Reality Check: H-1B Visas, Politics and the Enterprise
Do H-1B visas mean American job loss or U.S. business talent and innovation gain?
H-1B visas have entered into the political discussion recently, as candidates vying for nomination and then for the Presidency have latched upon the issue. So far, there are no really clear indications of what will happen when the election comes.
Roughly speaking, Hillary Clinton is interested in raising the cap of H-1B visas so that more can be issued; Donald Trump is opposed to these visas, but with wavering comments and uncertain plans for specific action.
While negative headlines revolve around job loss when H-1B visa holders are brought in seemingly to replace local workers, the reporting tends to stop there. On the positive side, many in the technology industry are concerned about the ability to use H-1B visas to supplement talent in science and technology where American graduates are not available.
What is an H-1B Visa?
An H-1B visa is a non-immigrant visa designed to allow U.S. employers to temporarily hire foreign workers in occupations that require specialized knowledge. These visas are issued for three years and may be extended to six years upon further application. After that, there must be a one-year stand-down before re-applying. There is a congressionally mandated annual cap on the number of visas provided, currently set at 65,000 with an additional 20,000 available for those holding a Master’s degree or higher from a U.S. institution. The caps are set anew each year, and the number has varied from year-to-year, so the total of current H-1B visa holders is likely to be in excess of 700,000.
H-1B visas are meant to make hiring of overseas talent possible where no U.S. candidates are available. With roughly twice as many applicants for available visas, a lottery system determines which applicants can obtain a visa. H-1B visas are the largest category of non-immigrant visas available; about 61 percent of approved H-1B visas are in computer-related occupations.
H-1B and Outsourcing
By far the largest number of H-1B visas is granted to IT outsourcing companies. This extraordinary disparity does not occur with any other visa category. About 20 percent of all H-1B visas are won by Indian outsourcing firms. More than half of the top H-1B visa winners in 2015 were IT outsourcing companies, with the numbers falling off dramatically outside of this group (as shown in the table below).
The reason these numbers are so high is that outsourcing firms have begun providing on-premises personnel at U.S. companies to improve their business models. This creates a unique dynamic. Outsourcing firms have long been concerned with increasing their margins and making their services more readily available to clients around the world. The H-1B visa is simply a tool that is being used to further the business.
In this context, the ability of large outsourcing companies to manage their visa programs creates a number of issues. First, the companies know that only a certain number of visas will be approved, and that a lottery is used to assign visas. To manage this, they routinely apply for at least twice the number of visas that they require. This ensures they obtain the visas and lets them manipulate the pay grade assigned to winning applications.
Applications have a cost; but this cost is low in comparison with the benefits of controlling the visas. The large number of applications is also a political tool to push for a rise in the visa cap. The effect for other H-1B visa users is to create a gigantic cloud of Indian outsourcing applications, which dilutes other valid applications and makes it more difficult to hire in other fields.
There is another part of this puzzle. Although it is often written that jobs are being taken by H-1B visa holders, it is important to note that the alternative is not likely to be hiring of American workers. In an age of globalization and digital connectedness, these jobs would simply move to Bangalore. In fact, sometimes they do.
Corporate Impact of Politics and H-1B
Most companies with a technological component require access to H-1B personnel to improve their competitive ability. But the ability to compete for visas is thwarted by visa management programs. Politically, very little is likely to be done because there is a conflict between the requirements for access to global talent and the desire to avoid local job loss. Any proposal to change H-1B would likely result in a political standoff.
There are programs that are related to H-1B such as Staple a Green Card, which is supported by both Trump (at the moment) and Clinton, in which graduates from U.S. universities gain a Green Card immigrant visa immediately upon graduation. Such an immigrant visa would be more attractive than H-1B and have additional advantages.
Companies need to watch this space. It is a complex area that belies simple mass media narratives. Perhaps more importantly, it clearly highlights the complexities of current issues in a globalized workforce.