The H-1B Visa Is Officially Dead - What Now?

The H-1B visa is officially dead. The reality is that the H-1B visa has been dying for a long time now, and offshore labor has played a part in that, but the H-1B visa is now dead. In late September, Trump and his administration officially announced that any new petition filed for an H-1B visa will now require the petitioning business to pay a $100,000 fee – in effect, killing the program.

Nominally, the H-1B visa exists to fill gaps in the American labor force. If American businesses are unable to find the skills or expertise they need with domestic workers, then they can seek them outside the country.

The H-1B visa might seem like a good thing for the economy. American businesses get high-skilled employees who can help improve the country and the economy. The truth of the H-1B visa is, as always, much more nuanced than that. 

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What is the H-1B Visa?

The H-1B visa is a non-immigrant visa that allows American employers to bring foreign workers to the United States who can fill specialty occupations. The H-1B visa is especially sought after by those in tech and STEM fields.

A total of 85,000 H-1B visas are issued each year, though there are usually hundreds of thousands of applicants annually. A lottery system has been put in place to randomly select those who may actually apply for a visa.

Prospective employers must initiate the process by first sponsoring their employee’s electronic registration. From there, the lottery is conducted. If the submission is selected, the business can then file a full petition for an H-1B visa.

Following the business’s submission of the petition for the visa, the petition is adjudicated, at which point it may or may not be rejected. Reasons for rejection could include anything from the job not qualifying as a specialty occupation that the employee not having the proper qualifications.

Assuming the petition is accepted, the prospective hire must now apply for the visa itself, which may still be rejected for any number of reasons.

At its core, the H-1B visa process is long, winding, uncertain, and expensive.

Each and every step of the H-1B visa process requires more time and more money on the part of the business. Paying for man-hours is just the start – filing for an H-1B visa almost always requires an immigration attorney to get involved, and each step of the filing process requires more fees and more paperwork.

Even if a business makes it through all the steps, it must follow strict regulations once its employee arrives in the United States. Records must be strictly kept, and any major change in job duties or work location means amending the petition. Failure to comply at any step could mean massive fines or exclusion from using the H-1B program in the future.

One of the fundamental flaws with the H-1B visa itself, though, is that it only lasts three years. Businesses can seek an extension that pushes the limit to six years, but that requires even more paperwork, time, money, and effort, and is by no means a guarantee.

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How Did the H-1B Visa Die?

Trump killed the H-1B visa when his administration officially announced that any new petition for an H-1B visa would require a $100,000 fee to accompany the petition.

As has already been discussed in this document, the petition for a visa may be rejected for any number of reasons, as can the application for the actual visa itself. Trump’s new requirements mean that even if the petition or the visa is rejected, the fee itself will not be refunded.

Few businesses are able or willing to bear the burden of Trump’s new fee. Even when spread over the three years a worker can remain in the country, the new fee adds $30,000+ to the expenses associated with an employee. Adding three years might reduce that yearly burden, but that could easily fall apart.

The most basic justification for paying Trump’s new fee is that the employee is worth an extra $100,000, broken up over three to six years, of course, but that’s still a lot of money.

To justify that extra $100,000, the employee must have a set of skills, experience, expertise, or something else going for them that could help a business. Whatever the justification, the cocktail of qualities this employee brings to the table must be very rare and very potent.

Another possibility is that the employee must be willing to shoulder the burden of the extra expense themselves – but that’s a tricky topic. Rules and regulations around salaries are very strict when it comes to H-1B visa holders, and lowering an employee’s salary to make up for Trump’s new fee likely won’t end well. While the employee might be willing to take that burden, the federal government might not allow it.

Even if the employee is worth an extra $100,000, that much money could turn to nothing. Even after the lottery, the H-1B visa process isn’t a sure thing – it’s a gamble. The process could fall apart at any step along the way, and few businesses are willing to place a $100,000 bet on something so uncertain.

Simply put, the extra $100,000 fee Trump has put on the H-1B visa is, in most cases, insurmountable. Very few businesses are willing to pay that much money for an employee, especially if even successfully hiring them is a gamble. Trump has, in effect, killed the H-1B visa.

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What Happens to the Economy Without The H-1B Visa?

The Economics of the H-1B visa itself are rather nuanced and debated amongst economists. There are two fundamental pieces at play when it comes to the H-1B visa – the macroeconomic effects, and the microeconomic effects – and they don’t always get along.

