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H-1B Visa Reform Bill: Tech Stocks Plunge as Trump Crackdown Begins

Indian tech stocks tanked on news of a new US legislation that seeks to double the minimum salary of H-1B visa holders, making it difficult for firms to replace American employees with Indian software professionals.

News18.com

Updated:January 31, 2017, 2:06 PM IST
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H-1B Visa Reform Bill: Tech Stocks Plunge as Trump Crackdown Begins
Infosys, TCS, Wipro and Tech Mahindra, the big four Indian IT firms, each lost between 3%-6% on the Bombay Stock Exchange.
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New Delhi: Indian tech stocks tanked on news of a new US legislation that seeks to double the minimum salary of H-1B visa holders, making it difficult for firms to replace American employees with Indian software professionals.

Infosys, TCS, Wipro and Tech Mahindra, the big four Indian IT firms, each lost between 3%-6% on the Bombay Stock Exchange on fears that their competitiveness vis-à-vis global competitors will now be eroded as they will be forced to hire expensive American labour.

The High-Skilled Integrity and Fairness Act of 2017 introduced by California Congressman Zoe raises the salary level at which H-1B dependent employer are exempt from non-displacement and recruitment attestation requirements to greater than $130,000. This is more than double of the current H-1B minimum wage of USD 60,000 which was established in 1989 and since then has remained unchanged.

Ball-park estimates show the average salary of a H1B visa-enabled Indian technology professional employed in the US is in the range of $80,000-110,000.

Indian IT firms’ business model relies heavily on price arbitrage, where the same work which can be done by American workers is done by Indian workers at a third or a fourth of the price. This runs counter to President Donald Trump’s campaign promise to protect American workers from foreign competition.

According to Bank of America Merrill Lynch, every 10 percent hike in H-1B wages can hurt earnings by 12 percent of Tech Mahindra. The brokerage firm has cut FY17 earnings per share estimates to Rs 35.12 from Rs 35.77.

Reacting to the report, Nasscom chief R Chandrashekhar said: “The fact is that skills required in this industry are simply not available in the US. That is well documented even by the US Home Department stats and Labour department.”

“Even college enrolment is 50 percent foreigners. There are more than 2 million unfilled jobs in the US on account of these issues. So if inspite of all this data, if for emotive or political reasons, some decisions are taken to restrict or constrict the movement of those skills, either jobs will be unfilled or jobs will move out of the US. Both of these are not good as far as the US economy is considered.”

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