Trump’s latest H-1B executive order poses challenge for companies looking to bag high tech workers from India

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President Donald Trump threw down a challenge April 18, to American and Indian technology companies operating in the U.S., with his Buy American, Hire American executive order that mandates a review of the H-1B visa. It is also a challenge for India concerned about its $100 billion IT industry, a concern Finance Minister Arun Jaitley conveyed yesterday April 20, to U.S. Commerce Secretary Wilbur Ross.

For Indian companies the newest executive order is not “earth shattering” or a surprise, as it was expected months ago when Vox.com leaked a draft, Sumani Dash, head of Confederation of Indian Industry (CII)-USA, told News India Times. “It’s asking for reviewing and removing fraud and abuse. This is not causing any further trepidation,” Dash said. What transpired after the review on the ground, will be the game changer, she indicates.

A key element in the order suggests raising the qualification for H1-B to ensure that it is available only for high-level positions. While this aspect of the order has generally been welcomed by American companies looking to hire the most qualified foreigners, Indian companies operating in the U.S., who resent being seen as robbing Americans of jobs, are moving to meet the challenges of reforms they anticipate coming round the bend as they wait and watch for what actual changes will mean for them.

Nevertheless, there’s universal agreement that it is high time the visa coveted by Indian IT professionals and by companies in the U.S., is reviewed and brought in line with market changes that have occurred since the 1980s.

Trump has ordered the State, Justice, Labor, and Homeland Security departments to “ensure the integrity” of the existing “Hire American” regulations to review and “as soon as practicable” to “propose new rules and issue new guidance, to supersede or revise previous rules and guidance if appropriate, to protect the interests of United States workers in the administration of our immigration system, including through the prevention of fraud or abuse.” More specifically it says, that “In order to promote the proper functioning of the H-1B visa program,” these four departments should, “as soon as practicable, suggest reforms to help ensure that H-1B visas are awarded to the most-skilled or highest-paid petition beneficiaries.”

H1-B visas are seen as a vital issue by the Indian government, which considers it an integral part of trade and commerce, as well as for tech companies from the nation, and the community. Indians are the largest users of the H-1B: In 2015 alone,  70.9 percent of the 85,000 annual H-1B quota, 20,000 of which are reserved for foreign graduates with Masters or Ph.D. from U.S. Universities, went to Indians, according to a 2016 report from Homeland Security (Characteristics of H-1B Specialty Occupation  Workers, October 1, 2014-September 30, 2015). Therefore, any changes to the visa system are viewed with concern.

Bad Lottery Luck

Tech companies, including the largest ones like Facebook or Google, and Indian outsourcing companies like Infosys and Wipro operating here, have long argued they are unable to find equally trained Americans and, therefore, the need to increase rather than reduce or freeze the numbers of H-1B.

At the same time, the lottery system that randomly chooses the H-1B visa recipients rather than a system based entirely on merit, has occasionally sidelined the highest qualified, complain American companies. “Right now there are so many applicants (for H-1B) that the higher level people are getting left out,” Naren Gupta of San Mateo-based Nexus Venture Partners, one of  the largest investors in early-age companies in India, told News India Times. He said the lottery system should be done away with altogether.

“Ideally, we should increase the number (of H-1Bs) but target only the highest skilled,” Gupta said.

But Vivek Wadhwa, distinguished fellow and professor at Carnegie Mellon University Engineering at Silicon Valley supports the hiring of “lower” level H-1Bs. “My students are low level programmers and they are the most valuable immigrants the U.S. could have. My graduates are top-of-the-line but starting at the bottom of the ladder,” Wadhwa said. Not having lower level hires under H-1B would be a “lose, lose, lose situation” he said,”Because the U.S. would lose competitiveness, companies won’t get the talent they desperately need, and brilliant foreign students won’t be able to stay after they graduate.”

Mend, Don’t End

The Information Technology and Innovation Foundation (ITIF), a non-profit, nonpartisan research think-tank, in a statement on the April 18 executive order, called for tweaking and not breaking the existing system. “We hope the goal of President Trump’s executive order on the H-1B program is “mend it, don’t end it,” ITIF said. “Reforming the program could help improve its effectiveness in attracting the world’s best and brightest,” it added. “Continuing to do that is vital, because, as ITIF found last year, 46 percent of the most important U.S. innovators are immigrants or children of immigrants,” the organization noted in its statement.

