US govt ups minimum H-1B tech salaries to $208,000 a year, more than startups can hope to afford, say VCs
- Reference: 1604367039
- News link: https://www.theregister.co.uk/2020/11/03/h1b_wage_hike/
- Source link:
Last week, in the latest of a [1]series of immigration crackdowns, the H-1B visa program’s lottery process was [2]abandoned in favor of a high-wage cut-off, meaning applicants will have to earn above market rates in many cases before being allowed into the country. To guarantee an H-1B visa, you'll need to be paid at least $208,000 for some professions, and considerably more than the current rate for less skilled workers.
“Modifying the H-1B cap selection process by replacing the random selection process with a wage-level-based selection process is a better way to allocate H-1Bs when demand exceeds supply,” [3]said the Department of Homeland Security (DHS) in an announcement.
The Trump administration claims this approach will prevent companies from hiring cheap foreign labor, and encourage the recruitment of Americans, yet the decision has sparked anger and frustration, particularly from startups that can’t afford to pay high wages and rely instead on things like equity, bonuses, and various perks to get the best candidates. None of those alternative forms of economic reward are accepted under the new rules.
President Trump's H-1B visa crackdown wiped $100bn off market value of America's largest corps, top study finds [4]READ MORE
An [5]analysis [PDF] of the new rules by non-partisan National Foundation for American Policy noted that the H-1B wage minimums will require foreigners to be paid much more than American citizens on market rates. That's not a problem for the likes of Facebook and Apple, though it will be disastrous for organizations like Infosys, that [6]import immigrant workers, as well as small and medium-sized businesses.
Computer research scientists would “need to be paid from 42 per cent to 49 per cent more under the new Dept of Labor wage system,” and employers would need to increase annual salaries by nearly 50 per cent for computer hardware engineers, over 40 per cent for computer programmers and chemical engineers at all wage levels, and more than 35 per cent for electrical engineers, computer network architects, computer systems analysts, mechanical engineers and database administrators at all wage levels, the foundation concluded.
Priced out
The reality is that some H-1B workers such as an IT analyst would need a starting salary of $208,000 to be eligible – a massive jump over the previous requirement.
An entry-level programmer would need to make $111,946 instead of the previous $78,125. “It’s already expensive, it was already a high bar, and we are making it prohibitive,” the co-founder of VC firm Scale, Kate Mitchell, [7]told the Wall Street Journal
There is a long history of immigrants acting as both founders and early start-up team members in the United States; Silicon Valley in particular. A third of all new VC-backed startups are founded by immigrants and over half of current “unicorns,” those valued at over $1bn, have at least one immigrant founder.
For decades, the visa program has acted as a way for America to pull in overseas talent, with those immigrants drawn to the unique combination of capital and risk-taking that can make a pipedream a reality and turns out companies that become mega-corporations. VCs and startups are worried that the new changes will drive those people to other countries that have been trying for a long time to create their own version of Silicon Valley.
The other reality is that in many cases there aren’t enough Americans with the necessary skills for the jobs. There are solutions to that – greater investment in education programs, or companies that hire underskilled workers and train them up – but those solutions come with a significant cost and time delay.
Ideology
Imposing a blunt economic solution without first ensuring there is the necessary supply of domestic workers is going to have an obvious negative impact on American businesses. But the new rules are largely the result of ideological beliefs rather than business pragmatics.
“The H-1B program is often exploited and abused by US employers, and their US clients, primarily seeking to hire foreign workers and pay lower wages,” said the acting DHS deputy Secretary Ken Cuccinelli last week.
“The current use of random selection to allocate H-1B visas …. fails to leverage the H-1B program to truly compete for the world’s best and brightest, and hurts American workers by bringing in relatively lower-paid foreign labor at the expense of the American workforce.”
Highlighting the fact that the Trump administration isn’t interested in industry feedback, it has also pushed the changes without going through the normal process of asking for and considering public comment.
