America’s tech hub is about to take a big hit under the recent overhaul of H-1B visas. The Department of Homeland Security’s new proposal further limits degrees that are considered applicable for the industry, raises base salaries, and shortens visa lengths for contract workers. This was a more severe approach on restricting workplace immigration and H-1B visas compared to earlier Trump Administration policy changes. According to the U.S. Citizenship and Immigration Services, due to tightening on visa issuance, in 2019, more than 21% of H-1B visa applications were rejected. In 2015, only 6.1% of applications were rejected.
The majority of baseline salaries under the new rule start at around $208,000, even for entry level positions: a huge caveat for startups who stay afloat early on due to having access to a pool of highly skilled low wage workers. Major companies are also at risk of suffering, as the new rules are estimated to cost employers more than $4.3 billion over the next ten years, even without accounting for wage increases. The Trump Administration is using these visa limitations to prevent low-cost foreign workers from taking jobs away from Americans, disregarding how it could be detrimental to the flourishing industry. Through new restrictions, the American tech industry's biggest problem is not losing out on low wage workers, it is losing out on some of the field’s top talent. Foreign workers have been a part of nearly a third of venture-backed startups and more than 50% of startups valued at more than $1 billion dollars have at least one foreign founder. As of now, these visa restrictions are proving to be more detrimental to the tech industry than the pandemic. American tech companies are at risk of losing their competitiveness as they lose out on workers who possess key skills for the tech industry that the current American labor market cannot provide.
While these rules disrupt daily life in the Silicon Valley, it can also be acknowledged how foreign tech workers can potentially benefit from them as they force employers to overturn certain practices. Companies profit from H-1B visas not only because of the highly skilled workers they supply but also because of the low cost associated with them. Research by the Economic Policy Institute and Howard University found that not only do major tech companies pay some H-1B workers less than local median wages, but also that 60% of H-1B workers receive lower than average wages for their job. While it might be demanding for startups, it would ensure that tech giants are paying their foreign laborers the same amount as their American counterparts. However, the rules also prevent qualified applicants from ever making it to the United States. For those who do manage to make it past the new degree specifications, there are positives and negatives with the rulings on the other end which we will only be able to observe as these new policies continue to play out.
Hackman, Michelle. “Trump Administration Announces Overhaul of H-1B Visa Program.” Wall Street Journal, October 7, 2020, sec. Politics. https://www.wsj.com/articles/trump-administration-announces-overhaul-of-h-1b-visa-program-11602017434.
Silicon Valley. “H-1B Visa: Trump Administration Issues Major Rule Change,” October 6, 2020. https://www.mercurynews.com/2020/10/06/h-1b-visa-trump-administration-issues-major-rule-change.