India’s major tech firms may end up paying a hefty price if US president Donald Trump goes through with an overhaul of the country’s current visa rules.
Reports of a draft executive order to revamp US immigration laws for foreign workers picked up steam on January 30. The largest Indian tech firms with US operations – Tata Consultancy Services, Infosys and Wipro – all saw their stocks plummet over 4% on the news.
An apparent version of the draft order, published by Vox, proposes changes to legal immigration that would “reduce the inflow of illegal entries and visa overstays” and “better serve the national interest.” In a bid to increase transparency around jobs going to foreigners, the order, if signed, would require immigration data to be published publicly. It also instructs the secretary of homeland security to consider alterations to the H1-B program to “make it more efficient and ensure that the beneficiaries of the program are the best and the brightest.”
Silicon Valley’s biggest companies, including IBM, Google, Apple, Amazon and Microsoft, import a sizable amount of talent from abroad. But the order could have an outsize effect on the US operations of Indian firms – the top source of applications for the H-1B visa, which grants foreign workers authorisation to work in the US for up to six years. Indian firms contract out thousands of workers to tech companies across the US, and an overhaul of any kind would have have a ripple effect throughout the industry.
“Immigrant STEM workers have contributed an outsize share to founding new companies, getting patents, and helping build up American companies, which in turn because of their success have created tens of thousands, hundreds of thousands of jobs,” Gary Burtless, a senior fellow at the Brookings Institution, who does research in labor markets, told Bloomberg in response to the draft order. “Discouraging such people to apply for visas to enter the United States to work – I can’t imagine how that can be considered to be in the American national interest.” A 2015 survey by the Confederation of Indian Industry, India’s oldest business association, calculated that 100 Indian companies in the US – 40% belonging to the IT industry – had created more than 91,000 jobs and invested over $15.3 billion in the US in 2015 alone.
A number of reforms to the H1-B visa process have been suggested over the years. The visa is in high demand, and attracts three times as many applications as are filled. A bill introduced last week by Californian congressman Zoe Lofgren, a Democrat who represents Silicon Valley, proposes scrapping the H1-B’s lottery system, which randomly awards up to 85,000 visas from the pool of applicants. Instead, it suggests prioritising applicants for whom employers are willing to pay 200% of existing wage levels. This would guarantee a place for high-paid, high-skilled labour.
There is also a provision in the proposed legislation, titled the High-Skilled Integrity and Fairness Act of 2017, to set aside 20% of the annual allocation for the H-1B visas for startups with less than 50 employees. This would ostensibly prevent bigger companies from flooding lower-level positions with cheaper talent from overseas (something Indian outsourcing firms have been criticized of doing). Ron Hira, an associate professor at Howard University, told Bloomberg that he found that outsourcing firms in the US paid workers a median wage of less than $70,000, compared to Apple, Google and Microsoft employees, who were paid $100,000 on average.
Lofgren’s bill also includes a suggestion to hike the wage exemption level. Since 1998, H-1B visa applicants needed to earn at least $60,000 in their job roles in order to be eligible for the visa. The bill suggests that the minimum be pegged at $130,000. If that happens, Indian IT firms could incur additional costs of hundred of millions of dollars.
Neither the bill nor Trump’s order is likely to result in any immediate policy changes, but in the event that changes are made to the H-1B requirements, outsourcing companies based here will have to reevaluate whether bringing in talent from overseas is worth the increasing cost burden.
Two-way dependency
The US remains India’s biggest destination for software exports, and its $150-billion technology sector derives more than half of its revenue from North America. Initially, India’s IT bigwigs looked like they might try to respond to Trump’s protectionist strategies by employing more local talent. When Trump first began to talk of tightening visa regulations during his presidential campaign, Wipro’s chief financial officer, Jatin Dalal, and Tech Mahindra’s chief executive, CP Gurnani, said they would look for opportunities to acquire US-based companies. Infosys COO Pravin Rao said the software firm would reduce visa dependency by stepping up recruitment efforts in the US.
But Silicon Valley already has a chronic skills shortage, which could impede any efforts to hire domestic talent. More than 64% of the H-1B visas allocated in 2014 went to people in computer-related occupations, illustrating the demand the US tech industry has for foreign workers. Last year, 65% of US chief information officers and IT leaders surveyed for a Harvey Nash/KPMG report said that skill shortages were holding them back. The visa revamp would also target the L-1 visa category, which allows multinationals and foreign companies operating in the US to bring in specialists and managers for a limited amount of time.
NASSCOM, India’s IT trade association, said in a statement issued January 31 that it would ask the administration to keep in mind India’s role “as a ‘net creator’ of jobs in the US” when revising its rules, and “to carefully calibrate the conditions, keeping in mind the skill shortage in the US.”
“In attempting to reduce the incentive to bring consultants into the US, the dynamic that will be created is incentives to move the entire project outside the US,” says William Stock, an immigration lawyer and president of the American Immigration Lawyers Association. “The big workaround is going to be: ‘How do we ship this work overseas? Because we don’t have the workforce in the US.’”
This article first appeared on Quartz.
