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U.S. President Donald Trump suspended the entry into the United States of certain foreign workers on Monday, a move the White House said would help the coronavirus-battered economy, but which business groups strongly oppose. Trump issued a presidential proclamation that temporarily blocks foreign workers entering on H-1B visas for skilled employees, and L visas, for managers and specialized workers being transferred within a company. He also blocked those entering on H-2B seasonal worker visas, used by landscapers and other industries. Businesses including major tech companies and the U.S. Chamber of Commerce said the visa suspension would stifle the economic recovery after the damage done by the pandemic. The proclamation’s immediate effects are likely to be limited, as U.S. consulates around the world remain closed for most routine visa processing. The order exempts those already in the United States, as well as valid visa holders abroad, but they must have an official travel document that permits entry into the United States.

H1B visa:

  • The H1B visa is a non-immigrant visa that allows companies to employ foreigners for a period of up to six years. This visa is aimed at helping companies employ foreigners in positions for which they have been unable to find American employees. The minimum salary for an employee holding the H1B visa is set at $60,000 per year.
  • L1 visas allows companies to transfer highly skilled workers to US for a period of up to seven years.
  • H-2B visas allow food and agricultural workers to seek employment in the US.
  • J-1 Visas: It is for students on work-study summer programmes.

Why is H1B visa programme criticised?

  • The aim of the H1B visa programme was to supplement the US workforce with high-skilled workers to do jobs that Americans are not skilled to do, not to replace the US workers.
  • But over time, there have been many grumblings that many companies use the H1B visa to replace American workers with foreign ones, as the latter can be hired at lower salaries without compromising on the skill sets.
  • In some cases, American employees have alleged that they were made to train H1B holders to do their own jobs, and then fired.

H1-B visas among those suspended till year end:

  • The broad-brush order includes the H-1B visa for skilled workers, which is widely garnered by Indian nationals, the H-2B visa issued to seasonal workers in the landscaping and hospitality industries, the L-1 visa for intra-company transfers, and the J-1 visa for students on work-study summer programmes.
  • It will also impact the H-4 visa for dependents of H-1B visa holders. The proclamation will enter into force on June 24 and be applicable until the end of the calendar year, which notably includes the November 3 presidential election.
  • It is intended as a follow-on order reducing the number of foreigners entering the U.S., as it comes on the back of the 60-day halt in legal migration that began on April 23.

Why this order was issued?

  • To protect American jobs during the ongoing pandemic. The entry of additional workers through the H-1B, H-2B, J, and L non-immigrant visa programmes presents a significant threat to employment opportunities for domestic workers by undercutting their jobs.
  • allowed to apply for permanent residency in the US as well as buy or sell property in the country.

How will this affect the US?

  • Skilled foreign workers who come to work in the United States on H1-B visas don’t just directly supplement the US IT industry with specialised skillsets, they also contribute indirectly to other industries in the US.
  • Often H1-B workers bring their families along and thereby bring additional business for other industries like real estate, Banking, hospitality, to name a few.
  • The effects of this announcement will impact the GDP and the overall business economy and growth of US. While 20% of H1-B visa quotas have been set aside for start-ups and small employers with 50 or fewer employees, there is no denying that this will be a dampener to the spirit of innovation and entrepreneurship.
  • In midst of all this, it’s critical to remember that most US-based companies (including many Fortune 500s) are highly dependent on IT Services Providers.
  • These companies actively outsource for both skills and cost advantages – important to note, it’s not just the latter that drives the decisions. Changes in the H1-B visa arrangement will add immense cost pressures on these organisations.

How does it impact Indian IT companies?

  • Indian IT companies are amongst the biggest beneficiaries of the US H-1B visa regime, and have since 1990s cornered a lion’s share of the total number of visas issued each year.
  • As of April 1, 2020, the US Citizenship and Immigration Services (USCIS) had received about 2.5 lakh H-1B work visa applications, according to official data. Indians had applied for as many as 1.84 lakh or 67 per cent of the total H-1B work visas for the current financial year ending March 2021.
  • Apart from the suspension of these work visas, the executive order signed by Trump has also made sweeping changes to the H-1B work visa norms, which will no longer be decided by the currently prevalent lottery system. The new norms will now favour highly-skilled workers who are paid the highest wages by their respective companies.
  • This could result in a significant impact on margins and worker wages of Indian IT companies which send thousands of low-cost employees to work on client sites in the US.
  • Though the large Indian IT companies have cut down their dependency on H-1B and other worker visas by hiring as much as 50 per cent of staff locally, they still rely on these visas to keep costs in check.
  • Indian IT companies also offer subcontracts to Indian nationals already present in the US with valid H-1B visas. Bangalore-based Wipro spends as much as 20 per cent of its revenue to subcontract Indian workers with valid H-1B visas.

Way ahead:

  • As labour and capital quit American shores, the more they try to protect their jobs, the more it will affect the rest of the world. But India being one of the fastest growing markets, has plenty of opportunities to stand up to it and deliver, but that require persistent mending of ways things function.
  • While there may be a temporary plug on legal issues in the US, it will lose the perception battle internationally. Since it is arguably inevitable, this gives a lot of chance to India, to introspect and build its own infrastructure.
  • When it comes to the IT industry, initially the Indian companies will be pressurised to hire Indian talent, but eventually, it will help in overall growth.
  • Additionally, Make in India and Buy American can work together too, which can only improve bilateral trade between the nations. While there may or may not be much logic in the events to come, the unpredictability can also be the sole reason for India to improve internally.