Doing business in the US is getting harder
When a federal judge in the United States temporarily blocked the Donald Trump administration’s ban on work visas, stocks in information technology-enabled services (ITeS) companies rose sharply. That reaction from the markets demonstrated that there are few takers for the IT majors’ claim that the work visa ban does not affect their bottom line, and may in fact be a positive. The Trump administration has long sought to attack the H1-B system, which is the standard way for Indian IT engineers to work in the US. Although the programme has been in the administration’s sights ever since it took office, it was the pandemic that gave them an excuse to crack down, imposing a ban on non-immigrant visas for the remainder of the calendar year in order to “protect employment” in the US.
Even after the courts stepped in, the administration continued to tighten requirements. It has now proposed to not issue temporary business visas, which are used by firms for short-term on site work. While this may not have a significant impact, the latest move is part of a larger trend. For instance, visa denials are almost 30 per cent over the course of the current calendar year, as compared with around 13 per cent before the Trump administration took office. It has also introduced a rule that makes it clear that a specific degree be directly linked to the position that the H1-B applicant is being hired for. The minimum payment in the position has also been raised. In many relevant areas, the minimum H1-B salary will now be close to over $100,000 a year for software engineers. This will significantly undercut any cost advantage that had remained for H1-B applications. Renewals of existing H1-Bs will also become more difficult.
According to the Washington-based think tank Brookings, the ban on the entry of temporary guest workers holding the H1-B and other visas such as the L-1 has already cost 471 of the listed Fortune 500 companies as much as $100 billion. Big losers included not just the Indian IT majors, but also the mainstays of the US indices such as Google, Microsoft, and Facebook. In fact, the IT firms have sought to reduce their dependence on work visas in recent years and have promised to hire more Americans, in response to the changing political climate in the US and greater regulatory difficulties. Some studies, including one from the Wharton School of Business, contend that the overall effect of the work visa ban would be to shift job creation to “countries like India and China with large quantities of high-skilled human capital and in countries like Canada with more relaxed high-skilled immigration policies and closer geographic proximity”.
This might be true on one level. But that does not mean that the current IT companies will be beneficiaries unless they can comprehensively rework their existing business models. This has been promised for years now, but their reorientation has not really gone as planned. Indian companies will have to focus on innovation and product development now rather than on service provision. After all, in the age of automation, the future belongs to those who can innovate. This is not an easy fit with their current operational and managerial structure — and would involve competing with some of their existing clients to whom they provide services. Things are increasingly getting more difficult for Indian engineers in the US, and for the existing IT companies.