As the world’s richest man Elon Musk likes to point out, he is a former holder of an H-1B skilled foreign worker visa for the US. So are Microsoft CEO Satya Nadella and Sundar Pichai, the Alphabet chief executive. Together these individuals run or have founded trillion-dollar businesses that have made a major contribution to US jobs and prosperity; a great American strength has long been its openness to foreign-born talent. All of which makes the Trump administration’s plan to impose a $100,000 fee for such a visa especially ill-conceived.
The move has exposed anew the divide between the techno-libertarians who helped finance Trump’s return to power and his Maga base. Curbing not just undocumented migrants but skilled worker visas is popular among his grassroots supporters, who see H-1Bs as favouring foreign workers and depressing US wages in key sectors. But many tech executives would like the H-1B system — currently capped at 85,000 a year for businesses, awarded via lottery — to be expanded. That the president has sided with his base shows the limits to his partnership with US billionaires — and that his populist instinct for splashy gestures, whatever the cost, can win out.
Silicon Valley uses H-1B visas heavily to hire foreign scientists, engineers and coders to make up for US skills shortages. Accountancy, finance and healthcare are also big users. Critics say hiring foreign workers more cheaply helps big business to keep costs down. But research has found that from 1990 to 2010, rising numbers of H-1B holders accounted for 30-50 per cent of all US productivity growth.
The White House says the fee increase will ensure companies only hire the highest-skilled workers, who cannot be replaced by US counterparts. But US companies will not be able to do without skilled foreigners entirely, so will face significantly higher outlays than the few thousand dollars that H-1Bs typically cost today. Big tech companies might absorb these, but they could be prohibitive for start-ups.
The result is likely to be reduced foreign hiring which could, for a time, exacerbate US talent shortages. It could also lead to more offshoring of specialist work to India or Canada. Along with Trump’s assault on higher education, making it harder to move from a US degree to a work visa could be another deterrent to future Musks and Pichais.
The US clearly needs to train more people with the right skills; US business should play its part by partnering with schools and colleges to sponsor the necessary programmes. Such efforts sometimes need a political nudge. But heavy-handed initiatives such as this threaten to be counter-productive.
The move also looks like another baffling swipe at India, still reeling from punitive US tariffs and whose nationals hold more than 70 per cent of H-1B visas. Investors are fretting about the impact on IT services groups such as Tata Consultancy Services and Infosys. Over time, however, higher costs for their US units could be offset by increased outsourcing to their India-based businesses. Some Indians have also suggested Trump’s move could help the country retain more of its homegrown talent and boost innovation.
There are opportunities here for other countries, too: Britain’s Labour government is exploring abolishing some visa fees for top global talent. That stands in stark contrast with Nigel Farage’s increasingly popular Reform UK party, which is proposing scrapping the main route for migrants to settle permanently in Britain. Yet such radical responses to the anti-migration backlash, which often fails to distinguish between the legal and illegal variety, risk harming growth — and exacerbating the squeeze on living standards and services that is a root cause of the discontent.