Tuesday, February 24, 2009

H1B Visa Restrictions in Stimulus Package – What Exactly Does it Mean?

Last week President Barack Obama signed into law the stimulus package that proposed to pump 787 billion dollars into the US economy to help recover itself from recession. One of the clauses in the stimulus bill is to tougher restrictions on companies that receive bailout money from hiring H1B visa holders. According to Wall Street Journal 

The provision (on stimulus bill) imposes higher government scrutiny on banks and other businesses getting federal bailouts if they use the H-1B visa program to hire skilled workers. The program generally grants temporary visas to at least 85,000 workers a year. 

Instead of barring H-1B workers, the stimulus law temporarily increases the number of procedural hurdles that banks and other bailout recipients must clear. It also gives the government much greater ability to scrutinize companies' hiring practices when it comes to the foreign workers. 

Once the stimulus package was passed media, especially in India, started interpreting it many different ways. It varied from “Indian workers' prospects of living the American dream may turn sour” to “unlikely to have a major impact”. The Economic Times in one of the article writes 

The time when young budding IT professionals of Bangalore would head to the United States for either higher studies or to fetch themselves the 'dream' job, seems almost to be over. But with the US Senate imposing restrictions on hiring foreigners on H1-B visa, the feeling has come hitting hard on the highly skilled Indians that the door to the US might actually close for them. 

Another article in the same paper says 

Nearly 100,000 skilled Indian workers' prospects of living the American dream may turn sour with the Congress barring firms that received bailout  money from hiring foreigners through HI-B visa programme if they replace US citizens. Estimates suggest that there are 100,000 Indian nationals among the 163,000 from across the world that had applied for the skilled worker visa in FY2009. 

It didn’t end with the media. The political parties did their part also. The Vishwa Hindu Parishad (VHP), an organization closely associated with main opposition party BJP in India, made a statement to boycott US goods in retaliation of the H1B visa restrictions. This was what VHP leader Praveen Togadia has to say 

Terming as "discriminatory" the US move to bar firms receiving government bailout from hiring Indian and other foreign workers through the skilled worker visa (H1-B) programme, the VHP on Wednesday threatened to boycott goods of US-based MNCs in the country.  

"The proposed discriminatory clauses that US companies employing H1-B visa holders will not be eligible to receive any sanctions from the 787 billion USD stimulus package are hurting Indians abroad. We are determined to take up this issue in a similar fashion by disallowing American products in India," Togadia told

Then there are other news reports like this one that there is going to be minimum impact on Indian companies and H1B visa aspirants. In another article in Economic Times 

The US Senate’s move to restrict H-1B visas to banks and companies receiving aid under the stimulus package is unlikely to have a major impact on Indian IT players. According to analysts, there are two reasons for this. First, offshoring, which is on the rise, has not been directly targeted by the amendment, and second, other categories of visas are still available. 

Now with all these contradictory reports what is the truth? Do these restrictions have a major impact on the H1B visa holders and their job prospects? My answer to this question is that it is only going to have a very minimum impact. Let me tell you why this restriction is going to be a non starter. 

See this piece of news 

A total of 21,800 foreign US work permits were requested for immigrant workers over the past six years from the 12 banks that received the largest rescue packages, totaling $15 billion. 

Each year US issues 85000 H1B Visas. So in six years the US could have issued 510,000 visas. In that only about 22,000 visas went to the major banks that received bail out money. This number is less than 5% of the total visas issued. So yes, in the next two years these banks may not be able to hire new H1Bs and that can have minor impact. 

At the same time there is another side to this story. Everyone knows that number of H1B visa holders working in these banks will definitely be more than 22,000. The practice these banks follow for many years now is that they don’t hire a H1B visa holder directly. They hire a H1B visa holder through a consultant. This works like this. You get your visa sponsored through your consultant and come to US. This consultant places you in one of the companies receiving the bail out money from the stimulus plan.  Now since the company is not directly hiring the H1B visa holder, the company doesn’t have to comply with the stricter H1B rules and it gets the right people for the right job. This was and will continue to be the major way the banks recruit H1B visa holders. With the new restrictions this practice will increase along with outsourcing. 

So the net effect of restrictions for H1B visas on stimulus package – a stimulus for consultants out there and business as usual for companies getting bail out money.

Related Posts: Do’s and Don’ts of applying for H1B Visa During Recession Time

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5 Comments:

Anonymous Vivek said...

Brijesh, you are absolutely right. Back home malayalam news papers and TV channels are spreading wrong news that everyone in H1B would now have to come back to India causing scare among people. The H1b visa restriction for TARP recipents was watered down at the last minute by sensible senators in the US before they agreed to ratify it.
More business to desi consultants in the banks that are receiving the bailout money.

February 24, 2009 12:47 PM  
Blogger AJ said...

Brijesh,

Still, I doubt the impact of H1B policy, this stimulus bill proposed. Because we saw it in front of our eyes last week at ASU during the career fair. I agree most of the companies are on a hiring freeze and/or not many are adding numbers to their workforce, then also only 2 companies were accepting resumes from F1 students. This means other companies even though they are not receiving the bailout money are reluctant to take applications from foreign nationals. I strongly doubt that this may be because of the fear of repercussions that they might have to face once if the economy goes further downhill.
This was not the case about 4 months back during the last fair when nothing about the H1B was mentioned in any packages. I feel like suddenly employers became panic with the clause in the "stimulus" bill.

February 24, 2009 11:41 PM  
Blogger Brijesh Nair said...

Vivek,
The exact point I was making

AJ,
There is no job out there. That is the real issue.

February 26, 2009 3:05 AM  
Anonymous Aranya said...

Informative Post! I think that this is basically aimed at scaring more US employers to refrain from hiring immigrants as permanent employees. Secondly, this would encourage consultants to continue eating up a Lions share of the employee paychecks as you are more dependent on them now. The slightest issue over here, then there is this huge media hype about the whole thing back home as usual. Nobody can change that!

February 26, 2009 11:40 PM  
Anonymous American Joe said...

This is good news. Indians have been coming to this country to steal our jobs for years now. They exploit their own labor, and now expect all Americans to be subordinate to them.

This gets rid of some of the job rigging that was going on, where an Indian scam outfit was pretending to look for local talent, advertising a job for a Phd at $25k.

I really enjoyed slumdog millionaire, and hope that people see the real side of india more often.

May 06, 2009 5:39 PM  

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