H1B Visa Ban: Reasons, Impacts and Criticism

Context:

The US administration on Tuesday said it was extending the 60-day ban on immigration and non-immigrant worker visas till the end of 2020. Popular work visas including the much-coveted H-1B and H-2B, and certain categories of H-4, J, and L visas shall also remain suspended until December 31, the White House said in a press note.

The move is said to have been initiated to protect domestic workers who had been impacted due to a contraction in the economy in the wake of the Covid-19 pandemic.

The US administration also hopes to end the diversity visa lottery permanently and for employer loopholes to be closed where jobs are given to lower-waged foreign workers

Reason for suspension of non-immigrant worker visas

Since it was started in 1952, the H-1 visa scheme has undergone many changes and revisions to allow or disallow certain categories of skilled workers in the US, depending on the economic situation of the country.

  • The technology boom coupled with the arrival of the internet and low-cost computers in developing nations such as India and China saw a large number of graduates willing to work at relatively low costs in the US, a win-win situation for both the employer and the employee.
  • However, it has since often been criticised for sending low cost workers to the US at the expense of domestic workers.
  • After taking over as the president of the US, Trump had hinted that the low-cost workers were hampering the economy and undercutting jobs of citizens.
  • Prominent companies such as Walt Disney (DIS) and Southern California Edison have been accused of replacing American workers with cheaper foreign labor.
  • American regulators believe these reforms will help protect the wages of American workers and ensure that foreign labour entering our country is high skilled and does not undercut the United States labor market

H-1B, H-2B and L work visas

In order to fill a vacuum of highly-skilled low-cost employees in IT and other related domains, the US administration issues a certain number of visas each year which allows companies from outside the US to send employees to work on client sites.

H-1B

Of these work visas, the H-1B remains the most popular among Indian IT companies.

  • The US government has a cap of 85,000 total H-1B visas for each year. Of this, 65,000 H-1B visas are issued to highly skilled foreign workers, while the rest 20,000 can be additionally allotted to highly skilled foreign workers who have a higher education or masters degree from an American university.
  • The H-1B is a visa in the United States under the Immigration and Nationality Act that allows U.S. employers to temporarily employ foreign workers in specialty occupations.
  • A specialty occupation requires the application of specialized knowledge and a bachelor’s degree or the equivalent of work experience.
  • The duration of stay is three years, extendable to six years; after which the visa holder may need to reapply.
  • Laws limit the number of H-1B visas that are issued each year

L1 Visa

Apart from the H-1B visas, the US government also issues L1 visas which allows companies to transfer highly skilled workers to US for a period of up to seven years.

H-2B

H-2B visas allow food and agricultural workers to seek employment in the US

Impact on Visas

  • Processing of all new H-1B, H-2B, J, and L visa categories stand suspended. This means those who do not have a valid non-immigrant visa as of June 23, and are outside of the US, will not be allowed to enter the country until December 31.
  • Workers in essential services in the food sector have been given some reprieve, and their entry shall be decided by the consular officer of immigration services.
  • H-1B, H-2B, J and L visa holders, and their spouse or children already present in the US shall not be impacted by the new worker visa ban.

Implication for Indian IT Sector:

Indian IT companies are amongst the biggest beneficiaries of the US H-1B visa regime, and have since 1990s cornered a lion’s share of the total number of visas issued each year.

  • As of April 1, 2020, the US Citizenship and Immigration Services (USCIS) had received about 2.5 lakh H-1B work visa applications, according to official data. Indians had applied for as many as 1.84 lakh or 67 per cent of the total H-1B work visas for the current financial year ending March 2021.
  • Indian IT companies also offer subcontracts to Indian nationals already present in the US with valid H-1B visas. Bangalore-based Wipro spends as much as 20 per cent of its revenue to subcontract Indian workers with valid H-1B visas
  • Apart from the suspension of these work visas, the executive order also made sweeping changes to the H-1B work visa norms, which will no longer be decided by the currently prevalent lottery system. The new norms will now favour highly-skilled workers who are paid the highest wages by their respective companies.
  • This could result in a significant impact on margins and worker wages of Indian IT companies which send thousands of low-cost employees to work on client sites in the US.
  • Though the large Indian IT companies have cut down their dependency on H-1B and other worker visas by hiring as much as 50 per cent of staff locally, they still rely on these visas to keep costs in check.

Criticism

Legal immigration is a positive for the American economy, and visa programs allowing American companies to secure qualified, legal labor throughout the world have benefited economic growth in the United States.

  • NASSCOM, India’s IT industry body criticised the move as misguided and harmful to the U.S. economy for without highly skilled immigrants, the economic pain would worsen, industry would slow, and the timeline for a treatment and cure of COVID-19 would lengthen.
  • Indian tech companies in the U.S. paid $22 billion in taxes from 2011 to 2015, according to a report by India’s software and services trade association Nasscom.
  • Indian temporary workers on the H-1B and L1 visas alone contribute $3 billion in social security funds annually, even though many don’t stay long enough to benefit from it.
  • Tech leaders in the U.S. were also dismayed as they believe that skillsets brought by visa holders are net job creators.
  • Google CEO Sundar Pichai stated that Immigration has contributed immensely to America’s economic success, making it a global leader in tech.
  • The H-1B programme in particular has played a crucial role in addressing shortage of health care professionals while also providing other key sectors of our economy with talent from around the world to not only fill jobs, but create new ones.
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