H-1B Visas Face Trump Opposition
India is lobbying to limit the damage of President Trump’s expected attack on H-1B visas. The president’s team has leaked a draft of an executive order calling for increased oversight of the lottery system which brings in skilled foreign workers to staff American companies. Currently, almost three quarters of the American visas issued in this category go to tech workers with Indian citizenship, and tech companies keep asking for additional workers to meet demand. Even without the threat of the executive order, Congress is also looking to revise the program. One possible change would be to put those companies paying visa applicants the most would be placed first in line for lottery spots.
How H-1B Visas Work
The H-1B visa program currently allows up to 85,000 highly skilled workers entry into America. In a reverse of the trend for American manufacturers to move blue collar jobs offshore to take advantage of lower costs, U.S. tech companies are working with outsourcing agencies to bring in more workers for math, science and engineering positions. A common critic of this system is that tech companies are using the H-1B visa process as a way to circumvent prevailing wages that American employees would expect. Supporters of the program counter that there is a shortage of U.S. citizens and legal residents with a background in the skillsets which are being recruited overseas.
Trump Targets Foreign Workers
During his campaign, President Trump targeted the H-1B visa system as a source of cheap labor and promised to end the practice, even though the First Lady, Melania Trump, used this type of visa to enter the United States as a model. He also pointed out several other visa categories used primarily to employ foreign workers, including summer work study and residency extensions for students, investor visas, and L-1 visas for foreign workers transferring to America from a foreign branch. Under the proposed revisions to the L-1 visa, employees working under this category would need to be supervised on-site, with periodic inspections.
Tech Companies Faces Higher Costs by Hiring Locally
American tech companies worry about additional costs after increased visa restrictions. This is the latest blow in a series of immigration based decisions which have affected the high tech sector. Last week, Trump unveiled an executive order revoking visas for several individuals who were born in the Middle East. Facebook, Google, and Twitter have all recalled workers from these countries since the executive order went into effect. Additionally, several CEOs have spoken out against the treatment of Muslims by the new administration.
PayPal Founder Backs Trump
Ironically, Peter Thiel, the PayPal co-founder who became one of Facebook’s first investors, is one of Donald Trump’s biggest supporters. As an investor in Lyft, Thiel benefitted from a boycott of Uber, the crowd-sourced transportation company. Uber ended surge pricing when taxi drivers in New York City went on strike in protest over immigration concerns. This led to delays and angry customers switched to Lyft. With Trump’s ascendancy, the worlds of business and politics will continue to collide. It will be increasingly difficult to separate a CEO’s personal views on an issue from those of his company. Investors hope to determine how far Silicon Valley will go to keep access to foreign nationals.
India Could Lose Big on Visa Cuts
As borders close, the biggest loser in Trump’s immigration war could be India. The country has $108 billion in contracts placing Indian workers with American companies. While the major Indian outsourcers also recruit from American citizens, Indian workers are more mobile and willing to accept short term, flexible arrangements at lower wages. Growth projections for Indian outsourcers fell by 25 percent since November. The uncertainty in the British banking industry following the Brexit vote also hit this industry. Many of London’s banks reduced staffing due to the expected changes in licensing regulations once the U.K. leaves the EU.
How Will H-1B Restrictions Affect Trading?
Stock prices for companies which rely heavily on this visa category will drop. Look for lower share values from Facebook, Google, Microsoft, and Twitter. This could also slow the rise of the DOW, given its heavy reliance on tech stocks. Tech companies will pay higher wages, encouraging consumer spending and raising the dollar. We may also see a rise in gold prices. Investors want to see if India, one of the world’s largest economies, can pivot to a new earnings model. Until then, many will park their capital in a safe harbor.