H-1B proposed Changes – Could be a Boon for MBA Applicants
Over the last few days, a number of you have written to me about the proposed changes to the H-1B Visa reform and its impact on your ability to secure a job post your MBA in USA. Hence, we did some research, the findings of which are presented below.
Summary of findings
Since this is a pretty long article, I have added a short summary here. In essence, the proposed changes (if implemented) can be extremely beneficial for most MBA candidates because of the following reasons:
1. Proposed changes may lead to higher chances of securing H-1B Visa: The H-1B visa program is severely abused and hence oversubscribed. Even with a sponsor, an MBA currently has a 33% chance of securing the H1B visa. The proposal in the senate intend to address the abuse and in turn drastically increase the probability of securing a Visa. (Most Post MBA jobs offer $100K+ salaries)
2. Minimum salary is not a must: The $130K number proposed by Zoe Lofgren is only for exempt filing process, that too for software engineers. It is completely possible to secure an H-1B visa while drawing a much lower salary by following the non-exempt process.
3. Faster Green Card processing: A part of Zoe Lofgren’s proposal requires that Employers file for immigration paperwork for H-1B Visa holders within 3 years. Currently very few employers do the same.
4. Probably higher intake by B- Schools: Quota for H-1B is one of the things holding back B-schools from admitting deserving qualified applicants. As the chances of securing H-1B visa improve, schools may admit more international applicants.
1. Background – What is H-1B Visa?
Why is it important to understand the purpose of H-1B Visa.. because it lays the foundation of the abuse of this Visa instrument as described later on in this document.
H-1B provides an instrument to US employers that allows them to hire foreign workers to bridge qualified and skilled labor gap in certain business areas. Essentially if there is a job for which suitable of sufficient local talent is not available, an employer may bring in a foreign worker to fill that gap. Technically, the only condition required is that skill gap be demonstrated and the foreign worker be paid fair wages.
Note, H-1B Visa is not just for IT/Tech professionals. Any kind of skill shortage can be fulfilled using this instrument. In 2015, the H-1B visas were awarded to functions in 18 occupations including social sciences, arts, law etc. If fact, the first lady Melania Trump came to USA on an H-1B Visa for 6 years to work as a model.
1.1 How many H-1B visas are granted every year? (Source Wikipedia and USCIS.gov)
There are 3 categories in which Visas are granted each year. Please see the table below for the same:
Visa Cap (##)
Anyone can apply under this category, even those with Master’s degree
Applicants with master’s degree or higher
Special – non profit etc.
No cap (unlimited)
|Only for work at universities, non-profit research facilities associated with universities, and government research facilities.
Due to these unlimited exemptions and roll-overs, the number of H-1B visas issued each year is significantly more than the 65,000 cap, with 117,828 having been issued in FY2010, 129,552 in FY2011, and 135,991 in FY2012.
However, MBAs are primarily concerned with the 65,000 + 20,000 = 85,000 quota. From now on, we will talk just about this quota.
1.1 How is H-1B Visa granted?
There are two methods by which H-1B is granted.
1.1.1 Nonexempt filing
This is the “original filing” method for filing an application for H1B Visa. Under this process, you need to demonstrate that there is a shortage of a certain kind of skilled worker that the H1B hire will not directly replace a current position (within 120 days) in the parent company or any other company that the parent company has a relationship with. The technical terms associated with this process are non-displacement, recruitment, and hiring and are explained in Appendix 1.
Employers following this route do not have minimum salary requirements i.e. they can pay any salary that is deemed reasonable for this position.
1.1.1 Exempt filing
In 1998, a change was made that led to “Exempt filing” process. Under this process, the employer filing for H-1B visa did not have to worry about non-displacement, recruitment, and hiring as long as the H-1B worker
- Receives $60,000 annual wages; or
- Has attained a master’s or higher degree (or its equivalent) in a specialty related to the intended H-1B employment.
Note, this H-1B worker was deemed as Exempt H-1B Worker.
Here is the official statement. Read source here. Essentially if you pay someone $60K or higher, or hire someone who has a Master’s degree, you can displace American workers as long as that American Worker is not employed with the employer that is filing for H-1B. (Note this point as you read the Disney example later on)
3.0 How has the H-1B Visa been Abused?
The Exempt filing process gave employers an amazing tool to displace American workers using H-1B Visa. This is because of a major flaw with the 1998 bill. While the $60K wage requirement in the 1998 bill was consistent with the IT salaries then, this bill did not index wage requirements to keep pace with wage growth or even inflation. As a result, H1B employers got a legal method to displace higher earning American Workers by H-1B Visa holders. The funny thing is that the $60K wage requirement in 1998 was set to protect the American workers from this scenario.
Hence, as wages in IT sector grew, outsourcing companies found a means to import engineers from India not to augment a skill gap but to replace already existing workforce, especially with the wage inflation in IT sector.
Non-Exempt process goes out of fashion
With passage of time the non-exempt filing process went out of fashion with IT employers because:
- It required more paperwork. You had to prove that local talent was not available.
- You had to pay the H-1B visa holder more (remember it required that employers pay competitive salaries which most H-1B employers don’t do. Read the section of abuse for more data on the same).
Essentially, very few people use the Non-Exempt H-1B process now.
3.1 What is the evidence that H-1B Visa is Abused?
This is a very important question and there is a lot of data available that proves that H-1B visa has been severely misused/abused by a large number of companies. There are two ways to prove the same:
- Anecdotal Evidence
- Statistical Evidence
There are a few cases in blogosphere where entire departments in companies have been replaced by outsourced workers. In January of 2015, nearly 250 Disney IT workers were laid off, and were replaced by workers from HCL and Cognizant. HCL and Cognizant got away with it, claiming that American workers who were displaced by visa holders were not their employees. Hence, even though the judge did not entirely reject the idea that the Americans were “adversely affected” by being fired, there was little he could do legally
The article below provides another data point.
Now, I am not trying to question the ethics of the situation or whether something like this should be allowed as per the “free-market” economy. The point is that H-1B visa was not designed for this purpose and is clearly being abused by Outsourcing companies. Read the section on Statistical evidence for more details.