The Employers’ Guide To The H-1B Visa Debate

‍Key Takeaways

• The H-1B visa lottery program each year allows US employers to bring in a total of 85 thousand foreign workers with specialized skill sets to work in the US for a period of 3 years, with the possibility of an extension.

• There are currently about 600 to 700 thousand foreign workers operating in the US under an H-1B visa.

• The vast majority of H-1B visa holders work in tech within the accounting/auditing, investment banking, and consulting industries, with between 8 and 9 out of 10 H-1B workers originating in India and to a lesser degree China.

The Employers’ Guide To The H-1B Visa Debate

Despite having Republican’s sweep the November elections and win control of not only the White House, but also both chambers of Congress in Washington DC, a stark divide within the party emerged on the issue of H-1B Visas prior to taking formal control of the federal government.

On one side of the debate, head of the Department of Government Efficiency and advisor to the incoming president Elon Musk has taken a strong stance in favor of the H-1B visa program, which has resulted in considerable pushback from a significant portion of President Trump’s MAGA voter base.

In response to the growing debate, President Trump sided with Musk in support of H-1B visas, which seemed effective at preventing the dispute from escalating further, but it remains to be seen if/how that ideological division between MAGA leadership and the MAGA movement will impact H-1B policy going forward as actual legislation and regulation are put on the table in the coming months.

In light of the uncertainty about the fate of the program in the future, we thought it would be worth taking a look at H-1B visas to get a better understanding of the size of the program, the scope of impact that potential that could result from any proposed changes, and what industries and organizations are likely to bear the brunt of the potential impacts.

H-1B Visa Program Background

The H-1B visa program launched in 1990 as a means for employers to obtain temporary work visas for highly skilled foreign professionals who work in ‘specialty occupations’ - often requiring a college degree or higher and specialized, relevant skills - or as fashion models of distinguished skill.  

While the program has evolved some over the years, for the last 2 decades the number of H-1B visas issued each year has been statutorily capped at 65,000 for standard H-1B visas plus an additional 20,000 for applicants with a master's degree or higher obtained from a US college or university.

H-1B visas are distributed via a lottery system and last for a duration of 3 years, although applicants frequently seek and are granted extensions beyond their initial term for a maximum of 6 years, after which time the applicant will need to reapply and obtain a new H-1B visa or the visa-holder must leave the country.

The H-1B Debate

The central question in the debate over H-1B visas is whether or not the H-1B program provides US companies with the talent necessary to keep ahead of and/or keep up with global competitors, or whether the H-1B visa program effectively suppresses wages for US workers by enabling US companies to access specialized labor at a discounted price.

In defense of the H-1B visa, Musk credited the H-1B program as the reason he’s in America, and he said it is responsible for bringing in so many critical people who helped build companies that made America strong.

Opponents of the H-1B visa program often concede that the program can serve a valid purpose in a relatively small portion of cases where a person with unique or rare skills, abilities, and experience must be recruited from outside the US.

In practice, however, opponents argue that the program is primarily used to recruit foreign workers with qualifications that are readily available among the US workforce but who are willing to accept lower wages in order to obtain a US visa, which works against the interests of similarly skilled US workers.

H-1B Visas By The Numbers

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There are approximately 600 to 700 thousand foreign workers operating in the US under H-1B visas, but the H-1B visa-holding population tends to fluctuate cyclically.

The low point for the H-1B holders population comes at the end of each fiscal year when some foreign workers begin leaving the country to pursue new opportunities outside of the US before their visas expire, meanwhile, the annual H-1B cap has already been hit so no new foreign workers can replace them until the beginning of the next fiscal year, as depicted in the chart below.

Last year, employers submitted more than 850 thousand applications for H-1B visas, which is more than 10 times the 85,000 annual cap for new H-1B visas, so the demand for these specialized foreign workers among US companies significantly outpaces the available supply.

Demand for these visas among foreign workers is strong , with workers from India and to a lesser degree China accounting for the vast majority of H-1B visa-holders. For example, in 2023, 76% of H-1B visas were issued to workers from India, with the next largest proportion going to Chinese applicants (12%). Men also tend to be disproportionately represented, accounting for 71% of successful H-1B applicants in that same dataset.

The average salary for H-1B visa holders is just under $120,000 per year as of 2024, which is up slightly from about $115,000per year in 2023. As of the most recent data available, about 75% or 3 out of 4 jobs filled by H-1B visa-holders last year paid $150,000or less.

H-1B applications tend to be concentrated in computer science, IT, and/or finance-related work across a relatively limited range of industries, with a handful of tech companies dominating the H-1B lottery, followed by accounting/auditing firms, universities, investment banks, and consultancies.

Mployer’s Take

In the recent H-1B debate, both sides are right in a sense.

The H-1B program has been bringing top (largely tech) talent to the US since the days when the internet was coming through the phone lines, and that talent certainly contributed to building the global digital infrastructure that we’ve come to know today.

It’s also clear that the size of the tech industry where H-1B holders have largely landed and the demand for tech talent in general has grown much faster over the years than the number of H-1B visa holders available to fill that growing demand, so the impact of H-1B visas on the US tech labor force has actually shrunk over most of the last 35 years.

On the other hand, with potentially fewer than 6 million tech workers currently employed in the US, if 75% of H-1B visa-holders are doing or supporting tech work, that could account for almost 10% of jobs in the space and would drive down wages for US tech workers enough to validate their opposition to the program.

Given both Musk and Trump’s stated support, along with significant bipartisan endorsement, the H-1B program does not appear to be going anywhere anytime soon., Even if the program were significantly pared down, the resulting impact on wages would be negligible everywhere outside the tech industry.

That said, the impact of significantly reducing the H-1B program on US tech worker wages could be meaningful, and that is especially true when the tech industry is in a state of contraction itself.

Still, expansion of the H-1B program seems more likely than reduction, but in light of the pushback against H-1Bs we’ve seen from the Republican voter bloc over the last couple of months, any expansion that may be trial-ballooned is unlikely to bring the program back to anywhere near the level of influence it had on the tech industry in eras past.

Under business-as-usual circumstances, the H-1B program would carry on operating undisturbed just as it has for most of the past 20 years and the recent debate would be replaced by another that is just as soon forgotten, but with would-be agents of change like Musk bringing the issue to the spotlight, it is impossible to count out the possibility that the H-1B program could see a massive overhaul of one sort or another in the near future.

If expansion of the H-1B program is proposed in the next few years, it seems a strong possibility that it would be coupled with some kind of accompanying US technical skill training program to help offset any blowback from the base.

Regardless of how the H-1B program is managed over the next 4 years, however, the only real certainty is that the demand for these types of visas will remain strong among employers for as long as they are available, and that demand will likely continue to outpace the supply.