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Jan 12, 2018 10:16 AM IST | Source: Moneycontrol.com

This is what the proposed H-1B visa reform means for Indian service providers and workers

H-1B visa reform is still highly probable, as President Trump wants change. If new legislation were enacted, it would cause significant issues for several stakeholder groups, but there will be winners and losers.

Moneycontrol News @moneycontrolcom

Peter Bendor-Samuel

Everest Group

A lot of talk in the US Congress and by President Trump evolved over the past three years as to how they wanted to change the H-1B legislation, but it was not a high priority for either political party. The priority changed recently, gaining momentum toward enacting legislation that would include ending visa extensions. This week brought an announcement that the current policy on visa extensions is not ending. So, the sky is not falling. Even so, H-1B visa reform is still highly probable, as President Trump wants change. If new legislation were enacted, it would cause significant issues for several stakeholder groups, but there will be winners and losers. Here’s an overview of the impacts.

The Momentum Driver

What bumped the proposed legislation up to a top priority? There is now a bipartisan effort in Congress to narrow the immigration focus away from all the contentious political issues. H-1B visa reform is a narrow space where there is agreement between both parties. The US is also moving into a mid-term election year, and both parties want to tout at least one bipartisan accomplishment to show they can govern together. So, there is now a high probability of passing H-1B reform.

Implications for Stakeholder Groups

The implications of the proposed legislation differ among three stakeholder groups: India’s H-1B workers, India’s service provider firms, and US companies.

Indian workers

The legislation is not aimed at Indian workers, and I believe the results would not be to the detriment of most individual Indians working in the US or seeking to work in the US. They would enjoy higher wages and do more interesting work because of the legislation.

However, there would likely be some complications for the workers that would be at the end of their H-1B cycle and had not yet successfully transitioned to green cards. There is currently an increasing backlog for processing green cards; if the backlog still exists when legislation is enacted, there would be a negative impact on those workers in that they might need to temporarily leave the US before transitioning to green cards. The H-1B program was designed as a temporary vehicle for workers to transition to a green card if they want to stay in the US, and the legislation would not change that intent.

Indian Service Providers

The specific target of H-1B visa reform is the Indian service providers successfully and lawfully using the visa lottery system as part of their H-1B visas to create a competitive advantage in the US labor market. The legislation would increase their H-1B visa cost. The increased cost would inevitably put additional pressure on their margins at a time when they already have downward pricing pressure, rupee appreciation and margin pressures due to the maturing of the labor arbitrage model.

However, the Indian service providers are still in – and will maintain – the envious position of being the most profitable service providers in the marketplace. This legislation alone would not challenge their relative profitability, but it would bring their absolute profitability down.

US Companies

The current bipartisan effort at reform attempts to reallocate H-1B visas from the Indian service providers to the broader US economy. However, India’s H-1B workers are highly valuable to the US. As the loss of these workers starts to bite companies, I believe we would see increasing political pressure (to allocate more resources to process green cards, for example), as the US would want to retain that talent.

Indian Diaspora Perspective

From an Indian diaspora perspective, the legislation would not result in total loss to India. Quite frankly, India as a nation might come out better because of such legislation. Service provider firms would not be better off, and the late-tenure H-1B workers would have risk if green card backlogs still exist at the time legislation is enacted. But India has the largest, deepest talent pool and the most qualified workers. The US will continue to want this talent, and more Indians would be able to work for higher wages under the proposed legislation.
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