H-1B Visa Denial and Hiring Overseas

Erez Greenberg October 24, 2019

Immigration restrictions are changing the hiring landscape in the United States and the way companies are responding is by moving jobs abroad. This is an unintended consequence of Trumps policy to limit the number of H-1B visas that are approved in order to keep as many jobs in the United States for its citizens.

H-1B visas are how high-skilled foreign nationals and recent international students are able to work long-term in the United States, but over the past few years government immigration policy has led to cracking down on the number of these visas approved. A recent study by the National Foundation for American Policy (NFAP) found the decline rate for H-1B visas has been drastic. In 2019 the decline rate set a record at 32%, in comparison, the years before the Trump administration, the decline rate was 5-10%. The decline rate for H-1B visa extension also increased, from about 3-4% to 14%.

The policy for limiting H-1b Visas is based on the notion that a fixed number of jobs exist, and foreign workers into the US labor force will steal jobs intended for the county’s citizens. However, many believe that this policy will stifle competitiveness and innovation within the US due to it being reliant on high-skilled immigration. Either way, the current administration doesn’t seem to be considering retracting their stance; they have recently announced that it does not intend to change current policy in order to avoid displacing or replacing American workers. However, Senate bill 386 also known as the Fairness for High-Skilled Immigrants Act of 2019, is intended to eliminate per-country caps on immigrants, which might increase the number of H-1B visas issued, but this is just speculation.

And the uncertainty is causing companies to rethink how and where they will employ.

The companies that have been hit the hardest from H-1B rejections have been big data technological firms and especially those with large R&D departments. Without the necessary high-skilled workers being permitted to enter the US labor force, these companies are abandoning the path of acquiring an H-1B and are instead hiring overseas or creating local entities abroad. In fact, for every three visa applications that were rejected, one job was moved overseas, with a large portion of those jobs shifting to China, India and Canada. China and India are both attractive countries due to their large highly skilled workforce (also where most H-1B applicants are from), whereas Canada’s proximity to the United states allows for benefits related to cost and time.

Apart from foreign workers, international students are also realising that work opportunities are becoming limited in the United States, and a better long-term strategy is studying in a country that has more prospects following graduation. This means that countries with more lenient foreign worker visas will become more popular destinations, such as Spain and other European countries. The shift of students away from US universities means the next generation of high-skilled workers will be abroad, and very likely staying there. For US companies looking to obtain and retain top talent will now require a local entity or an EoR abroad.

The new challenge presenting itself to companies who typically acquire workers locally through H-1Bs, is how to properly hire and manage a highly skilled workforce abroad. Papaya’s knowledge in global employer of record or local entity in over 100 countries helps guide and navigate companies through the challenges of global expansion, from payroll to payments.