The TLDR: The Trump administration rolled out stricter rules for work visas that will make it very difficult for foreign workers to get a job in the United States. But its previous big move—a temporary ban on H-1B visas announced in June—has now been blocked by the courts. This latest thunderbolt may fizzle out as well.

H-1Bs explained: This visa is issued to foreign citizens who have special skills required by a US company—which has to prove that it cannot hire an American for the same position. The application process has become increasingly difficult and expensive ($10,000). These can be transferred from one company to another if the person finds a new job. The United States grants 85,000 such visas—and 70% go to Indians who either have graduated from US colleges, or are brought into the country by US companies.

Ok, tell me about the new rules

This is an ‘interim final rule’—which is why it was implemented without warning. Typically, US agencies have to give a 60-day notice before they implement major new policies. This gives those affected time to raise objections. But an interim rule can be issued without notice in emergency situations. In this case, the Department of Homeland Security cited “the economic crisis caused by COVID-19.”

It puts in immediate effect (starting October 8) three big changes:

Definition of ‘specialty’: Right now, foreign workers with an undergraduate degree can get a work visa for ‘specialty’ jobs. For example, an electrical engineer can apply and be hired for a position as a software developer. But under the new rule, she will have to possess a degree or experience in the exact same field. The Wall Street Journal notes:

“That requirement could make it tough for technology companies to hire in emerging fields like artificial intelligence or bioinformatics, which combines biological data, computer science and mathematics. Experts in such fields may have studied other subjects, or degrees in some subjects may not have existed until recently.”

FYI: the only exception to this rule are fashion models like, say, Melania Trump—who entered the country on an H-1B. But as some point out, this rule would have disqualified Sundar Pichai because he doesn't have a computer science degree.

Higher wages: Since salaries vary widely for a given job, companies are required to pay foreign workers wages that fall into a certain range. Right now, the required range for entry workers is the bottom 17th percentile (i.e. 83% make more than that in the industry). But the new rule will hike that to 45th percentile. For high skilled positions, the salary range will jump from 67th to 95th percentile.

Right now, 60% of H-1B workers are being paid well below the median salary. And by making these hires more expensive, the government is pushing employers to hire Americans instead.

Short-term and limited: Many Information Technology companies in the US bring in foreign workers who they then outsource as IT staff for other companies. This kind of arrangement will become a lot harder under the new rules—and that’s bad news for Indian companies like Wipro and HCL for whom this is their main business. 

Just as bad: Work visas will now be issued for only one year at a time—instead of three. This will again raise the costs and hassle of hiring H-1B workers since the company will have to file a fresh visa application each time.

Will this have a big effect?

If it goes through, then yes. 

Jobs for foreign workers: It has already become very hard to get an H-1B visa. The percentage of applications rejected has increased from 6% in 2015 to 15.1%. Some industry experts put that number as high as 30%. But everyone agrees, the denial rate will certainly shoot up. That said, the new rule doesn’t affect the actual number of visas issued. As one analyst points out: “If you’re saying you’re doing this because lots of people are unemployed, I don’t see anything in here that says there will actually be fewer H-1B workers.” 

Point to note: As of April 1, US Immigration received about 250,000 H-1B work visa applications. Indians have applied for 184,000 (67%) of them. 

Jobs for US workers: Supporters of the program argue that clamping down on foreign workers also hurts economic prospects of Americans:

“Research has found that when a city gets more H-1B workers, employment growth for college-educated native-born workers in that city accelerates and wages rise. H-1B workers might compete with educated native-born workers within specific companies, but this effect is overwhelmed by the investment a pool of skilled foreign workers attracts. Effectively, by bringing skilled workers here, we prevent tech investment from going elsewhere.”

Translation: If you don’t allow tech companies to hire foreign workers in the US. They will just hire them in other parts of the world.

Costs: The new requirement will cost employers around $4.3 billion over a decade—and that doesn’t include money spent on higher wages.

So why do this? 

According to the administration officials, half-a-million H-1B workers have displaced their American peers—which has led to reduced wages in a number of industries and the stagnation of wages in others. U.S. workers are being ousted from good-paying, middle-class jobs and being replaced by foreigners. A Homeland Security official said: “Put simply, economic security is homeland security. In response, we must do everything we can within the bounds of the law to make sure the American worker is put first.”

OTOH: The Indian tech lobbyist NASSCOM points out that while the overall U.S. unemployment rate grew from 4.1% in January to 8.4% in August, unemployment rates in computer-related professions actually went down—from 3% to 2.5%—in the same period. In other words, there is zero evidence that H-1B tech workers are hurting job prospects of their American peers.

The bottomline: It’s the height of election season, and pushing through a crowd-pleasing nationalist policy is a signature Trump move. And it may not stand up in court since judges in the past have been tough on policies that skip past the required regulatory process. That said, Joe Biden has refused to comment on the new rule. And his platform supports requiring higher wages for foreign workers.

Reading list

Wall Street Journal has the best reporting but is behind a paywall. Quartz offers a good alternative. Economic Times has the extended reaction of Nasscom VP Shivendra Singh. Worth your time: Two Bloomberg News columnists debate whether H-1B jobs help or hurt Americans. Also read: our explainer on Trump’s H-1B visa ban.