H-1B visa obstacle won't be a headache

The 'levelling' fee for H-1B visas is designed to raise the cost of hiring an entry-level immigrant worker in the US to roughly the median income for technology workers in the country. The one-time $100,000 fee, spread over a three- year visa tenure, would make hiring an immigrant 33% costlier for US technology companies. The equalisation levy will have an even lower marginal impact if it is not reimposed on extensions, which typically add another three years. The median labour costs of companies in the S&P 500 - which include large tech firms that primarily utilise the H-1B programme - are around 14% of revenue. This covers the 4 mn technology workers in the US, who should not be affected by the new fee. The additional costs on the annual H-1B quota of 65,000 can be absorbed by the US technology industry.

Moving from deterrence to unintended consequences, technology jobs above the median income level are unlikely to discriminate in favour of US-born workers the further they rise above the threshold. Jobs paying less than the median salary - the target of the fee - will favour Americans only if these jobs remain in the US. Without a complementary levy on outsourcing, such positions can be exported. Since Indians hold over 70% of H-1B visas, low-skill technology jobs in the US could increasingly be performed in India.

The existence of the H-1B programme reflects a recognised labour shortage in the US technology sector. A quarter of US tech jobs are held by immigrants, who rapidly reach pay parity with the domestic workforce. Critically, foreign-born workers contribute a disproportionately high share to the economic value of US patents, making the H-1B visa a 'holy cow' for Silicon Valley, which supported Donald Trump's re-election. Pushback against the fee can be expected, alongside possible legal challenges to the US administration charging such an extraordinary amount to recover the cost of processing applications.