US President Donald Trump has issued executive orders to ensure that only the “most skilled and highest paid” foreigners receive visas for on-site work in the country. The order which is already sending shivers through India's $150 bn IT industry, if stringent, may create more American jobs in the short term. However, they will also raise wage costs and erode US competitiveness. An official said Indian software companies paid $65,000 a year for temporary Indian workers, the minimum wage for H-1B visa holders, as compared with the median software pay of $150,000 in Silicon Valley.
Several top Indian companies have sought to mollify the US President. Infosys said it would hire 10,000 Americans and open four technology centres in the US in the next two years. The previous administration had already raised visa fees and toughened rules. Indian companies have acquired several small American groups, expanded their US development centres, and reduced their H-1B visa applications. They may aim for more L-1 visas, which are less regulated. While the US industry complains of a chronic shortage of skilled workers and says H-1B workers are essential for business, US software workers say many companies use foreign workers to simply undercut local wages.
A Trump administration spokesman accused Indian companies of gaming the system by applying for enormous numbers of visas beyond their true needs, ending up with two-thirds of the allocations, many of which go to workers with very moderate technical qualifications. The country operates a lottery system for allocating H-1Bs to a multitude of applicants, which will now be replaced by a process of scrutiny to ensure that only the most skilled, best-paid foreigners are granted visas. There will also be other changes, including blocking spouses of visiting employees from working locally.
Silicon Valley is lobbying against excessive stringency while legislators contemplate on bills increasing minimum wage for H-1B visa holders. Nomura Securities estimates that such an increase will raise the wage costs of the three top Indian IT companies by between 4 and 13 per cent, and squeeze their operating margins by between 40 and 120 basis points.
