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Here's how the wage-based H-1B selection, instead of lottery system, could hit IT firms and aspirants

The Department of Homeland Security proposal would impact smaller firms harder as they will find it difficult to hire from foreign campuses even for entry-level jobs. The proposal for a wage-based system is yet another attempt by the US to make securing H-1B jobs tougher at all levels. A majority of these workers are Indians.

October 30, 2020 / 05:28 PM IST

Barely a week before elections, the Trump administration is doing its utmost to make securing H-1B visas tough at all levels. This time, the administration has targeted the H-1B applicants’ selection process, proposing to make it wage-based, instead of the lottery system, which is the norm. The new proposal was made by the Department of Homeland Security (DHS) on October 28.

Earlier, on October 6, the US government announced two rules aimed at increasing H-1B wages and tightening the visa norms, to protect American jobs by making it difficult to import  foreign labour. A majority of these workers are Indians.

According to immigration experts, the proposed rule for H-1B selection would harm IT firms, with smaller companies getting hit the most. Not all companies will be willing to pay high for entry-level talents, thus impacting the job prospects of foreign students as well.

So what does the proposed rule change?

The US Citizenship and Immigration Services (USCIS) uses the random lottery-selection process to choose H-1B applicants for 85,000 fresh H-1B visas (including 20,000 for advanced degree holders) issued every year.


For the 85,000 visas, the USCIS gets a large number of registrations. For FY21, there were 274,273 registrations. Now, the Department of Homeland Security (DHS) has proposed to make it wage-based.

According to the DHS report, “Level I and II beneficiaries may receive increased wages. Companies which have historically paid level I wages may be incentivised to offer their H-1B employees higher wages, so that they could have a greater chance of selection to level II or a higher grade.”

H-1B wages are divided into four levels. Level 1 is the fresher/entry-level requirement and level 4 is the qualified professional with significant experience. Priority would be given to level 3 or 4 candidates since they have higher wages.

So, prospective level 1 and 2 candidates enjoy lesser chances of getting in, unless companies are willing to pay them the salaries similar to that of level 3 and level 4. The table below gives you the sense of current wages for H-1B candidates across levels.

h1b wages new

 This might be a challenge

Level 1 and 2 workers account for a significant portion of H-1B selections. According to the DHS document, for FY20, of the 82,900 regular cap applications (85,000 visas issued per year) selected, 26,140 were in level 1 and 44,530 were in level 2.

Level 3 and 4 (senior- level employees) accounted only for about 8,622 and 3,608, respectively.

Joel Yanovich, Attorney, Murthy Law Firm, said: “The rule would certainly harm the IT industry. A large number of H-1B cap cases are filed on behalf of recent graduates. I suspect many employers are going to be reluctant to pay an IT worker with a year or two experience a wage rate you would normally pay to someone with many years of experience.”

Xiao Wang, co-founder & CEO, Boundless Immigration, said that it would also affect smaller companies, non-profits, and startups that depend on equity to attract talent. They will be largely shut out of the H-1B market. “This will also disproportionately hurt early-career individuals and those who have recently graduated from universities,” he pointed out.

If getting a job in the US gets tougher, Wang pointed out, it will accelerate the trend over the past three years of declining foreign student enrollments in the US and increase foreign enrollments in other English-speaking countries such as Canada and Australia.

Is it all doom and gloom for IT companies? 

It might not be all bad for IT firms, say analysts. Peter Bendor-Samuel, CEO, Everest Group, an IT consulting firm, said: “This time, I think we will see some smiles on IT executives’ faces.”

“What will make the IT executives smile is that if these regulations come into effect, it will make the importation of labor much more predictable through the elimination of the lottery programme,” he pointed out. Samuel reasoned that while the lottery system is unpredictable, a wage-based system is not and that will allow the services firms to tap into more experienced resources, with large paychecks, and deploy them in the US.

So the proposals, if implemented, may well work to the service firms’ advantage by allowing them a more predictable way to bring in experienced talents to the US, where there is demand, he added.

Will the proposals get passed with elections around the corner?

The proposed rule will be open for comments for about 60 days and the comments will be considered by both the DHS and the USCIS before implementation.

Kellen Powell, an immigration attorney, said that the current government will definitely try to enforce this new rule for the cap season (which starts in April 2021). “But I’m curious to know how they intend to get this implemented by January 20, when we’ll likely have a new administration,” Powell said. January 21 marks the commencement of a new four-year term of the president of the United States.

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Swathi Moorthy
first published: Oct 30, 2020 04:06 pm
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