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Wednesday 26 July 2017
News updated at 12:11 AM IST

Wither pursuit of happiness as Trump begins to fulfil poll pledge

R Srinivasan March 19, 2017, 0:21 IST
R Srinivasan

R Srinivasan

In his inauguration speech as US president, Donald Trump made an “America First” pledge where he promised that people would “Buy American-Hire American”. True to his word, he has set the wheels in motion for this to happen immediately on his election. The H1B Reforms Bill is a significant step in this process. So what is this bill and what does it seek to reform?

Simply stated, the H1B visa is one of the most sought after visas that allow a holder with specialised skills or expertise in specialised fields to work in the US. Under this programme, every year, US companies hire up to 65,000 highly skilled foreign workers as well as 20,000 international students to study in the US. So high is the demand for this visa that in just a few days of opening the H1B process, US authorities are flooded with applications far in excess of the annual quota.

So what is the issue? The issue is that technology companies, particularly of Indian origin, take up a majority of the H1B visas and bring in employees from India to work in the US. Since some of the H1B holders are paid much lower than what a typical US national in that position is paid, it is seen as a tool to replace US workers with lower paid foreign workers. Understandably, it evokes resentment in the minds of US nationals.

The new bill seeks, among others, to more than double the compensation for H1B workers to $1,30,000, earmark 20% of these visas for small and startup companies and prohibit companies with over 50 employees having 50% or more of their employees on H1B or L1 visa from hiring on H1B visas. The doubling of the minimum wage applies to companies with over 15% of US employees on H1B visas. It therefore excludes companies like IBM which do not fall in the ambit of this Bill.

Large Indian IT companies such as TCS, Infosys and Wipro will feel the immediate impact of the H1B reforms. If you look at the market reaction to this bill, it is a telling story. Immediately after the introduction of the H1B bill in the US House Of Representatives, five top Indian IT companies lost over $5 billion of market capitalisation in a single trading session. Interestingly, none of these companies have come up with a quantification of what the potential impact will be despite being publicly held and listed on stock markets.

The impact on the wage bill of Indian IT companies is undeniable. With the H1B visa holders’ compensation going up to $1,30,000, there is clear and present danger of the wage bill going up. In the short-run, this will need to come from the companies’ profits. In the long-run, perhaps some work could shift offshore and companies could negotiate with their clients and bridge some of this gap.

If you look at it from an employee perspective, there is a clear impact on employee psyche. In the past, the US was the preferred destination for most Indian technology workers. However, this is set to change. With the H1B bill seeking to prohibit spouses of H1B visa holders from working in the US, the added attraction for many Indian IT workers also disappears. Following the recent sporadic instances of people of Indian origin being targeted in violent incidents, yet another dimension has emerged in this puzzle. The Indian IT workers are now beginning to get apprehensive. Superimpose the fact that the coveted ‘green card’ itself may now become a distant dream, and the circle of disillusionment is complete.

Competitive environment
Many Indian IT workers in the US on H1B visas are now unsure how long they can continue there. Consequently, many of them are exploring other options, including returning to India. The current turn of events is not without its impact on the US economy. There is no denying that outsourcing has cost some Americans their job. It is also a fact that the families of Indians who are in the US on H1B visa have contributed to the local economy.

In today’s globally competitive environment, many of the US Fortune 500 companies rely on Indian IT companies to fulfil their IT needs at a very competitive cost. This is intrinsic to the success of these companies. Indian IT companies in turn rely on the existing H1B visa regime to continue delivering their services at the current service levels.

As of now, it is unclear how many of the US Fortune 500 companies are prepared to add on costs that are inevitable in the new H1B scenario. After all, it could blunt their competitiveness as well. However, US technology companies like IBM which can continue to bring in people on H1B can overcome this to some extent. The fact is that US citizens have some strong sentiments attached to the H1B visa reform issue. Clearly, immigration policy is an internal matter for the US and that is something we must not forget.

(The writer is an independent consultant based in New Delhi)

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