Moneycontrol
Apr 19, 2017 11:59 AM IST | Source: Moneycontrol.com

Donald Trump signs order to end H-1B visa lottery system

The move by Trump administration is likely to create more jobs in India as offshoring of work is likely to increase. Companies will no longer be able to replace American workers with cheap foreign labour for IT projects

ByHarsimran Julka
Donald Trump signs order to end H-1B visa lottery system

US President Donald Trump on Tuesday signed an executive order that is likely to end the H-1B lottery system from next year onwards. The new rules are likely to allow work visas to highly skilled people who fall under a certain salary bracket.

Every year, about 65,000 applications are randomly selected from a pool of over 200,000 applications. The selected and approved applicants are granted H-1B visas, thus terming it as a lottery system.

“Right now, H1B visas are awarded in a totally random lottery -- and that's wrong. Instead, they should be given to the most-skilled and highest-paid applicants, and they should never, ever be used to replace Americans,” Trump said in a speech post signing the ‘Buy American Hire American’ executive order.

“American workers have long called for reforms to end visa abuses.  That includes taking the first steps to set in motion a long-overdue reform of H-1B visas,” he added.

This year, about 199,000 applications for H-1B visas were received for the 2018 intake compared to 236,000 received last year.

Trump’s executive order directs the US Secretary of State, the Attorney General, the Secretary of Labour, and the Secretary of Homeland Security to suggest legislative reforms to help ensure that H-1B visas are awarded to the most skilled or highest-paid petition beneficiaries.

“Widespread abuse in our immigration system is allowing American workers of all backgrounds to be replaced by workers brought in from other countries to fill the same job for sometimes less pay.  This will stop,” Trump added.

The executive order also mandates the administration to propose new rules and issue new guidance, to supersede or revise previous rules to protect the interests of US workers.

At present, there are an estimated 120,000 H-1B workers in the US.

Earlier in the week, the Trump administration also targeted companies such as Infosys and TCS in a press briefing.  “Top recipients of the H-1B visa are companies like Tata, Infosys, Cognizant -- they will apply for a very large number of visas, more than they get, by putting extra tickets in the lottery raffle, if you will, and then they’ll get the lion’s share of visas,” a senior US administration official said.

The official later clarified that it was the program rules that made it easy for misuse. “Those three companies are companies that have an average wage for H1-B visas between USD 60,000 and USD 65,000.  By contrast, the median Silicon Valley software engineer’s wage is probably around USD 150,000,” the White House official added.

The executive order is expected to hit IT outsourcing firms hard, which used to import cheap foreign labour on work visas and replace US workers.

However, for countries such as India, it is likely to create opportunities for more offshoring of non-core work. IT companies will find it hard to hire expensive labour for projects with low margins and thus offshore it to cheaper destinations. It is also likely to create an oversupply of IT talent and reduce salary hikes. It is also likely to create more opportunities for tech-based entrepreneurship as returning techies are likely to build businesses back home.
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