Trump H1B Executive Order: “Buy American, Hire American”

In a long-expected move to reform the H1B visa program, President Trump signed an executive order on April 18 requiring four different federal agencies to “crack down on fraud and abuse” of the program.  In addition, the Department of Labor, Justice Department, Homeland Security and State Department will all be proposing reforms to the H1B visa program and how visas are awarded.

What Will Happen to the Current H1B Program?

For significant program reform, there will need to be new legislation passed by Congress, but this executive order is paving the way for some significant changes.  As one senior member of the administration commented, “You’re creating an entirely new structure for awarding these visas. I mean, — it is a total transformation of the H-1B program.”

Here is the goal of the Trump administration with regards to the H1B visa program:

  • To only award H1B visas to highly skilled foreign workers, with the educational degree and professional background to qualify
  • To give priority to high wage positions, and move away from lower wage positions in the IT sector that have dominated the program
  • To do away with the random lottery system, and impose a merit-based selection system to award H1B visas to the ‘best and brightest’

This year may be the last random lottery that the H1B program will ever see, and although the 85,000 visa slots were filled already, you can be sure that petitions will be strictly reviewed for approval.

Who is Most Affected by This Executive Order?

This new executive order targets Indian IT outsourcing companies that obtain H1B visas for contract workers that are paid the lowest possible wage.  Those workers are the ones accused of displacing higher paid US workers in the same positions.  

The proposed changes will all but eliminate the practice of IT contracting to Indian workers employed by companies such as Tata and Infosys, and will favor direct hires at high wages to US based tech companies.  The USCIS already announced two weeks ago that entry-level computer programmers would no longer qualify for the H1B visa ‘specialty occupation’ requirement, immediately affecting the visa hopes, or even current immigration status, for thousands of IT workers.

Similar Work Visa Changes in Other Countries Mirror Trump’s Order

That announcement by USCIS was mirrored by similar move in Singapore on the same day, to limit work visas for Indian IT workers in that country.  Trumps executive order was also duplicated in Australia, where the ‘457’ visa program is being changed for the same reasons.  In each of these countries, it is perceived that a flood of cheap IT labor from India has affected unemployment levels and displaced local residents from their jobs.

Of course, the appeal of paying a foreign IT worker 30-40% less than a citizen is appealing to any business that is watching the bottom line.  Unfortunately, the large Indian IT outsourcing companies decided to take advantage of the work visa programs in developing countries, and came to dominate the number of visas issued each year.  

Indian IT Outsourcing:  A Doomed Business Model

The outsourcing companies based a large part of their business model on demand for IT workers that were willing to work part time or for lower wages, but this practice caught the attention of government officials as people began to complain about losing their jobs to H1B and 457 visa workers.  

Naturally, Indian IT workers and the Indian government are complaining about the effect of these rule changes, but in some ways the IT outsourcing companies are to blame, by creating a false demand through abusing work visa programs simply to supply cheaper labor to the IT sector (as well as make a profit on each contracted position).

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  • April 27th, 2017
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