H-1B visas
February 1, 2017 | Expert Insights
What are the implications for the Indian IT Sector?
On 21 Jan 2017, Ms. Zoe Lofgren, Democrat and the US Representative from Silicon Valley California introduced the, ‘Highly Skilled Integrity & Fairness Act’ as a bill in the US Congress. The bill, should it become law, is likely to alter US policy on the issue of H-1B visas, in a manner that may have major implications for the Indian IT sector.
What are H1-B Visas?
An H1-B is a temporary work permit, which empowers a foreign national to work in the US. Thus, through H1-B visas, US firms can sponsor and employ foreigners, for specialist jobs in the US. However, if the employee is dismissed or quits the job, he or she would be required to return to the home country or seek alternative non-immigrant status.
What is the Current US Policy on HIB visas?
Current law limits to 65,000 the number of foreign nations who may be issued with H-1B visas, in each fiscal year. Other laws exempt a further 20,000 foreign nationals holding a Master’s degree from an American University, from the cap on H1-B visas. The demand for H1-B visas is hugely oversubscribed and the allotment is made by a lottery system. In 2016, the demand was more than three times the availability. The current policy also fixes a country cap; though obviously, the Indian cap exceeds other nations, by a wide margin.
What does the New Law Propose?
The new law proposes to more than double, the minimum salary offered to a foreign H1-B visa holder. The current minimum salary is US$ 60,000 and it is proposed to be revised to more than US$ 132,000. The current minimum salary was fixed in 1989 and has remained unchanged, since. The new law also proposes to remove the country cap; enabling all workers to be treated equally without regard to national origin. Representative Lofgren claims the legislation will still empower American firms to employ the best & brightest, by paying them well. At the same time, it will remove incentive for US firms to undercut American wages and outsource jobs.
How will the New Law Affect India?
India’s outsourcing industry employs millions of people for businesses in the US. In 2015, India’s IT exports alone to the US, was valued at US$ 60 billion and is India’s largest export to the US. Indian firms provide engineering and other technical services, to firms such as IBM, Microsoft, Citibank, Amazon and Apple amongst others. There are an estimated 350,0000 Indian workers with H1B visas, working in the US.
Assessment
If and when the new law comes in to force, US companies will find it difficult to replace US employees, with cheaper foreign workers. Existing Indian H1B visa holders will now have to draw much higher salaries in the US or revert back to India. Though the legislation was introduced by a Democrat, the effect aligns with President Trump’s election promise, to bring back jobs to America.
Indian IT companies shall also be forced to raise (considerably) the foreign remuneration to Indian workers in the US or hire cheaper American labor, if available. Will suitable American skilled labor be available to replace the now more expensive Indian labor, in the US? Perhaps, some of the US jobs may be out-shored back to India, with periodic visits to the customers. If the law indeed comes to pass, many of the 350,000 Indian H-1B workers shall have to revert to India, when their visa expires.