By AI Trends Staff
In a dispute with the US Department of Labor over how much to pay H-1B visa holders, the ITServe Alliance prevailed in a Dec. 3 court ruling that had the effect of resetting the rules to what they had been before the new Trump Administration policy went into effect.
The ITServe Alliance is an association of IT solutions and services organizations, representing over 1,400 member companies. Founded in 2010, the Alliance has 16 regional chapters in the US. The H-1B is a temporary visa category that allows employers to petition for highly educated foreign professionals to work in specialty occupations that require at least a bachelor’s degree or equivalent.
The Department of Labor had issued a new rule on Oct. 6, resetting the prevailing wage required to hire H-1B employees, making them much higher. Before the new rule, for example, a software engineer in Los Angeles who had a prevailing wage of $85,550, would have to be paid $116,418, a 36% increase, according to an account in Forbes. This came with two days notice.
The Department of Homeland Security at the same time issued new rules around H-1B visa renewals. This was four weeks before the US presidential election on Nov. 3.
Immediately following the win by ITServe in court, the DOL rescinded the new rules as of Dec. 4, 2020.
“Everybody won,” said ITServe Alliance President Amar Varada, in comments to AI Trends. The effect of the new rules would have been to drive the jobs offshore, where the tech talent could be hired for less. While the workers in the US would have made more money, they were uncomfortable that DHS was reviewing the terms of the visas. “They were nervous about the DHS regulations; they knew it would not be good for anyone,” Varada said. “They were stressed about whether they would have to leave the country.”
IT Sector Has More Jobs Open than Qualified Workers to Fill Them
IT unemployment before the onset of the pandemic was two to three percent, according to Kishore Khandavalli, advisory director for ITServe, noting that the pretense for the rule changes was to protect American jobs. “More than a million jobs are open in the IT sector,” he said. “We always have more jobs than people available to fill them.”
With the new rules in place, the options for the service providers were to not comply or go elsewhere to hire the needed tech talent, namely from India, China, or Eastern Europe. “That’s why we had to take action,” he said, by filing for the injunction to halt the new rules from going into effect.
Skills in the IT sector need to be frequently renewed. “Unless you update your skills every three or four years, your skills get outdated,” Khandavalli said. Cobol programmers are not in much demand in the US, for example. “But a software engineer with AI skills with a couple of years’ experience, can command $150,000,” he said. In response to questions he gets from college students as to what technical field to pursue, he said, “Look up what is going to be in demand for the next three to five years: data, AI, and the cloud. That’s the future. Everything is going to the cloud; AI is driving it; and AI is based on data.”
H-1B visas are currently capped at 65,000, and 20,000 in the master’s cap category. During the Clinton presidency, no limits were set on H-1B visas, then it dropped to 185,000.
“We don’t have any opinions about it,” Khandavalli said. “As business owners, we just don’t want to be surprised. We comply with the rules. Just tell us what the rules are and don’t change them overnight.”
Policy Aimed at Protecting US Jobs has Unintended Consequences
The move by the Department of Labor to ostensibly protect US jobs, had the effect of pricing many H-1B professionals out of the market in the US, driving them overseas. “Policies that are motivated by concerns about the loss of native jobs should consider that policies aimed at reducing immigration have the unintended consequence of encouraging firms to offshore jobs abroad,” stated Britta Glennon, an assistant professor at the Wharton School of Business who has researched the market, to Forbes.
An H-1B visa is typically the only practical way for a high-skilled foreign national, including an international student, to work long-term in the United States. The denial rate for H-1B visas stood at six percent halfway through President Obama’s second term, according to the National Foundation for American Policy. Since President Trump took office, the rejection rate increased steadily, reaching 24% in FY 2018, and 30% by FY 2020.
Companies that provide business services, such as ITServe Alliance members, had far higher H-1B denial rates under Trump administration policies.