Last updated on April 14th, 2021 at 03:21 pm
Silicon Valley and the San Francisco Bay Area have long held a strong reputation around the world for innovation and software engineering expertise, however, over the last few years, this world-famous hotbed of technological skill has faced a host of labor problems that look set to continue for the foreseeable future, if not get worse.
The American workforce is lacking in IT experts, and this has led to increasing numbers of Silicon Valley companies looking overseas to hire skilled teams of workers. Unfortunately, this all looks set to come to an end in the near future as President Trump has committed to a policy of reducing the number of H1B and L1 visas to be issued to non-residents. With the annual cap of just 85,000 H1B visas being reached in as little as 5 days of applications, a lottery system has had to be put in place to determine visa recipients, and while the new policy may look like good news for American workers, it spells disaster for Silicon Valley companies who are looking for ways to reduce their expenditure.
Tech companies are the main area in which the overuse and outsourcing of H1B visas in the past has begun to cause havoc. Originally, H1B visas were designed to fill places in which there was insufficient American talent to meet the necessary demand. Actually, there have been some extremely high-profile examples of former H1B visa holders, including Tesla and SpaceX founder Elon Musk, as well as AppDynamics founder Jyoti Bansal. However, in an attempt to bypass the high salaries that American workers demanded, H1B visas were brought into play to obtain an equivalent level of talent at a more affordable price. The clampdown now looks set to raise some serious financial issues for those very same Silicon Valley tech companies.
April 2017’s Buy American Hire American executive order from the President seeks to create better rates of employment and higher wages for homegrown American talent, however, in the cases of tech companies, the thinking is somewhat flawed. In the past, Silicon Valley companies relied heavily on overseas skilled workers with H1B visas who were prepared to work for lower salaries in order to save on costs. However, since the change in the presidency, the result has already been that companies are struggling to obtain H1B visas for non-American highly skilled workers and are increasingly having to depend on the home-grown American workforce- who can command high hourly rates and expect extremely high salaries simply because of supply and demand.
Those H1B visa recipients who have been able to come to work in America have found that life has been anything but smooth sailing, with increasing RFEs (requests for evidence) being bombarded upon their employers resulting in considerable time and effort having to be put in to meet the many requirements. For companies, this means a potential loss of focus and revenue as well as for H1B workers themselves, and the result can often be a hardship, as they hang in the balance waiting for the authorisation process to be finalised. Even when the visa is finally issued, there is a strong chance that the period of validity will be less than the full three years which used to be guaranteed. All of this spells a lot of hassle for companies which ideally need to be dedicating their time to their industry and not to the recruitment and retention of their skilled overseas workers.
Despite the high salaries which can be commanded by Silicon Valley’s workforce, the extraordinarily high cost of living in the Bay area means that even with a six-figure paycheck, it is still increasingly difficult to afford housing. An article in The Guardian newspaper demonstrated this all too clearly in an interview with a tech worker who commanded a salary of $160,000 and yet struggled to raise his family, with rents on even cheap 2-bedroom properties as high as $3000 per month. A monthly rent of approximately $3,500 is standard on a basic one-bedroom property – a cost which is even 30% more than the prices charged in Manhattan!
With purchase prices now coming in at an average of $1.13 million, the latest estimates from the US Department of Housing and Urban Development say that in San Francisco, a family of 4 on a salary of under $105,000 per annum is considered to be on a low income. Even families on $400,000 a year are only considered to be in the middle classes here, finding it hard to make ends meet and keep on top of their bills.
It’s no wonder, then, that almost 50% of residents in the area are keen to leave and that, too, adds up to a considerable problem for businesses in Silicon Valley which will be robbed of essential workers who leave in search of more affordable homes and a better quality of life, no doubt heading to places like Washington State, Texas, Nevada and Oregon where they can get more value for their money.
It comes as no surprise that these out of state areas are also the destinations of choice for new tech startups which have decided to look further afield for talent in places where they can benefit from tax advantages.
The problem will only be exacerbated by the fact that increasing numbers of tech companies are moving to the Bay area. Apple, 8X8, Bloom Energy and HP Enterprise have all expanded or relocated to the neighborhood and are all demanding high-caliber staff who can meet the needs of their highly technical enterprises. Unfortunately, in a region that is already struggling to attract new residents and retain the residents that it already has, the problem is being further aggravated by the fact that insufficient housing is being built to accommodate those essential workers. It has been calculated that there is a need for 250,000 new housing units in the area every year, however, at present only 110,000 are being constructed annually.
Although it may not immediately appear to have an impact on the labor market, the worsening traffic problems around the Silicon Valley and Bay area are also having a knock-on effect on levels of employment in the area. With the average commute taking around 2 hours, the once-present appeal of working in Silicon Valley is extremely diminished and the result is that new talent is reluctant to work here and existing talent is keen to leave.
As if all of this wasn’t enough, there is a further problem facing the executives in charge of staff recruitment – the aging workforce. Evidence has shown recently that in some of the industries in Silicon Valley half of workers are aged 45 and above, and this spells further difficulties as increasing numbers choose to opt for early retirement or to leave the sector due to burnout and stress issues. With many managers and leaders of organizations (as well as workers further down the line) coming to the end of their career paths, the problem of who will be able to replace them looks set to be a major issue within the next decade as the oldest members of the workforce depart with, potentially, no one capable of replacing them.
There is an effective solution to the recruitment problem in Silicon Valley, however. By outsourcing work to local vendors with worldwide reach to highly skilled vendors, not only can firms save the time and effort of attracting and retaining homegrown staff, but they can also save themselves the challenge of trying to obtain H1B visas for talent from abroad. Utilizing local vendors with highly skilled developers will not only help to reduce the hassle and difficulties faced by tech companies in this area which is struggling to attract and retain staff in the existing economic climate but will also help to slash their costs and get essential work completed at a lower price.
While in the past, working with a remote team posed its own challenges, today, there has been a shift in the equilibrium. Thanks to the power of the internet and the cloud, more companies are now adept at managing remote workers and with the improvements that have been made in collaboration tools with the possibilities of video calling, high-quality project management software, and next-generation chat programs, many high-profile businesses are now using outsourced development teams with great success.
Harnessing the power of overseas talent sidesteps the many problems that the Silicon Valley working environment presents in terms of obtaining visas, finding affordable housing, and recruiting talented employees who are prepared to put up with the many challenges that the area throws up in order to work for a prestigious tech company. By outsourcing, organizations can successfully take their business through the future difficulties that they face.
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