The H1-B: A Solution And A Mess

The new H1-B visa policy may be a mess, but it may also be a solution to several economic precipitants.

The visa issue will be revisited time and again, atleast for the next year or so. There are umpteen ramifications of the new visa proposal, and there are larger number of concentric policies that will affect outsourcing leaders like India. Perhaps the most affected will be the employment situation in the United Stated. Not just the minimum wage, but also the restriction on the number of foreign workers, will affect workplaces in the country. A decrease in the number of foreign workers from 85,000 to 70,000, and the limitation of hiring not more than half of its entire staff from outside the US, is more than a large concern. However, Trump, who also used this program for his businesses, is still closer to a median solution, although he has emphasized that the whole program indeed needs a lot of changes.

In the past, large companies, particularly in the IT industry, had a way to around the rules of the H1-B visa program by filing multiple petitions for the same workers. Workers accepted the petition of different companies which allowed them to change companies under the same visa; a catch-22 situation. A blanket of opportunities for the larger companies meant that the smaller ones lost prospects and remained dreary.

The costs of hiring foreign workers and the risks, were not small, to start with. Of particular concern are Indian outsourcing companies that provide workers through their subsidiaries based in the US, with employees mostly for entry-level positions. Some firms have as much as 60% of their subsidiary’s employees as H1-B visa holders. Also, 65% of H1-B petitions in 2014 were for the tech workers mostly from India and the top 10 recipients of visas in 2015 were outsourcing firms.

Although the number of the people who annually receive a visa is not large compared to the number of US citizens, the problem crops up in the length of stay. The H1-B visa lasts for 3 years and can be extended for another 3 years. This has decreased the possibility of further hires for that time-period. Blame it on ‘skilled’ foreign labour, or the ability to work harder, or a general choice in terms of costs of labour, this has been the story. With more than 20% being foreign workers in the IT sector currently, there is imminently lesser probability that the American worker is without employment. Some more workplace rages seem to come from individual competition and appointer’s obliviousness, especially when American workers are to train these foreign workers before they are laid off. The anger is presumably justified. Trump’s policy on employment rates conceivably stems from all these issues.

The biggest apprehension is about new H1-B holders, albeit future work-visa seekers, and of course the ones that have been already working in the subsidiaries, in the recent past may also be in the same boat. The argument that companies cannot find skilled workers in the US doesn’t stand too. Given that foreign workers must have a prevailing wage or a higher one, and that companies usually pay the level 1 wages to reduce labour costs, it means that they are usually paid less than the average local workers with the same qualifications. When an employer advertises a job with this lower salary, it is no wonder that a small number of local people apply for the job, which allows them to seek foreign workers for that job. But, in order to justify a salary lower than the market average, companies must prove that these workers are not as qualified. That is the biggest paradox.

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