT service company is cheapest at £120 a day. An onshore Indian IT worker at a client base will cost £300 a day. Compare that to an internal charge rate for a permanent client UK IT worker at £400 a day, covering pension and holiday pay as well as salary. Now compare that to a UK contractor at £500 a day including an agency cut and a UK consultant from an IT service company at £800 a day and the maths are fairly clear.

An Indian IT worker could potentially cost under £50 a day to their employer while being charged to the client at £120 a day. Tempting figures.

It begs some questions, and they mostly can be directed to the UK's intra company transfer visa.

The intra company visa does not require a job to be in an area with recognised work shortfalls and it does not need to be advertised to show that the work could be done by UK staff. The few restrictions in place are simple and at surface value they look reasonable. A foreign employee must have been working at a related organisation for at least a year, though it was at six months before April. There is a points based system in place. They must pass the threshold and be paid at least the going or appropriate rate for the job.

Typically the salary clocks in at £24,000. Adding up visa costs, flights, accommodation and salary should if anything make using an intra company transfer rack up the expenses tally. It doesn't look profitable. Until you realise expenses and tax free allowances can be counted towards the "salary". As a source tells TechEye: "This is complete madness."

IT service companies with the resources can negotiatie with HM Revenue & Customs blanket tax free payments and allowances which cover legitimate business expenses that employees incur having worked at a client site for the first two years. Because these are not salary payments, the HRMC considers them tax free and it means every employee doesn't have the burden of sending in receipts which must then be counted and tallied. The tax free allowance dispensation can be between roughly £1,000 and £1,500 each month.

So if these consultants are on-shore Indian IT workers, they can be sent to client sites. They can be paid a minimum wage salary and grab a tax free allowance of up to £18,000. As a friend of TechEye puts it: "The UK Borders Agency rules are passed, their Indian IT workers are happy, and they can significantly undercut UK workers, void UK income tax and national insurance, both employer and employee."

Indian IT workers on an intra company transfer visa pay very little tax and national insurance. By comparison a UK worker would pay a lot - the system is cutting its nose off to spite its face. Employers using temporary foreign workers gain a strong competitive advantage over local workers. This was noted by the Migration Advisor Committee in a report last August. It stressed the loophole leaves the system, and the UK, wide open to abuse.

The UK Border Agency recognised that allowances could be used to undercut UK workers, but in its statement at the end of March 2010 it decided not to take any action. See page 8, paragraphs 41 onwards, here.

It's also worth looking at the UKBA's appropriate rates policy. They are specified in the codes of practice, here, which states that migrants but be at least paid the national 25th percentile salary in the job. In simple terms that means 75 percent of UK workers doing the same job would be paid better, and for the majority of migrants, who work in the South East, you can imagine up to 90 percent f workers in the region would be paid at a higher rate.

The going or appropriate rate can be 20 to 40 percent less than what the average UK workers doing the same job, in the same region, would be paid.

Read more: http://www.techeye.net/business/uk-big-business-exploits-visa-loophole-to-decimate-it-jobs#ixzz14hGkrSzx

Edited November 8, 2010 by madpenguin

[N1AK]

An astonishing back-stab to all those who took Computing at University

Your astonishment is your shortcoming not ours, and there are no knives protruding between my shoulder blades, which as a computer science graduate of 5 years one would assume there would be.

I don't expect the government to take half-arsed steps to protect my 'value' which would in practice do nothing of benefit.

Block companies from taking quality foreign workers and the UK becomes less attractive to invest in. I'd rather have to compete on merit than watch companies avoid setting up in the UK to begin with. The government should be focusing on encouraging companies to create jobs, I'll deal with getting them tyvm.