H-1B visa fee hike: Why it will hurt the US economy more

In a chilling message to the US firms as well as to firms belonging to other countries sponsoring H-1B visa for their employees, President Trump signed an executive order on September 19, asking them to pay US$ 100,000 per year as H-1B visa fee per employee. This order takes effect from Sunday (September 21), which is why the likes of Microsoft and Amazon, both incidentally Seattle-based, have urged their employees holding H-1B visa to rush back before this date, if they have been away from the US for more than 12 months. 

The next day, the US administration made a clarification. With this, the existing H-1B visa holders will not be affected by the latest Trump tantrum as it applies only to H-1B visa applications made after 12 AM September 21 East Coast time. The exorbitant fee can also be waived by the US Homeland security if it feels the application is in national interest including for workers in healthcare industry and engineering firms.  The ominous news however is in all other cases, H1B would be granted only in non-menial jobs meaning high-end IT services or esoteric industries like gene therapy etc., where the employee can bring esoteric knowledge or talent to the table.  

Indian techies like Infosys, Wipro and TCS who are already reeling under the AI impact and onslaught are going to be further badgered when it comes to executing onsite jobs in the US hiring Indian employees for peanuts as it would suck out up to 10% of their profits. The present H-1B visa sponsorship fee is just US$ 1000 whereas for the newcomers it would be a recurring annual fee of US$ 100000.  

It is understood that Indian tech companies often continue paying employees sent to work onsite in the US their Indian salaries, credited to their Indian bank accounts, while providing only a minimal foreign allowance in dollars. From the companies' perspective, it makes little sense to shell out US$100,000 per year when they have limited visibility into the status of their order books for the following year. Notably, Indian firms account for the lion’s share—around 70%—of the H-1B visas issued by the US government.

Trump is hoping to discourage hiring of foreign talent for menial jobs forgetting that in the first place his own blue-blooded countrymen are loath to do such menial jobs.  Be that as it may.  It is possible that employers instead of paying US$ 100,000 annually may think in terms of buying them Trump gold visa card costing ten times more than H-1B annual fee for their foreign employees.  After tenth year, the cost would have been recovered but the danger is such gold cards being non-transferable might turn out to be a dead loss should the employees quit or die.  In any case they would toy with such idea only after 12 months given Trump’s proclivity to flipflop which has earned him the moniker TACO — Trump always chickens out.   

Indira Gandhi at the height of her socialistic zeal imposed 97% maximum marginal rate of tax. Indian industrialists said they would rather not earn.  Trump is shooting himself on the foot because if the Americans don’t evince interest in such low-paying entry level job or are not up to their foreign peers, the US economy would take a beating.  Indian tech firms may settle for doing the foreign contracts from the comfort of their Indian offices rather than deputing their employees to the US.  You don’t need H-1B visa to work from India to serve American interests. Do you? Past masters in setting up call centers where their employees work in the ungodly hours, the same model suitably tweaked might be their riposte to the latest Trump needling.   

Commerce Secretary Howard Lutnick said hot on the Presidential proclamation that we’re going to only take extraordinary people at the very top, instead of those trying to take jobs from Americans. They’re going to create businesses and create jobs for Americans. And this programme will raise more than $100 billion for the treasury of the United States. 

Time alone will tell if his optimism was egregious. There are better ways of mobilising funds for paying off gargantuan debts.  In the end, the latest move could well prove to be as counterproductive or shortsighted as the tariff tantrums which while bringing in revenue to the US government in dollops is hurting its consumers who have to grin and bear the heightened cost of imports.  Ask the Indian diaspora in the US whose weekly shopping includes a mandatory purchase at the various India stores led by the redoubtable Patel brothers.  

Apple a day may or may not keep the doctor away but a shocker a day keeps Trump the cynosure of all eyes at the cost of becoming a butt of international ridicule.  

 

—The author, S Murlidharan, is a Chartered Accountant and columnist. The views are personal.