Unintended consequences of increasing minimum salary requirements for H-1B visa

A new bill is making way to the house. This one is about increasing the minimum salary requirement for H-1B visa to $130,000.

H-1B visa a nonimmigrant visa in the U.S. that allows employers to temporarily employ foreign workers in speciality occupations. Employees under H-1B need to be paid a minimum salary determined by the government for various occupation types. The visa has been the most common way for tech companies to hire much needed skilled workers not easily available in the U.S.

H-1B visa has, again, recently come under fire from several policy makers about its abuse by outsourcing companies. Legislators posit that outsourcing companies employ foreign workers at lower wages and take away American jobs. These companies hire people in a foreign country and bring them to the U.S. at lower incomes for work that was previously done by American citizens. These employees are not skilled (based on the expected definition) and they exploit the visa for lower quality work.

As a way to reduce this competitive advantage of outsourcing companies, lawmakers want to increase the minimum salary required to hire an employee on H-1B. Their belief is that this would take away the cost advantage and the reason for American companies to outsource work to other nations.

I want to explicitly state that I’m not downplaying issues raised by the legislators or suggesting in any way that current H-1B visa law has no problems.

My hypothesis is that viewing H-1B workers only from an income point of view will lead to bigger losses for the U.S. economy even if it gets a few American citizens employed. There are many benefits of current the H-1B program that go beyond immediate employment.

I haven’t had the chance to read the bill and don’t really know the full extent of changes and implementation. I want to highlight a few things:

• it may exempt certain categories or types of companies. For e.g. it may be applicable only to companies that have high percentage of H-1B workers
• there may be other programs that take care of certain issues that I’m unaware of
• there may be proposed changes in the current legislation that solve all of the points mentioned below

Now with that context, I want to share my perspectives being an international student and H-1B visa holder*.

I believe it’s important to consider H-1B just not as a visa for immediate employment, but a larger tool to attract talent at various stages of their lives. We need to understand the lifecycle of a H-1B visa holder starting before they get the visa and after they were employed. If we only focus on the companies/salaries and not on the stories of people, we could miss a large part of the workforce that may not be skilled on day one but adds a lot of value over their lifetime in the U.S.

Here are a few unintended consequences of increasing the minimum wage for H-1B:

1. Reducing the number of international students coming to the U.S. — There are about 1.2 million international students currently enrolled in higher education in the U.S. The highest number of international students come from China and India. Chinese students are mostly enrolled in undergraduate courses and Indian students in graduate courses. About 50% of international students are enrolled in STEM courses. These students spend $30 Billion on tuition to U.S. universities. Scholarships are limited to none and most of these students take loans or have parents supporting them. U.S. schools are not cheap. If you are earning in INR (Indian Rupee) and have to pay in USD, you can’t do that without a loan and if you have a loan, you can’t make a big enough salary in your home country to justify the loan. It’ll take decades for most people to pay off their U.S. school loan with an Indian salary. These students need some sort of certainty in jobs when they move to the U.S. They know that if they work hard and get good grades, they’ll be able to find jobs. Most of these jobs initially don’t pay $130k. No company is willing to pay such a high salary to a recent graduate (including tech industry). But with the new minimum salary requirement, these students may not be able to find jobs as companies need to pay $130k for filing H-1B. With only 12 months — 36 months OPT, they’ll have to train new employees every year if they don’t pay $130k and most companies don’t. If this certainty of finding a job after school goes away for international students, they’ll be less interested in coming to the U.S. The burden of student loans in their home country is too high for them to take this risk. U.S. institutions will lose out on billions of dollars in annual tuition fees. Which brings me to my next point.
2. Reduced funding for research at nonprofit institutions — Many schools enroll international students (Bachelors and Masters) with zero financial aid. Absolutely none**. These students pay for an expensive U.S. education and a significant part of it goes to research initiatives at the universities. A lot of PhDs are funded with the tuition fees from MS students. If international students stop moving to the U.S. (either because H-1B is now more difficult or their salary won’t meet the requirements), it’ll have an impact on research funding for sure. This impact won’t be talked about much but research is one of the cornerstones of innovative culture and it’s being attacked on multiple fronts due to Federal funding cuts. This is going to constrain research efforts at universities.
3. Future entrepreneurs and business leaders — A lot of students who then become workers including H-1B workers start companies later in their careers when they get their green cards and really have the experience to start something new. It takes time for people to get settled in a new country, pay off debts (if they studied in the U.S.), and get into a risk taking mindset. A fair number of current first and second generation business leaders won’t be here if their parents never moved to the U.S. 51% of billion dollar startups had one non-U.S. citizen co-founder. Most likely they were all not geniuses with high salaries when they moved here. If we view H-1B in a narrow time frame, we may miss out on its positive effects in the future. So many current doctors are Indians for example and they wouldn’t be here if their parents didn’t move to the U.S. many years ago either on H-1B or some other type of work/education visa.
4. Employment in sectors like nursing and education — There are many other non-tech categories such as education and health where many international workers are on H-1B visa. These industries pale in comparison to tech hiring but it is important to consider the effects. Many teachers at institutions like Harvard and other schools are people who came to the U.S. for school or work and had to work on H-1B visa for a while at income levels below required by the new rule. The same with nurses and other professionals.
5. Attracting innovative and young people — Last but not the least, it is important for U.S. to be seen as a country for innovative and hard working people. There is a ton of talent out in the world than can help humans reach their potential faster — only if they are given opportunities. U.S. is seen by far as the best country for opportunity and if that feeling starts to fade, people will find a new destination (and other countries will grab this opportunity). According to Pew Research, U.S. will stay a young country because of immigrants. Young people move here in their prime years — they work hard and add a ton of value to the country in addition to making a better life for themselves. This goes beyond H-1B but if U.S. stops being attractive to young, innovative, and hard working people, some other country will.

If we want to really make U.S. a hotbed of innovation, we need to not only allow people to work here who are great right now, but also who can be great in the future. They may not have a huge impact immediately but they can be a great source of innovation in the coming years. They can bring new perspectives and ideas to workplaces because of diverse backgrounds and help U.S. stay at the top of innovation pyramid.

**there may be few limited scholarships for students from economically backward countries

*I moved to the U.S. in 2010 as an international student for MS at Columbia University in NY. Then was on OPT and finally H-1B. I started a company last year and went through Y Combinator. I wouldn’t have qualified for a visa with the proposed cap.