Happy New Year, folks! In today’s Finshots, we break down the H-1B visa debate and how it affects both the US and Indian economies.

The Story

In 1990, President George Herbert Walker Bush signed the “Immigration Act of 1990” and introduced the H-1B visa programme. The idea was simple — help American companies fill vacancies in specialised fields like research, engineering and computer programming by temporarily hiring skilled foreign workers.

But over time, the programme became a hotbed of controversy. Just think about it. If foreign workers started taking up jobs in your country, wouldn’t it feel like your chances of landing one were shrinking? That’s exactly how many Americans started to feel too.

And this unease has fuelled endless debates about whether H-1B visas help or hurt, even sparking divisions within President-to-be Donald Trump’s team.

During Trump’s first term as President, he wasn’t exactly a fan of the programme. He thought it was unfair to American workers and introduced restrictions in 2020, arguing that it allowed employers to replace locals with cheaper foreign labour.

But fast forward to now, and things seem to be shifting.

Trump’s new allies like Elon Musk and Vivek Ramaswamy, who’ve been tasked with leading the US Department of Government Efficiency (DOGE), are rooting for reforms to strengthen the H-1B system. And with Indian-American Sriram Krishnan joining Trump’s team as a senior AI policy advisor, there’s even talk of removing country-specific caps on these visas, which could be a game-changer.

To put things in perspective, every year, the US Citizenship and Immigration Services (USCIS) hands out 65,000 H-1B visas, with an extra 20,000 reserved for those with master’s or doctorate degrees from US institutions. But here’s the catch. There are way more people applying than the number of spots available. So, the system turns into a lottery. And many eligible applicants miss out purely because of bad luck.

And here’s where things get even trickier.

You see, Indians make up over 70% of the H-1B visa recipients, while China takes around 12-13%. The rest go to countries like Mexico, Canada, the Philippines, Taiwan and Korea. But then again, there’s a cap on how many visas any one country can get. No more than 7% of the total H-1B visas can go to workers from any single country, even if there’s an overwhelming talent pool waiting. So, if those country-specific caps were removed, it could open up more opportunities for Indians looking to work in the US.

But you can imagine that not everyone in America shares that optimism. Some Trump loyalists like Steve Bannon (former White House Chief Strategist), Nikki Haley (former Governor of South Carolina) and Laura Loomer (political activist) argue that foreign workers are taking jobs from Americans. And they’re not alone. Recent surveys show that 60% of Americans believe the country already has enough skilled workers to fill these roles and doesn’t need more.

But do their worries actually make sense, you ask?

Well, if you look at it from the lens of tech companies, their argument may be valid. After all, some of the biggest employers of foreign workers in the US come from the tech world, including global giants and four Indian tech majors like Infosys, TCS, HCL and Wipro. Together, these companies account for about 35% of the top 10 H-1B visa beneficiaries.

If you’re wondering why, well, hiring Indian employees is often cheaper for these companies. Many Indian workers are willing to accept lower pay than their American counterparts, allowing companies to save on wages while still offering a pay raise that looks impressive by Indian standards.

For context, in 2023, almost 70% of the H-1B petitions approved for Indian professionals were for salaries under $100,000 per year, even though the average IT salary in the US was around $104,000. This means that Americans might have had to lower their pay expectations to compete for these jobs. And that has led some to argue that foreign workers are driving down wages for domestic employees.

But here’s the twist. Immigrants on H-1B visas might actually be benefitting Americans more than people think. Yup. Because think of it this way. Immigrants and native-born Americans don’t always have the same skill set, which means they’re not always competing for the same roles. Instead, they’re collaborating, filling in the gaps where needed.

When immigrants spend their earnings in the US, it creates a ripple effect. More demand for goods and services means companies grow, rather than moving operations overseas. Plus, immigrants often start their own businesses, adding even more jobs to the US economy. Not just that. They bring fresh ideas and innovation that fuel economic growth and create more opportunities.

And it’s not just us saying this. The numbers back this up. A study by the American Immigration Council found that from 2004 to 2023, and even during the pandemic, fields like science, technology, engineering and mathematics (STEM) consistently had low unemployment rates. So, the demand for skilled workers was actually more than the supply.

Moreover, it suggests that H-1B workers don’t really earn low wages or drag down the wages of their domestic counterparts. In fact, the average wage for an H-1B worker was $108,000 in 2021, compared to $45,800 for US workers in general. And between 2003 and 2021, the median wage of H-1B workers grew by 50%, while the average wage of US workers rose by 40%. So it’s like employers who hired H-1B workers often offered them wages above the Department of Labor’s “prevailing wage” for similar jobs.

And let’s not forget that between 2010 and 2019, US companies like Moderna, Johnson & Johnson and Pfizer, who later helped develop COVID-19 vaccines, hired over 3,300 scientists, including biochemists and chemists, through the H-1B programme. Many of the doctors on the front lines during the pandemic were also H-1B visa holders. So, maybe that’s the bigger picture Americans haven’t fully considered yet.

On the flip side though, here’s something for Indians to think about. If the US clamps down on H-1B visas, the flow of skilled Indian professionals might shift back to India. And India might just be ready for it. With improved infrastructure, a skilled workforce, and a booming ecosystem for global capability centres (GCCs) in fields like AI and robotics, the country could absorb this returning talent. But even if H-1B aspirants are concerned about their quality of life in India, other countries, especially in Europe, might swoop in and grab that talent instead.

So yeah, no matter where the H-1B visa debate goes, it’s not going to drastically change things for most Indians. We’ll only have to wait and see how the Trump administration navigates this.

Until then…

Don’t forget to share this story on WhatsApp, LinkedIn and X.

📢Finshots has a new WhatsApp Channel!

If you want the sharpest analysis of all financial news without the jargon, Finshots is the place to be! Click here to join.

Your ultimate Term Insurance checklist!

Secure the future of your family today!

Click here to book a FREE call with our IRDAI-certified advisors to understand the importance of Term Insurance.