Trump’s visa overhaul risks stifling startups, boosting outsourcing firms

The White House said a fee would ensure that employers only submit petitions for workers they need so much that they’re willing to pay an extra $100,000 to get them.

After the White House’s startling changes to the nation’s high-skilled visa program, employers have moved from shock to acceptance.

Some are strategizing how to work with the new rules. Others are making plans to litigate. And many wish the Trump administration had heeded the piles of ideas to fix the program’s central, widely acknowledged failing.

Since the early 2000s, demand for specialized workers has far outstripped a cap that remains where it stood when the H-1B program started in 1990. The government allocates the visas randomly, and outsourcing companies have learned to flood the system with applications for relatively low-paid positions.

The Trump administration said it wanted to stop that practice and reserve the coveted visas for the most valuable workers so they do not displace American software programmers, researchers and engineers. The solutions the administration chose — a $100,000 fee for new visas and a complex weighting system to favor higher-paid jobs — are unlikely to accomplish that.

Instead, loopholes appear likely to allow outsourcing companies to adapt while startups, universities and research organizations lose out, according to experts from across the political spectrum.

“Something that addresses the right problem and sounds good on paper can still lead you down the exactly same problematic road,” said John Lettieri, president of the Economic Innovation Group, a think tank that has studied the H-1B program.

A Really high barrier

Any comfort that might have come from certainty about the administration’s long-awaited action was erased by the likelihood of legal challenges to the new rules. A provision for exemptions based on the “national interest” — which the White House suggested it might grant to doctors, for example — has kept workers and employers hoping for clemency.

“They want to create a really high barrier that gives them discretion to bring people to them to make a deal,” Lettieri said.

Immigration officials aggressively denied H-1B applications in President Donald Trump’s first term, but the support of tech leaders including Elon Musk raised hopes that Trump might look more favorably on foreign talent now.

The H-1B is America’s largest visa category for workers with specialized skills. The annual limit is 85,000, and employers that aren’t subject to the cap — including nonprofit universities and hospitals — usually expand the total by at least 50%. The visa can be extended for up to six years, or longer if the worker has a pending green card application. In 2019, the last year the Department of Homeland Security provided data, there were about 583,420 H-1B visa holders in the United States.

Almost since its inception, the program has been plagued with instances of employers who substituted foreign visa holders for American workers and paid them less. In the early 2000s, the federal government embraced a lottery to allocate scarce visas, with no mechanism to elevate exceptional talents over more run-of-the-mill workers.

Despite the program’s shortcomings, economists have generally found that H-1B visa holders boost American productivity and raise wages even for American workers. Politicians and policy experts on both sides of the aisle have called for changes to maximize the program's value.

“It’s all random chance, which is insane for a program that should be our flagship high-skilled immigration program,” said Jeremy Neufeld, director of immigration policy at the Institute for Progress.

Some possible fixes

To squeeze more benefits from the system, Neufeld has proposed ranking applications by compensation, so that only the highest-paid workers would be assured visas. Alternatively, the government could devise a points system — similar to Canada’s — that would capture other desirable characteristics such as youth and language skills that aren’t reflected in compensation. Policymakers could also reduce abuse by awarding more green cards, which allow workers to switch jobs for better offers.

Some solutions would require congressional action. Lawmakers have proposed fixes like requiring employers to look harder for domestic applicants before recruiting outside the country, or banning layoffs of workers who are replaced by visa holders. They have also considered more targeted measures to crack down on wage suppression by outsourcing companies. The Biden administration finalized a rule in its last days allowing for tougher oversight.

The $100,000 fee, however, came out of nowhere.

“Up until this weekend, business felt aligned with the Trump administration on the need to modernize the H-1B program,” said Jennie Murray, president of the National Immigration Forum, which helps companies integrate their foreign-born workforces and pushes for immigrant-friendly policies.

The White House said the fee would ensure that employers only submit petitions for workers they need so much that they’re willing to pay an extra $100,000 to get them. But the employers that profit the most from H-1B workers — including workers who are relatively low-paid — would still have an incentive to request visas.

“If they keep the H-1B worker for six years, it’s a worthwhile investment,” said Daniel Costa, director of immigration law and policy research at the labor-aligned Economic Policy Institute.

The largest tech companies could afford the fees, improving their chances in a crapshoot that right now gives them only 1 in 5 odds. And the fee is only required for people applying from outside the United States. It is easier for multinational corporations to bring their desired workers into the country on other visa types before transferring them to an H-1B, allowing them to skip the fee. More than half of H-1Bs are granted to people who are already in the United States.

“Primarily, we’ll see small businesses being locked out of the program,” said Cecilia Esterline, a senior immigration policy analyst at the Niskanen Center, a think tank. “It’s kind of incoherent.”

A small edge for higher-paid jobs

The other major element of the changes to the H-1B program comes from a proposed rule that would take effect after several months of comment and review. It is intended to give higher-paid positions an edge in the lottery. But rather than ranking them by compensation, it would tie the lottery to four wage thresholds based on occupation and region, giving additional weight to the higher wage levels.

That means a relatively well-compensated worker in a less lucrative profession — like journalism or nursing — could have a better shot than a recent college graduate entering a highly paid field with the potential to earn much more in the future. Employers would still be able to bring people in at the lowest wage levels, which an earlier version of the rule proposed in 2020 would have effectively prevented.

“The whole point — which I emphatically agree with — is to select high-wage H-1B workers,” said George Fishman, senior legal fellow at the Center for Immigration Studies, which pushes for more restrictive immigration policy. “This would undermine the basis for the entire rule.”

Todd Schulte, the president of the pro-immigration group FWD.us, favors a simple wage floor that would ensure that the visas go only to the highest-paid workers. The median annual compensation of H-1B holders is $120,000. One approach would be to cut out everyone below that level.

“There are things we can do to reform and improve these visa categories,” Schulte said. “But that is absolutely not what we’re seeing in any aspect of what is being thrown out now.”