H-1B Visa restrictions and fallout

H1B-Visa

by Vinny Davis and Seppi Sebastian

Substantial changes are being made to the existing US immigration framework. A key reason for this being a wave of nationalist and protectionist sentiments that has swept over the very proponents of liberalisation. President Trump’s electioneering rhetoric was around the premise of securing ‘American Jobs for Americans’. Limiting the issuance of H-1B visas was always an area of critical interest for those advocating ‘America First’ or ‘Americans First’ with the assumption that, restricting it will reduce an inflow of immigrants and transnational labour that displaces American workers. ‘H-1B’ is a non-immigrant visa issued by the US and allows employers to temporarily hire foreign workers in specialty occupations. The visa, under the Immigration and Nationality Act, Section 101(a)(17)(H), is normally used to bring in highly skilled professionals who possess a body of  specialised knowledge in a ‘field of human endeavour’ such as computer science, academics, medicine, mathematics, business etc, and who hold a minimum bachelors degree. The existing visa allocation is based on a lottery system, usually conducted on April 1 every year, and sets a cap of 65,000 applications. However, there are numerous exceptions to the cap, where by 20,000 additional visas are kept aside for master’s degree students from US universities, non-immigrant workers and subcontractors to academic and research institutions, special visas based on free trade agreements and so on. During the past couple of years, 85,000 or more H-1B visas have been issued annually to non-immigrants.

‘High-Skilled Integrity and Fairness Act of 2017’, was introduced by U.S Representative Zoe Lofgren in January 2017 aimed at curbing abuse of the H-1B visa while attempting the overhaul of a broken high skilled immigration programme. The proposed legislation includes clauses to eliminate per country cap for employment-based immigrant visas (for employers to hire the best minds without discrimination on grounds of nationality or origin). It also prioritises a market-based allocation of visas to those companies willing to pay 200 per cent of a wage ratified through pay rationalisation while eliminating the lowest salary grade. The move consequently, raises the salary level to one above $130,000, where H-1B dependent employers will be exempt from non-displacement and recruitment attestation requirements. The proposal also sets aside 20 per cent of the annual allocated H-1B visas for small and start-up employers with less than 50 staff. This should ensure that budding organisations have an opportunity to attract high-skilled workers while still protecting against outsourcing.

President Trump signed a ‘Buy American, Hire American’ executive order on the April 18, 2017, which sets the broad policy directions for federal agencies to propose reforms to the H-1B visa system. This could have considerable repercussions on the $150-billion Indian IT industry, which increased its contribution to India’s GDP from 1.2 per cent in 1998 to 7.5 per cent in 2012. In fact, Indian IT firm stock prices fell by 4 per cent resulting in a loss of 35,000 crore even during the initial stages of discussions regarding H-1B reforms. As of 2015, 70 per cent of the issued visas went to Indian software engineers (U.S Citizenship and Immigration Service, 2015). During the application process starting April 3, 2017, it was reported that Indian firms had reduced their visa applications and were neither sending junior staff nor applying for visas proportionate to their business needs. Indian IT players in the US who depend largely on H-1B visas for recruitment will now be forced to shift operations elsewhere or subcontract them to US firms. Such enterprises will thus bear higher costs for the delivery of their services and lower profit margins.

Recent media reports indicated that a Trump administration official, during a press briefing, had highlighted the operations of Indian IT majors such as Tata, Infosys and Cognizant who reportedly often misuse the current system by flooding it with applications, which in turn increase their chances of success during a lottery draw. Indian IT players are also accused of bringing in low-cost IT workers to the US at the cost of American jobs. Contrary to that argument, a report by the National Association of Software and Services Companies (NASSCOM) indicates that the salaries of foreign workers and U.S nationals are equivalent – if the wage of a US national is $ 81,447, that of a US visa holder is $81,022 in addition to $15,000 in fees.

Indian services companies do a commendable job by providing cost competitive solutions, innovations and capacity building in the form of assistance to US government departments in system upgradations including standardising software for transport systems, automation of payment collections and designing affordable health care solutions to name a few. During the recession in 2009, when the unemployment rate in the US was 9 per cent, Indian IT firms were able to add jobs and hire locals. The tech industry has lesser unemployment at 2.9 per cent (Nov 2016)  than the broader US economy, where the unemployment rate remained at 4.5 per cent in March 2017. A NASSCOM report shows that Indian IT firms generated 410,000 jobs in the US – 255,000 direct and 156,000 indirect jobs; Indian companies have invested $2 billion in the US; and have paid $22 billion in taxes (2011- 2015). In addition, Corporate Social Responsibility (CSR) contributions of Indian IT companies include reaching out to 125,000 Americans across various initiatives such as sponsorships, funding health care programmes, donations, capacity building initiatives and training programmes.

The proposed changes in visa policy will also have spill over effects on the U.S Economy. US tech giants such as IBM, Facebook and Google also employ 800,000 professionals (contributing $19 billion or a fifth of India’s software export) under the H1-B programme and will likely see a decline in revenue. There is a shortage of skilled workers in the US with nearly 46 per cent of STEM (Science, Technology, Engineering & Mathematics) jobs lying vacant. Studies indicate that the US will be facing an acute shortage of close to one million engineers by 2018. In fact, international students contribute nearly $32 billion a year to the economy and America has so far stayed ahead by attracting the best minds. Recently, 40 per cent of college applications in the US saw a dip in its numbers, perhaps due to global economic factors, and the climate of uncertainty following President Trump’s travel ban.

Perhaps for the first time by a World Trade Organisation (WTO) member, India formally filed a dispute in 2016, challenging the immigration laws of another member. The complaint then was regarding the increased visa fees for IT workers and that obligations under General Agreement on Trade in Services (GATS) were being contravened by the US. Indian IT companies can pressure the Indian government to follow suit, initiate retaliatory trade measures or tackle the situation constructively. Narayana Murthy, (co-founder of Infosys) had once suggested that Indian companies stop sending people on H1-B visas and instead hire locals in the US with the aim of becoming truly multicultural and transnational corporations. Meanwhile, with Indian techies in the US forced into involuntary servitude and underpayment because of binding ties to work visa sponsor/employer, a change in US visa policy could retain the best minds for India’s development.

Vinny Davis is Managing Associate, CPPR Centre for Strategic Studies and Seppi Sebastian is Executive Director, CPPR. Views expressed by the author is personal and does not reflect that of CPPR.

This article was first published in The Dialogue, Click here to read: H-1B Visa restrictions and fallout

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