Changes such as a more merit-based system to attract a higher order of STEM (Science, technology, engineering and math) skills, rooting out abuse, better enforcing existing rules, and raising the salary requirement as long as qualified STEM workers are welcome, are good steps, in ITIF’s view. But ideas such as requiring applicants to advertise job openings for an extended period of time could not only be onerous, but also make it an ineffective program to fill positions in a fast moving industry that encourages innovation, job creation and growth.

The ITIF also made a pitch for continuing to allow the spouses of H1-B visa holders, who are on the H-4 visas, to work. “It’s a fallacy to suggest that H-4 workers supplant American workers in domestic jobs, because there isn’t a fixed amount of work to be done in the economy. To the contrary, if we add more highly skilled workers, then we’ll generate more growth and create more jobs for everyone,” the ITIF said.

Organizations representing big technology companies like FWD.us, founded by CEOs of top IT companies and investors like Facebook, Dropbox, and Kleiner Perkins Caufield and Byers, welcomed the emphasis on highly qualified H-1Bs, and took a swipe at Indian companies like Infosys and Wipro saying those companies that are heavily dependent on outsourced labor should be treated differently, also called on Congress to “expand” the number of H-1B visas, while protecting American workers.

“We are hopeful today’s announcement will do what FWD.us has long advocated: improve our high-skilled immigration system,” it said in a statement released April 18, adding, “Highly skilled immigrants create new American jobs, raise wages for native-born workers, and contribute enormously to growing our economy. ”

But it called for a “targeted” approach “by increasing the wage floor, treating super-dependent companies (that is, those with 50 employees of whom 50 percent or more in the U.S. are on H-1B visas) differently and banning their ability to do third-party placement.” This was pointing the finger at Indian companies which have become a negative poster child for the H-1B, without naming them.

Responding to this implicit hit against some Indian companies, Dash said, “It’s unfortunate that the negative rhetoric (on H-1B) is piled up on Indian companies.” She claimed that Indian outsourcing companies in America apply for high-skilled and not lower level jobs through H-1B. “The bad rep and animus created against H-1B ,” she said, “was created in the 1980s.”

Senior White House officials, in a background briefing preceding the April 18 order, maintained that 80 percent of H1-B workers are paid less than the average wage for their job, the Washington Post reported, signalling a future change in the current $60,000 minimum wage set for foreign skilled workers. According to Homeland Security data for 2015, 45 percent of  H-1B petitions approved that year were for workers with a bachelor’s degree.

“The officials said reform could first come through administrative changes, such as raising the visa application fees, adjusting the wage scale to more accurately reflect prevailing salaries in the tech industry, and more vigorously enforcing violations,” the Post reported, adding, “It could also change the lottery system to give foreigners with U.S. master’s degrees a leg up.”

“Companies that are complying with the letter of the law are not worried,” Ron Somers, former head of the U.S.- India Chamber of Commerce, told News India Times in an earlier interview. However, he added, “Also, we have been hearing that there are those abusing the (H-1B) program.” Somers now runs the business consulting firm, India First Group.

Waiting and Watching

Any fundamental changes, such as wage levels, the lottery system, reducing the number of H-1Bs, or specifying the speciality qualifications, will need Congressional approval, Dash says.

“All Indian companies (here) were expecting changes whether it was a Democratic or Republican administration,” she notes. And they have already starting moving forward with more local hiring and working with U.S. universities to increase STEM enrolment. At the end of the day, Indian outsourcing companies are servicing American corporations in several sectors, Dash says, and those U.S. companies “will feel the effects if adequate skilled personnel are not available.”

The CII recently led a week-long Capitol Hill lobbying effort, meeting several lawmakers heading key committees, including co-chairs of the India Caucus, and also Commerce Secretary Ross and other policymakers in the current administration.

“Everyone walked away comfortable that all this can be worked out,” Dash said. “We all agree we need high tech support; that there’s a lack of STEM resources here: we have to get people from elsewhere – the reality of the need for specialty occupations,” Dash added.

“We certainly conveyed some concerns Indian companies faced on high skills (area). And our request is that whatever change is made, should be applied in a level playing field,” Dash added.