us-pause-on-h1-b-how-it-will-impact-indian-companies

Context: The US administration recently extended the 60-day ban on immigration and non-immigrant worker visas till the end of 2020. 

More on the news:

  • Popular work visas including the much-coveted H-1B and H-2B, and certain categories of H-4, J, and L visas shall also remain suspended for the same period.
  • Apart from the suspension of these work visas, the executive order has also made sweeping changes to the H-1B work visa norms, which will no longer be decided by the currently prevalent lottery system. 
  • The new norms will now favour highly-skilled workers who are paid the highest wages by their respective companies

About H-1B, H-2B, L and other work visas:

  • Purpose: In order to fill a vacuum of highly-skilled low-cost employees in IT and other related domains, the US administration issues a certain number of visas each year which allows companies from outside the US to send employees to work on client sites.
    • Of these work visas, the H-1B remains the most popular among Indian IT companies. 
    • The US government has a cap of 85,000 total H-1B visas for each year - 65,000 H-1B visas are issued to highly skilled foreign workers, while the rest to highly skilled foreign workers who have a higher education or masters degree from an American university.
  • H-1B: Person is Specialty Occupation: To work in a specialty occupation. Requires a higher education degree of its equivalent. Includes fashion models of distinguished merit and ability and government-to-government research and development, or co-production projects administered by the Department of Defence.
    • H-1B visas are generally approved for a period of three years for a person, but many visa holders change employers to extend their US stay. 
  • L1 visas: Allows companies to transfer highly skilled workers to the US for a period of up to seven years. 
  • H-2B visas allow food and agricultural workers to seek employment in the US.
  • The J-1 Visa offers cultural and educational exchange opportunities in the United States through a variety of programs overseen by the U.S. State Department.

Reasons for suspension: 

  • Depends on the economic situation of the US: Since it was started in 1952, the H-1 visa scheme has undergone many changes and revisions to allow or disallow certain categories of skilled workers in the US, depending on the economic situation of the country.
  • The technology boom and low cost workforce: Coupled with the arrival of the internet and low-cost computers in developing nations such as India and China saw a large number of graduates willing to work at relatively low costs in the US, a win-win situation for both the employer and the employee. 
  • Hurts domestic workers: However, it has since often been criticised for sending low cost workers to the US at the expense of domestic workers.
  • Economic contraction due to Covid-19: Which has resulted in job losses to the tune that some economists compared this slow down with the Great Depression of 1920s.
  • America First: Clarion call given by the US president as part of his campaign to the presidential election to be held soon.

Impact: 

Since the ban is effective immediately, the processing of all new H-1B, H-2B, J, and L visa categories stand suspended. 

  • Adversely affect: Those who do not have a valid non-immigrant visa as of now, and are outside of the US, will not be allowed to enter the country until the ban is revoked.
  • Some reprieve to: 
    • Workers in essential services: In the food sector have been given some reprieve, and their entry shall be decided by the consular officer of immigration services.
    • H-1B, H-2B, J and L visa holders, and their spouse or children already present in the US shall not be impacted by the new worker visa ban.
  • Impact on Indian IT companies:
    • Increase their cost of operations: Though the large Indian IT companies have cut down their dependency on H-1B by hiring as much as 50 per cent of staff locally, they still rely on these visas to keep costs in check.
      • Indian IT companies are amongst the biggest beneficiaries of the US H-1B visa regime.
      • As of April 1, 2020, the US Citizenship and Immigration Services (USCIS) had received about 2.5 lakh H-1B work visa applications. 
    • Indian IT companies also offer subcontracts to Indian nationals already present in the US with valid H-1B visas. 

Hence the suspension could result in a significant impact on margins and worker wages of Indian IT companies which send thousands of low-cost employees to work on client sites in the US. 

Source:https://indianexpress.com/article/explained/us-h1b-visa-suspension-india-it-companies-6471966/

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