New measures were introduced by the Trump administration this month to “further deter and detect H1B visa fraud and abuse”, causing a stir among large Indian IT services firms just days before the application lottery was due to begin.

The new policy, issued by the department of U.S. Citizenship and Immigration Services (USCIS) and effective immediately, requires companies to prove that software development roles require enough advanced knowledge and experience to justify an H1B application.

“I don’t think they’ve thought it out,” said Vikek Wadhwa, Carnegie Mellon Silicon Valley Distinguished Fellow, during an interview with Bloomberg Technology. “The U.S. Government is doing the same stupid thing as they did with the Muslim ban, and now they’re haphazardly, last-second applying it to the H1B visa.”

Wadhwa, who has also appeared as a speaker at our annual Nexus event a few years ago, continued by explaining that if the government is locking out computer programmers, then students at Carnegie Mellon University and Stanford can no longer get jobs in the U.S. “Why do we want to lose these brilliant kids?” he said. “They’re going to go back to their home countries and it’s going to hurt us while benefiting the rest of the world.”

Correctly Crunching the Numbers

In 2016, there were more than 13,000 visa requests for jobs that pay an average salary of $72,000. The tech industry made up 13% of applicants, 41% of which were in line for the lowest wage level positions.

Even so, Mohandas Pai, Chairman of Manipal Global Education Services and Aarin Capital, and previous Head of Infrastructure at Infosys noted that the amount of software-focused H1B applicants in the last two years actually dropped and that people are still referring to 2014 data, which is misleading everyone.

“It’s a self-defeating policy that the Trump administration has enacted, and things have changed in the last three years,” said Pai. “Around 85% of engineers go for single projects that last 15-18 months; very few of them stay for 3 years continuously. Around 25% go back within 6 months, 10% within a month, and 50% within 18 months. This is all based on the latest data, which is not being placed in front of the U.S. authorities. Instead, this whole scenario is being based on flawed perception, anecdotal evidence, and old data.”

Wadwha is also seeing big-picture deficits in the country’s global positioning for innovation and IT. “Fifteen to twenty years ago, all the unicorn tech companies were in the U.S., whereas today you have around one hundred in India and China, but eighty of ninety in the U.S., so the country is losing its advantage,” he said. “This [new policy] is a lose-lose; it’s a brain-dead strategy, frankly.”

Huge Talent Deficit

Everyone we interviewed agrees that the reality of the situation in the US is that the country is not producing talent.

Anna Frazzetto, Global IT Solutions & Outsourcing Strategist for Harvey Nash feels that this lack of talent is going to push more outsourcing and offshoring initiatives. “There is, in fact, a rise in interest in outsourcing because companies are already predicting this,” she said.

Pai is of the same opinion: “What will happen next is that more work will flow offshore, there will be more automation, and the number of people in the U.S. will come down. The jobs aren’t going to come back to the US because there are no people to take the jobs. There are around 600,000 vacancies in IT that aren’t being filled. Costs will shoot up, because the $125-$150k jobs will go to “Main Street” America, not Silicon Valley. This will happen in the next year or two.”

Applying Actionable Fixes

The problem with the current H1B visa, according to Wadhwa, is not the influx of applicants that apply for it, but the fact that it is tethered to the hiring company. Instead of adding more restrictions to the visa, he suggests allowing H1B visa holders to accept higher-paid jobs in other companies, reducing the amount of cheap labor.

Pai also sees a mixed future now that the policy has changed: “When the dust settles in a few months, the amount of people using the H1B visa will come down, there won’t be more jobs created in the United States because of the lack of American talent, costs will shoot up, and when more processes become automated, the jobs will cease to exist.”

Despite the potential to cause major shake-ups for business, Indian IT services companies are running scared. Nearshore Americas reached out to Infosys in India, but the company refused to answer our questions because it “would not benefit business”, even requesting that we don’t even mention their name in any coverage.

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Furthermore, neither Tata Consultancy Services (TCS) nor Wipro have responded to our request for comments.

Lottery Results

The lottery for H1B visas took place last week, opening on Monday and maxing out by Friday–the limit of 65,000 applicants, plus the additional 20,000 visas reserved for those with master’s degrees, was reached in just five days.

All that stands in between these applicants and their new jobs now are the “targeted site visits to employers” that the USCIS will conduct and the new tests designed to prove the skills of engineers, something which Pai is not concerned about.

“Indian engineers who go to the U.S. are more skilled than software programmers; they are of the caliber of senior analysts who have worked on projects for three to five years,” he said. “They are highly-skilled, have been extremely well-trained, and are on par with the rest of the world. Yes, sometimes the English communications can be poor compared to native speakers, but that shouldn’t detract from their immense skill. India graduates 1 million engineers a year, and these people come from the top 10-15%. They are very smart people and they will all pass any tests thrown at them.”