Do NOT Panic Over Trump’s H1B Reforms

Trump’s H1B Reforms Aren’t As Bad As We Anticipate. At Least For Now.

As the hullabaloo over Trump’s executive order on immigration ban reaches a plateau (well, it refuses to die down), it appears that the tech giants of the Silicon Valley are waking up from their slumber of fantasy. It is very rare to see Facebook, Microsoft, Google and Apple weigh down on the same side of an argument. Now, as the dust settles, Trump and his team are eyeing the lucrative H1B program to go through a series of reforms.

The subsequent immigration reforms which are about to follow in the H1B and L1 categories are not without sound reason. To an extent, I do agree with Trump that the salary caps for H1B visas which were laid out way back in 1980s and 1990s need to be revised to suit the economy of today. Take this for instance, the existing law for H1B visa states that the minimum salary for H1B visa holders should be USD 60,000. Now, if you adjust for inflation — 60k USD in 1990 amounts to 110k USD in 2016.

Now consider this: there were 99 American billionaires in 1990. Today, that figure stands at 540 in the US. And there are 1810 billionaires across 67 countries today (well, at least the ones we know). So, raising the cap of the minimum salary of H1B visa holders is a much welcome move and it should encourage the companies to be selective in their hiring process and sponsor only the best of the best foreign applicants to come and work in the US.

As long as the cap on the number of applicants is not affected, I would not be too much worried about the effect of H1B visa on exceptional foreign workers. I remain optimistic that the big tech companies will be aggressive as ever on their H1B visa stance and the change in salary cap should not significantly affect the relative operational costs that they incur each year over a long period of time. I would, however, be worried about three indirect effects of the upcoming reforms on the American economy.

As I mentioned earlier, the bigger companies such as Amazon and Microsoft would continue without much disruption. However, it would be the smaller companies and young startups who have to bear the brunt of Trump’s H1B reforms. In the event of newer H1B reforms, the smaller firms would be reluctant to hire foreign skilled labor without shelling out a minimum of USD 130k per year. This would be detrimental if indeed there is a scarcity of specialist talent in the US. And even if there isn’t, it would give the American workers an opportunity to negotiate higher terms than expected, which isn’t necessarily bad for the workers themselves.

The second downside of the new H1B reforms is that in theory, the major tech companies could still continue to hire foreign workers at a higher salary while continuing to hire skilled American workers at a lesser salary. In a big organization, this could possibly sow seeds of discontent and mistrust among employees and the companies. The newer labor reforms could push for higher salaries not just for alien but also domestic workers in specific sectors such as biotechnology and aerospace. However, the overall cost to the company would continue to rise beyond the scope of the cost due to hiring alien workers.

Lastly, the rise in accumulated cost to the companies -whether through domestic or alien workforce would eventually be put out to the customers. This means the prices for Apple’s iPhones or Amazon’s web services could see an additional hike in the foreseeable future. It remains to be seen how the American customers would react to this chain of events if they come forth.