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NEW YORK (Reuters) - U.S. technology companies, which are laying off thousands of employees, will likely have to water down their long-running campaign for permission to hire more foreign workers to avoid a political backlash this year.
The tech industry employs three out of every five foreign workers under the country's H-1B visa program, which lets U.S. companies hire up to 65,000 foreigners per year, according to U.S. Citizenship and Immigration Services data.
Tech companies have long argued that hiring should be tied to market needs and not capped artificially, seeing the ability to scoop up foreign talent as critical to America's competitiveness.
Through Compete America, an alliance whose members include Microsoft Corp (MSFT.O), Oracle Corp ORCL.O and Intel Corp (INTC.O), the tech industry has lobbied for the right to employ foreigners freely to make up for domestic shortages of computer programmers, engineers and other skilled workers.
But the H-1B visa program has drawn new criticism amid a deepening recession, with the unemployment rate soaring to a 16-year high of 7.6 percent in January and nearly 600,000 jobs cut.
"The bloom is a bit off the rose politically" for tech companies enamored of foreign workers, said Neil Sims, a managing director at executive search firm Boyden.
Sims, who works in Boyden's technology practice, said it would be tough for corporate lobbyists to justify the need for foreign workers because the unemployment pool is brimming with laid-off American workers.
"Politically, it would be difficult to make that case to the American workforce right now," Sims said.
Immigration lawyers and recruiters expect the annual firestorm around H-1B visa quotas, the applications for which are due in early April, to reignite in Washington this year.
Already, the U.S. Senate this month barred recipients of government bailout funds from hiring foreign workers if they laid off American employees in the past six months.
And in January, Sen. Charles Grassley, an Iowa Republican, sent a letter to Microsoft saying the world's biggest software maker had a "moral obligation" to preserve the jobs of Americans ahead of H-1B workers.
The move came after Microsoft announced plans to cut 5,000 jobs. The company said in a statement that it is laying off both domestic and foreign workers, and will extend support to every affected employee. Microsoft is one of the largest employers of H-1B workers and Bill Gates has been a vocal proponent of the campaign to expand the program.
Eric Thomas, a spokesman for Compete America, said in an email that the current situation is unlikely to change the campaign's "basic message" but he would not comment on the alliance's strategy for this year.
"Because the IT migrant worker is such a critical part of the Valley, they're considered natives," said Adam Charlson, senior partner at executive recruitment firm Korn/Ferry International Inc (KFY.N), referring to the Northern California region that is home to many tech companies. "But it will become an issue in the context of the wider economy."
Norman Matloff, a professor of computer science at the University of California, Davis, and a fierce critic of the H-1B program, expects the tech industry to continue to push hard for an H-1B increase as it did in the aftermath of the dotcom bubble's bursting in 2000.
Matloff has argued that foreign workers are willing to work for lower wages and crowd out Americans. As long as companies focus on quarterly profits, they will push for cheaper foreign labor to bring down overall wages and save on costs, he said.
Still, lawyers say they are seeing fewer H-1B petitions this year as companies struggle through the worst financial crisis since the Great Depression. They also have a larger pool of domestic workers to choose from, after more than 2 million Americans lost their jobs in 2008, according to the Bureau of Labor Statistic.
In 2008, the USCIS received 163,000 H-1B petitions for 65,000 visas. This year, employers will probably file no more than 100,000 petitions, said Charles Kuck, president of the American Immigrant Lawyers Association, a group that favors expanding the H-1B program.
But that does not mean companies are getting cold feet, Kuck said, distinguishing between short-term exigencies created by weak overall hiring and the longer-term issue of a domestic shortage of highly skilled workers.
Kelly McCown, an immigration attorney at San Francisco-based McCown & Evans LLP, said a big technology company client is cutting H-1B applications by one-third.
"That's at least partly because they have a bigger pool to choose from for the skill sets they're looking for," she said.
Reporting by Anupreeta Das, editing by Tiffany Wu and Matthew Lewis