H1B: Revisiting labour arbitrage

Amidst a simmering immigration debate, there has been a significant drop in H1B visa registrations for the fiscal 2026 – a 26.9 per cent decline to 3.44 lakhs. Contrary to the expectations of a dominant section of Trump voters, particularly those belonging to the Make America Great Again or MAGA group, the Trump administration has granted a 1.20 lakh H1B visas, lower than the past two years at 1.35 lakhs and 1.88 lakhs in financial years 2025 and 2024 respectively. The administration’s new immigration thinking is having its impact as is evident in the declining number of visa registrations, but the reality is the US needs a talent pipeline that taps into the global pool and therefore immigrant visas could not be wished away. At least, not anytime soon, much to the chagrin of Trump supporters who are unable to come to terms with reality. The MAGA group is dead against foreign employees who they claim deprive Americans of jobs. The technocrat coterie advocates for a more liberal visa regime to meet the industry’s talent needs. The Trump administration, with ambivalence as its second nature, thrives in situations riven by internal and external contradictions.

As a nation of immigrants and proud of its melting pot culture, America has had its share of dilemmas in letting people immigrate to it. Its “own” human resources talent pool could not keep up with the pace of economic development or R&D in science and technology. With the advent of internet and the subsequent information technology boom, the Silicon Valley’s voracious appetite for tech talent too could not be locally met. Now the country needs foreign talent in the fields of AI,cloud computing and green technologies. Though there are many reasons for this, the most important one is labour arbitrage – foreign labour initially comes cheap and that’s music to the ears of corporates. The reason why US companies shifted manufacturing to China is the same reason why they outsourced jobs to Asia or want H1B visas for staffing their US offices.

Indian tech giants such as Infosys, TCS and HCL, which were and continue to be the biggest beneficiaries of H1B visas, have realised the limitations of such a strategy and began to reduce their dependence on it, especially as the issue was getting embroiled in political controversies. Indian IT companies have two options. One, recruit more locals, which they have begun to do. Two, leverage virtual technologies to get more work done without having to move a large number of Indian professionals to the US. At least that’s what the top executives are saying. They could be more worried about the potential disruption by Artificial Intelligence than by H1B visa policies.

Interestingly, it is the big tech US companies such as Amazon, Google, Meta, Apple and Tesla that need H1B visas and are queuing up for them. Either way the US would continue to need foreign talent to stay globally competitive and be ahead of the innovation curve. Given its mortal fear of losing the race to China, it will be business as usual. At best, loopholes will be plugged and processes streamlined which should be welcomed. But doing away with the H1B visa system will be a day dream if macro systemic issues in the realm of STEM education and the entrepreneurial and managerial ecosystem are not addressed in the long run.