IT stocks crash amid concerns over H-1B move

02 February, 2017, 00:38 | Author: Celia Hoffman
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According to latest developments, the US House of Representatives, has already called for more than doubling the minimum salary of H-1B visa holders to $130,000 (approx Rs 89 lakhs) making it hard for firms to use the programme to replace American employees with foreign workers, including from India.

- It will eliminate the Master's Degree exemption for employers.

US President Donald Trump is expected to issue an executive order to restrict work visas, H1B and L1 issued to professionals working in the US for a short period of time, as part of a larger immigration reform.

The actual reason behind introducing this visa is to help American firms deal with labour shortages in rapidly growing jobs that require specialised skills, such as in software programming, research and engineering.

Foreign work visas were originally established to allow United States companies to recruit workers from overseas if there weren't any qualified local workers. Its business in the USA, where it provides engineering and other tech services to firms such as IBM, Microsoft and Citibank, is highly dependent on the H-1B visa.

Arguing that they face a shortage of skilled USA workers, technology companies including Microsoft and Apple say they need more H-1B visas, while critics say the programme is used as a source of low-priced labour.

The proposed order would force companies to try to hire Americans first, and to give priority in foreign recruiting to the highest-paid workers, according to a draft copy reviewed by Bloomberg.

Some experts believe that Friday's order may not affect Indian IT companies, as they have "elaborate pre-hiring process to verify their employees".

The bill proposes to raise the minimum salary of a "H-1B" visa holder to around $130,000 per annum from the present limit of $60,000 per year.

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The change in business model will also depend on the existing working model of individual IT companies, which have been trying to increase local hiring in the US. Meanwhile, the IT Index plunged 4.4 per cent to 9,722 points, 3-month low. At the end of the day, Infosys closed down 2.01%, TCS shares fell by 4.47%, Tech Mahindra fell by 4.23%, and Wipro Ltd by 1.62%.

Speaking to Bloomberg, Gary Burtless, a senior fellow at Brookings Institute research labour markets has said that immigrant STEM workers have played a large role in job creation in the U.S. and building American companies.

According to ComputerWorld magazine, almost 86 per cent of H1-B visas for computer-related jobs and 46.5 per cent for engineering positions were given to Indians.

Is there a silver lining? It sets aside 20 percent of the annually allocated H-1B visas for small companies and startup employers (50 or fewer employers) to ensure small businesses have an opportunity to compete for high-skilled workers.

The H-1B visa bill removes the "per country" cap for employment-based immigrant visas. India has been largely silent on Trump administration's recent immigration ban barring foreign nationals from seven Muslim-dominated countries.

"India's interests and concerns have been conveyed both to the U.S. Administration and the U.S. Congress at senior levels", foreign ministry spokesman Vikas Swarup said Tuesday.

With this legislation being passed the effect on Indian IT stocks was immediate. "I have been contacted by numerous American workers at many companies who are now training their replacements".

"We continue to focus on localisation".

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