However, many companies that will be negatively impacted are simply watching and waiting. This week, national elections may eventually see a new president elected and a Biden administration take over in January. If so, it is a virtual certainty that the new rules will be thrown out. ®
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[1] https://www.theregister.com/2020/10/06/h1b_visa_changes/
[2] https://www.theregister.com/2020/10/29/h1b_visa_change/
[3] https://www.dhs.gov/news/2020/10/28/dhs-trump-administration-protect-american-jobs-unfair-international-competition
[4] https://www.theregister.com/2020/10/26/trump_h1b_ban/
[5] https://nfap.com/wp-content/uploads/2020/10/Analysis-of-DOL-H-1B-Wage-Rule.NFAP-Policy-Brief.October-2020.pdf
[6] https://www.theregister.com/2020/09/02/infosys_american_hires/
[7] https://www.wsj.com/articles/tech-startups-say-new-pay-rules-for-h-1b-visas-are-unaffordable-11604246400?mod=djemalertNEWS
[8] https://whitepapers.theregister.com/
IANAL, but still. Come on.
There is a long history of immigrants acting as both founders and early start-up team members in the United States; Silicon Valley in particular. A third of all new VC-backed startups are founded by immigrants and over half of current “unicorns,” those valued at over $1bn, have at least one immigrant founder.
H1-B visas are not anything to do with immigration. People holding them are not immigrants.
This isn't directly aimed at MS, FB, Apple etc.'s H1B staff. This is aimed at the SIs and outsourcers that everyone (including MS, FB, Apple etc.) uses who ship people in wholesale on below-market rates, keeping salary rates suppressed for everyone involved, reducing the paths for natural advancement/grad recruitment and killing off any hope of a competitive day-rate/contingent worker market. They get to game the H-1B lottery places through sheer force of manpower that no one else can match and keep SV and NYC well-fed with below-market-rate contingent workers.
>A third of all new VC-backed startups are founded by immigrants and over half of current “unicorns,” those valued at over $1bn, have at least one immigrant founder.
Honest question: how many of these were H1B immigrants or the children of H1B (or equivalent) immigrants? You called out Google as an example but Sergey Brin came across as a child, with his father taking a teaching post. In modern parlance that would be a J1, not an H1B. Likewise you mention VMware, presumably referring to Ed, who arrived in the US as a postgraduate student, again typically an F- or J-flavoured visa and not an H flavoured visa. I'd be willing to bet the same goes for the rest of the examples you've referred to. The people arriving on H-1Bs today are not the ones going on to found VC-backed unicorns.
Visa reform can be and frequently is an attack on immigration and immigrants. But let's not pretend the H-1B system is a grand beacon, calling the greatest minds towards the greatest companies in the greatest country. It's a deeply unfair system riddled with abuses that right now does little else but prop up an abusive business model we'd all be better off without.
Dear VCs: if your business can't pay a competitive wage to staff then it's not a sustainable business. You're welcome.
Dear AC, a base (fixed) income at more than 30% above market rate makes it not sustainable, especially at the beginning when companys hardly make a profit. That's why there are additional things like equity or boni (ffs. bonus is Latin, plural should be boni) that are offered, based on how well the company does. Would who complain now all be able to afford that, if these were also taken into consideration? Not likely, but it would open some more doors.
Thanks for reading the text by the way. The reading comprehension exhibited by you clearly shows why the H1B visa program is so important.
But wasn't that the point of the H1B?
Heaven knows I am not a Trump administration fan, quite the contrary, however:
I thought the point of the H1B was *always* to augment staff when the local market couldn't provide *and* you had to pay notably more in compensation.
I worked in the USA 25 years ago (oh gods... where did time go?!) and the company had to prove that my compensation was equal or higher - and it was, as I was easily one of the best paid in the organisation in comparable roles.
What exactly changed in that time (I've been gone from the US for a long time (oh gods... where did time go?!)) that they need to introduce what sounds like a cheap populist measure but actually sounds like "the way things used to be"?