What’s in the news?

• The US administration has said it was extending the 60-day ban on immigration and non-immigrant worker visas till the end of 2020.
• Popular work visas including the much-coveted H-1B and H-2B (non-agricultural workers), and certain categories of H4 visas (H-1B dependents), J visas, and L visas (intra-company transfers) will also remain suspended until December 31.
• The move, US President Donald Trump said, was to protect domestic workers who had been impacted due to a contraction in the economy in the wake of the Covid-19 pandemic.

H-1B visas

• In order to fill a vacuum of highly-skilled low-cost employees in IT and other related domains, the US administration issues a certain number of visas each year which allows companies from outside the US to send employees to work on client sites.
• Of these work visas, the H-1B remains the most popular among Indian IT companies. The US government has a cap of 85,000 total H-1B visas for each year. Of this, 65,000 H-1B visas are issued to highly skilled foreign workers, while the rest 20,000 can be additionally allotted to highly skilled foreign workers who have a higher education or masters degree from an American university.
• H-1B visas are generally approved for a period of three years for a person, but many visa holders change employers to extend their US stay.

Why did the US suspend non-immigrant worker visas?

• Since it was started in 1952, the H-1 visa scheme has undergone many changes and revisions to allow or disallow certain categories of skilled workers in the US, depending on the economic situation of the country.
• The technology boom coupled with the arrival of the internet and low-cost computers in developing nations such as India and China saw a large number of graduates willing to work at relatively low costs in the US, a win-win situation for both the employer and the employee.
• However, it has since often been criticised for sending low cost workers to the US at the expense of domestic workers.

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 the 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 the U.S. administration 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.