What H-1B Visa Changes Could Mean for Tech Startups

Changes to the H-1B visa program announced in October will make qualifying for the work visas much tougher and compel employers to pay foreign workers drastically higher wages. U.S. technology startup founders and investors say the limitations will hamstring their ability to recruit top-tier talent to grow their businesses.

1. The rules hit especially hard for tech startups.

Founders and rank-and-file workers at these companies are often immigrants. Nearly a third of all venture-backed startups are founded by immigrants, according to a 2016 report from the National Bureau of Economic Research. More than half of startups valued at $1 billion or more have at least one immigrant founder, according to a 2018 paper from the National Foundation for American Policy, a nonpartisan think tank.

2. Startups say the pay rules are unaffordable.

Tech startups usually pay employees a lower salary but compensate with stock options. The wages mandated under the new rule are significantly higher than current market wages, an analysis from the National Foundation for American Policy found. For more than 18,000 jobs, including a number of common tech jobs such as a San Francisco-based software developer, the Labor Department has determined a salary floor of $208,000 annually, regardless of skill. Equity, bonuses and other types of compensation don’t count toward the salary requirements, according to government rules. Many startups aren’t able to bear the increased costs. Under the changes, an entry-level computer programmer in San Francisco would be required to receive a salary of $111,946, compared with the previous wage requirement of $78,125, according to Labor Department data.

3. Some founders are shifting hiring plans away from the U.S.

The H-1B rules are the latest in a string of immigration restrictions dating back to the travel ban against citizens from predominantly Muslim countries that President Trump issued a week after his inauguration. The cumulative effect has left some tech startups weary of doing business here, founders say. Some founders say they are shifting hiring and growth plans away from the U.S., establishing engineering hubs in Eastern Europe and sending new recruits from American universities who would require a U.S. visa to work at satellite offices in Canada instead.

4. The Trump administration says the rules are designed to ensure U.S. workers get priority for jobs.

“For too long, foreign worker programs have been abused at the expense of American workers,” a spokesperson for the Labor Department said. The new rules “will help put an end to these harms.”

5. Some institutions are pushing back.

Tech companies, trade groups, universities and health-care organizations have filed lawsuits against the new rules, arguing, among other things, that the administration circumvented the established rule-making process and didn’t adequately weigh the effect of the changes on employers and existing visa holders. A preliminary ruling on at least one of the lawsuits could come as soon as mid-November. The future of the H-1B visa program also will be shaped by the outcome of presidential election.

Read the original article by Heather Somerville and Michelle Hackman here.

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