The US Small Business Administration (SBA), which supports entrepreneurs and small businesses in America, has written to the Department of Labor (DOL) to delay the implementation of wage hike rule by 30 days.
The 30-day time period, the agency said, will help organisations share comments on the adverse impact it would have on them and develop “less burdensome regulatory alternatives”, the letter, dated November 9, said.
This comes at the back of the DOL’s implementation of H-1B wage hikes effective October 8. The rule increased the salaries for H-1B workers substantially, in some cases as much as 50 percent.
Immigration attorneys pointed out to Moneycontrol that this would have a huge impact on tech workforce and more so on smaller companies who will not be able to afford the talents with the surge in fees.
So how is this relevant to Indian workforce there?
This is important given that Indians are by far the largest beneficiaries of H-1B visa. Of the over 5 lakh H-1B workers in the US, Indians would account for a significant share and are employed across large and small firms and also startups.
Many of Indian students pursuing higher education in the US aspire to work in the Silicon Valley startup ecosystem. Such hikes will be a setback to those aspirations as not many startups will have deep pockets to hire expensive talent competing with tech majors.
But there is not much clarity on how many of these 5 lakh people are employed in startups and smaller firms. It is likely that a fair share of Indians are likely to be employed in smaller businesses.
What is the significance of SBA writing to DOL?
This move is significant since the US SBA is an American government agency that provides support to the he entrepreneurs and small businesses. The agency offers various support including secure loans by offering government-backed guarantee.
The agency is opposing the wage hike rule announced by another government agency, DOL, on grounds that it would make it unaffordable for smaller businesses to attract talent.
What does the letter say?
According to the letter, small businesses have the agency that small businesses will lose out on talented workers harming innovation and business growth at a time when they are struggling to growth at the back of COVID-19.
The letter submitted to the DOL by SBA also pointed out key concerns regarding the rule.
1. DOL has not given enough justification for immediate implementation of the wage hike since its argument of protecting American jobs do not have enough basis.
2. It further points out to increasing job openings for qualified workforce. As of October 2, there were 6.5 lakh job openings that required bachelor’s degree and above, a 4.7 percent increase compared to May 2020.
3. Rather than helping companies thrive, the report said, the compliance cost for smaller businesses would increase by 3 percent of the total revenue in 2020-2021.
All these, the agency said, would result in reduction of small companies’ participation in the H-1B programme.
“Small businesses would be shut out of the H-1B visa program for new workers, making it difficult to innovate and grow their operations,” the letter said.
“Small businesses are concerned because there is a shortage of US workers in STEM (science, technology, engineering and mathematics) fields… companies may lose new projects and business to offshore companies who have more access to qualified labor,” the agency further added.
How much weight is it likely to have on blocking the rule?
There were three lawsuits filed challenging the wage hike and the Department of Homeland Security’s strengthening H-1B regulations. This comment could add weight to them.
While judgement in one of the lawsuits is awaited, hearing for the lawsuit filed by ITServe Alliance, an association of IT firms, against Trump administration is coming up on November 16. Hearing for the lawsuit filed by the US Chamber of Commerce and 12 other organisations, supported by large tech firms such as Amazon, Google and Microsoft is set in the coming weeks as well.
What are the chances for this rule to be rolled back?
Going by the commentary of immigration attorneys, there are plenty of chances. For one, the DOL did not follow the notice and comment period required for implementation making it vulnerable to lawsuits.
The wages have been increased substantially and as pointed out by multiple think tanks and companies, it would make it tough to hire skilled talent in the US impacting the smaller firms and more so medical professional disproportionately. Rather than improving economic situation, it would have a negative effect.
In case the court failed to block, Biden can potentially roll them back in the form of a new regulation.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
