Winners and losers of the battle against H1B visas

Winners and losers of the battle against H1B visas

The beginning of the Trump Administration has been highly controversial. After its Executive Order to ban entrance in the US to visa holders from selected Muslim countries, it is now time for a new topic that comes from the election campaign: protecting American jobs by revisiting the non-immigrant visa system. 

An unconfirmed and unsigned memorandum with the subject line Executive Order on Protecting American Jobs and Workers by Strengthening the Integrity of Foreign Worker Visa Programs was leaked earlier this week. The order instructs the Secretary of Homeland Security to:

  • “restore the integrity of employment-based nonimmigrant worker programs and better protect U.S. and foreign workers affected by those programs”
  • “consider ways to make the process for allocating H1B visas more efficient and ensure that beneficiaries of the program are the best and the brightest”
  • “… provide recommendations for making U.S. immigration policy better serve the national interest, and to recommend changes to the immigrations laws to move towards a merit-based system”

In line with this document, a series of bills have been brought forward:

In California, Congressman Zoe Lofgren introduced earlier at the end of January a Bill to amend the High-Skilled Integrity and Fairness Act of 2017 by introducing a minimum salary of $130,000 for the beneficiary of the H1B visa, (over a 100% hike from the original $60,000). The same bill would also limit the number of visas for their family members.

Utah Republican Representative Jason Chaffetz, introduced a bill that seeks to replace the country-wide immigration caps with a first-come-first-served system. Senators Chuck Grassley and Dick Durbin, reintroduced a bipartisan H1B reform bill from 2007 that eliminates the lottery system and gives foreign students educated in the U.S. priority on visas. It would benefit advanced degree holders with valuable skills.

What is an H1B visa?

Both documents address, among others, the H1B. The H1B is a non-immigrant visa that allows US companies to employ foreign workers in specialized fields that are technical and know-how intensive for a period of 3 years, renewable once. The US issues annually, on a lottery-based system, 65,000 H1B visas (Regular H1B Cap) with additional 20,000 available (Advanced Degree Exemption – ADE Cap) to foreign students who have completed graduate programs at a US university. However, in 2015, 172,748 H1B visas were issued, more than twice the combined caps. The explanation lies in the fact that there are some H1B cap exempt employers: institutions of higher education, non-profits, non-profit research organizations, and government research organizations.

Who stands to win

In the past, several cases of abuse were reported. Infamously, Indian IT company Infosys paid in 2013 a $34 million fine when it was discovered that it was using tourist visas (which prohibit employment) so that its workers could serve clients in the US. Cases of H1B holders being mistreated and underpaid and US workers being discriminated against in favor of workers from low-cost countries are also not uncommon. In this respect, the

In this respect, the Lofgren Bill, more than the Executive order, would help reduce abuses against domestic and foreign workers and guarantee fair working conditions for both. It is the bill that provides for transparency for H1B visa holder by requiring employers to provide immigration paperwork within three years and protects the same by prohibiting liquidated damages for H1B workers who cease employment prior to a date agreed to by the nonimmigrant and the employer.

Small employers are also set to win since the Lofgren Bill Sets aside 20% of the annual allocation of H1B visas for small and start-up employers with 50 or fewer employees. Under the current provisions, small employers have almost no chances of successfully sponsoring visas.

Who stands to lose

  1. US-based IT companies have been in the past the main beneficiaries of the non-immigrant visa policy. Companies like Apple, Google, Microsoft, Facebook etc. have turned to foreign nationals to fill positions that could have or couldn’t have been filled by American workers. The jobs that attracted the most H1B visa holders were Computer Systems Analyst, followed closely by Software Developers and Computer Programmers and they were predominantly located in California. Believing or not that American workers are discriminated in favor of foreign workers depends on whether there is or not a shortage of STEM skilled workers in the US. There definitely used to be one back to 1999, the Y2K crisis and the aftermath when the IT consulting companies were simply overwhelmed. Nowadays, experts say that the shortage contracted but that the companies take advantage of the H1B to drive their bottom lines. Whether that is the case or not, that bottom line will take a big hit under all proposed legislation.
  2. India-based IT companies such as Infosys, TCS, Tech Mahindra and Wipro took a hit in the aftermath of the publication of the two documents. Their stocks plummeted by 4.5%, 5.5%, 9.7% and 4.1% respectively. Infosys, for example, is by far the largest sponsor of H1B visas, almost twice as IBM. The US market generated about 60% of the Indian IT industry for the last fiscal 2015-2016 but now the Indian companies are considering the trade-off between hiring local workers in the US to the detriment of their profit margin and automating some of the software services.
  3. American Universities also stand to lose since one of the criterion used worldwide to rank Universities, both undergraduate and graduate programs is international diversity. In the academic year 2015/2016, there were over 1 million foreign students enrolled in US Universities, 47% of which originating in China and India. They are the ones usually paying the full price tag of what is the most expensive tuition system in the world and are a great source of income for American Universities. Only 20% of them receive funding from the schools (money that would be wasted if the student would not be allowed to remain in the US). The students are incentivized to study in the US, not only by the quality of the education but also by the possibility of finding a job in the US after graduation. Should that possibility become uncertain, they might be more inclined to pursue college and graduate studies in countries such as Australia, New Zealand and Canada, all countries that are more welcoming to highly skilled, highly educated people. In this respect, the bi-partisan Grassley/Durbin bill gets it right.

All documents are in an early stage and it is unclear at this point whether, which one of them and under what form they will be passed. The news of their very existence was enough to cause uncertainty among US It companies and visa applicants alike.  States have different rules about the time it takes for legislation to become effective. As a rule of thumb, a bill implementation process is about 90 days in most states. In California however, most bills become effective on January of the following year.  On the other hand, the executive orders become effective 30 days after being published in the Federal Register.


Categories: North America, Politics

About Author

Alina Harastasanu

Alina Harastasanu works as a business analyst and has over 7 years experience in consulting and international business. She holds a B.A. in Political Sciences from the University of Bucharest, a M.A. in Geopolitics and Global Security from University of Rome “La Sapienza” and an MBA degree focused on International Business and Strategy from The Ohio State University.