Macroeconomics, simply put, focuses on the economy as a whole. Microeconomics studies how individuals and businesses interact with each other. A core tension in economics is that what has a positive effect on microeconomics might have a different, and possibly negative, effect on the macroeconomic landscape. While any policy put in place, including Trump’s new H-1B visa fee, will have both a macroeconomic and a microeconomic effect, the effect isn’t always uniform.

The H-1B visa creates a core tension between our understanding of macroeconomics and microeconomics, and that’s where the nuance lies.

The consensus is that from a macroeconomic perspective, the more the merrier. The more workers a country has, the better. More workers mean more people making money, more people creating businesses, more people buying things, and more people paying taxes. These are precisely what drives economic growth within a country, and this is where the H-1B visa shines.

By bringing in more workers, the H-1B visa can help drive up economic growth in the United States, but it’s not a free lunch. The H-1B visa does carry its downsides.

From a microeconomic perspective, the H-1B visa could be a negative. H-1B visas bring more workers into the country, especially white-collar workers. A greater supply of workers means a potential decline in wages for preexisting American workers or a possible reduction in job opportunities.

Without the H-1B visa, American workers might also be able to gain more bargaining power. With fewer competitors, many of whom might demand less from their employers, American workers could more easily demand better benefits or a better salary.

Within the H-1B visa lies a core tension – the H-1B visa could help the American economy, but hurt the American worker.

From a macroeconomic perspective, Trump’s decision to kill the H-1B visa is illogical. He’s reducing the American labor pool and cutting away at the American economy. From a microeconomic perspective, what Trump is doing is brilliant. Trump is helping raise the wages of American workers, potentially improving their benefits, and expanding their job opportunities.

Will the microeconomic effects of the death of the H-1B visa win out over the macroeconomic effects? Time will tell. Some research has shown that the H-1B visa is a net positive for the American worker, while others have shown that it does increase competition and reduce wages.

Right now, we simply don’t know what effect Trump’s H-1B visa fee will have. What we do know is that, for now, no business should be counting on the H-1B visa as a way to get more employees.

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What Can Your Business Do Without the H-1B Visa?

So, the H-1B visa is dead – what now?

There are certain exemptions to the new H-1B visa fee. Workers deemed necessary for national security or who it is in the best interest of the country to have can get a visa without having to pay Trump’s new fee. These exemptions, though, are highly specific, and many positions a business might want filled won’t meet the standards.

Other visas do exist, but if a business tries to use them to bring a worker into the country, the federal government might disapprove, which can lead to significant financial and legal penalties.  

An obvious path for any business to go down is to simply try to find local talent. This creates problems, though. Local workers don’t always have the skillset that a business might desire, or demand a reasonable salary, and businesses might simply not be in a location that could attract the talent they need.

Businesses can also try to hire employees from the wider United States, but potential employees don’t always want to relocate. Relocation could also mean demands for higher pay or certain benefits, neither of which a business might be willing to deal with.  

Another option exists, though. The H-1B visa itself is chaotic and challenging for a business to work around, and local talent isn’t always enough, but if the goal of the H-1B visa program is to help businesses get their hands on highly skilled workers they can’t find in the US, then labor offshoring can fill the gap.

Remote offshore workers are more than capable of filling the role of workers with H-1B visas or domestic employees, and they can do it without the same downsides.

Labor offshoring allows businesses to find and work with highly skilled and experienced employees for significantly less than their H-1B visa-holding counterparts, or even domestic employees.

With offshore labor, businesses no longer need to work tirelessly and pay exorbitantly high fees to find and employ the best workers from outside the country – they can simply hire workers directly outside of the country.

High-skilled roles like software engineering, marketing management, product design and development, and even high-level executive roles can be filled by remote offshore labor.

With reductions in salaries ranging up to 70%, labor offshoring offers unprecedented opportunities for reducing costs, increasing efficiency, and boosting growth.

By using offshore labor, businesses can often afford to hire multiple workers for the price of one, providing unprecedented scalability. Workers can also be employed in different time zones, meaning that a business can operate 24/7, allowing for extraordinary efficiency.

Businesses can hire accountants, virtual assistants, online content managers, tech support, HR representatives, and more, all while saving money thanks to labor offshoring.