The US Department of Labour’s proposal to increase wages of skilled work visa holders, could result in a sizable reduction in future visa applications and could eliminate mid-level jobs for H-1B visa holders.

The White House budget office is reviewing a fast-track regulation that would narrow the definition of a “speciality occupation” eligible for a skilled-worker visa under the H-1B program, according to the budget office website. The wage increase could be around 20 per cent. In the US, skilled visa workers are classified into four categories and L2 is the mid-level job category. Currently, according to industry estimates, 60-70 per cent of the visa holders are in the L2 category. “Entry and mid-level jobs will be history if this goes through,” said Prashanthi Reddy, New York-based immigration lawyer.

Visa applications may be hit

Industry watchers also estimate that there would be a drastic reduction in visa applications. “It could result in reduced H-1B visa applications,” said Dan Nandan, who runs Hire IT People, a US-based staffing company. In 2019, there were 420,549 H-1B cases as per government data. The new proposal could reduce applications by more than 50 per cent, said Reddy. This development also comes six weeks before the US Presidential elections.

IT companies did not respond to comments.

Also read: Trump restrictions on H-1B visas survive early court fight

Visas getting harder to get

Look beyond the wage increases and if you factor in that the US government is increasingly making it difficult to obtain a skill visa. coupled with remote working and we are thinking, why bother to go through the visa application process,” said a senior executive from a top 5 IT company.

Indian software services companies, in the last few years, have seen visa rejection rates of around 30 per cent. Add to that, recently, the US Department of Homeland Security announced in a notification that the cost of H-1B was hiked by 21 per cent and L1 visas by 75 per cent. “H-1B fee increase + wage increase = no future for the H- 1Bs,” said Nandan.

One of the biggest advantages for using an H-1B employee was the fact that they were cheaper than local American workers and were available in large numbers, notably from India. Currently, the median salary is $80,000 -$85,000 per year for most H-1B holders. Also every state has its own wage rules. Average wages in New York for a software developer is now at $100,526 per year and this could jump to $122,221. In California, it is $120,931 and this could go up to $145,117. Even if the proposal does go through, does the US have the required talent pool, asked Poorvi Chothani, managing partner of LawQuest.

Some in the industry are of the view that even if this proposal comes through, it will bring in better skilled workers to the US.

“The total cost to companies for hiring locally, which used to be three-four times in the 90s have become insignificant in recent times.” said Ganesh Natarajan, Chairman, 5F World and former CEO of Zensar.

“The net effect of having better skilled workers onsite could be of benefit to the outsourcer and the employee,” said Rohit Turkhud, Partner, Fakhoury Global Immigration.

US local hiring up

Companies, on their part, have accelerated their local hiring. TCS, Infosys, HCL Tech and Wipro, have on an average, 50-65 per cent of their international workforce as locals. Often overlooked in these policy discussions is the fact that immigrant professionals have a positive effect on the US economy, because their contributions often end up creating more innovation and jobs for Americans downstream.

Also read: Operating margins of IT firms to shrink yet again, due to H1-B visa curbs: Report

In the rulemaking process, I hope the administration considers the value immigrants provide to the growth of the US economy, said Sophie Alcorn of Alcorn Immigration Law.