Update 896 – Trump’s New H-1B Visa:
Whopping Cost for American Employers
On Friday, the President drastically raised the cost and requirements for high-skilled workers to be employed in the United States on an H-1B visa. His unilateral Executive Action leaves an uncertain future for American companies that depend on highly specialized foreign workers. While the previous H-1B visa program was not perfect, such extreme changes leave some of America’s largest and most innovative companies at a loss as to how to navigate the new system and maintain the quality of their workers and their productivity.
The President also introduced Gold and Platinum visas. For the price of $1-5 million, wealthy immigrants can simply purchase their way into the U.S. Without any investment guarantees, America’s immigration system is quickly transitioning to a “pay-to-play” system that favors the ultra-wealthy. We examine the new program and its economic implications below.
Best,
Dana
President Trump’s immigration announcements last week ushered in a brand new landscape for high-skilled immigration pathways. The new costs are essentially prohibitive for both foreign workers and U.S. employers to continue business as usual. Introducing a wealth-based entry system poses risks to the U.S. economy and will likely face legal challenges.
H-1B Visa
Last week, the President significantly increased the price for employers to hire foreign workers through the H-1B visa program. The Executive Action (EA) introduced a new fee for employers of $100,000, beginning September 21. Previously, the application fee was $215, along with thousands of dollars in legal and administrative fees.
The President specifically orders:
- a one-time $100,000 payment for any new H-1B visa petitions;
- a Department of Labor review and raises wage minimums for H-1B holders; and
- a Department of Homeland Security to prioritize high-skilled and paid applicants in the lottery system, which ultimately grants the visas to approved applicants.
Over the weekend, companies like Amazon, Microsoft, and Meta rushed to tell their employees with H-1B visas traveling abroad to return immediately because the language of the President’s directive was so vague. In response to confusion and fear amongst visa holders and companies, the White House issued language to make clear that renewal petitions are not subject to the higher fee, and that the EA should not hinder travel for current H-1B visa holders. Many aspects of the EA and the new process for applications remain to be detailed by the administration, such as whether universities and nonprofit research institutions will be exempt.
What is the H-1B Visa?
Established in the Immigration Act of 1990, the H-1B program allows employers to hire foreign workers in “specialty occupations” and is intended to address critical workforce needs. The Department of Labor defines a specialty occupation as one that “requires the application of a body of highly specialized knowledge and the attainment of at least a bachelor’s degree or its equivalent.” When employers struggle to fill positions from the U.S. workforce, the program allows temporary employment – typically three years with the possibility of an extension for up to six years – for those foreign workers who have the needed skills and abilities of the employer.
It is estimated that there are between 600,000 and 700,000 H-1B visa holders in the United States. Each fiscal year, there is a cap of 85,000 total visas granted, which is divided into 65,000 typical H-1B visas and 20,000 additional visas for professionals with a master’s degree or doctorate from a U.S. institution of higher learning. A random lottery system is used by the U.S. Citizenship and Immigration Service (USCIS) to allocate approved visas. During his first term, President Trump attempted to modify the lottery to a wage-weighted system but was blocked in a federal court. Institutions of higher education, nonprofit research organizations and government research organizations are exempt from the H-1B visa cap.
The rate for approvals for renewal applications has been on the rise, as seen in the graph below:
Source: Pew Research
By far, the most H-1B visas – three-fourths – are held by workers born in India. Chinese-born workers account for the second-highest share of H-1B visas at 12 percent. STEM (science, technology, engineering, and mathematics) sectors tend to employ the highest number of H-1B visa holders. Within these sectors, American firms such as Amazon, Cognizant Technology Solutions, Infosys Limited, and Tata Consultancy Services, Ltd. are among the employers with the highest number of approved H-1B applications.
The President has long been critical of the H-1B program. In his Presidential Proclamation on Friday, President Trump says the program “has been deliberately exploited to replace, rather than supplement, American workers with lower-paid, lower-skilled labor.” He points to employers that he alleges “artificially suppress wages” for American workers and cites the struggles of recent college graduates with computer science and computer engineering degrees to find jobs.
President Trump is not alone in critiquing the H-1B visa program. Bipartisan calls for reform of the system have persisted for years. For example, a bipartisan coalition of lawmakers came together in 2023 to offer legislation to reform the program that would require more wage and recruitment considerations to protect American workers. Americans are increasingly in support of high-skilled, legal immigration, according to a recent AP-NORC poll.
Economic and Political Implications
Some of the country’s highest-performing companies sponsor thousands of H-1B workers. With President Trump’s newest directives, companies that drive U.S. economic growth and opportunities will be hamstrung in their recruitment strategies.
Source: Fortune
Research over the past few decades suggests that specialized talent under the H-1B visa spurs growth in STEM sectors, which then have downstream effects on demand for construction, food services, and child care, according to the Peterson Institute. A study found that between 1990 and 2010, the rising number of H-1B visa holders accounted for 30-50 percent of productivity growth in the U.S. economy. Foreign workers are more likely to start their own businesses and contribute to lower costs and greater innovation in the United States.
The new $100,000 fee completely changes how some of America’s most profitable companies will structure their businesses and recruitment. It stands to reason that companies may simply hire fewer foreign-born employees and turn to offshoring some of their services. Regardless, if the underlying issue is that America needs more specialized workers, investments into critical vocational or educational programs are vital.
Start-ups and smaller companies simply cannot afford this price tag. The Action puts smaller firms at a clear disadvantage and ushers in a pay-to-play model that only benefits those companies with the cash to sponsor workers’ applications and directly pay the U.S. government.
President Trump’s new policy is likely to face legal challenges. The Constitution grants Congress the power to regulate immigration, and in this case, create new visa types. While the President amended an existing visa program, it may still face legal scrutiny given the scope and scale of the action. Legislation or a proper rulemaking process with months of notice and public comment is typically required. In Trump’s first term, he attempted to change the structure of the H-1B program and was struck down due to a lack of the necessary comment period and notice. The Chamber of Commerce, which won its case in 2020, released a statement immediately following the EA expressing its concern about harmful implications for employees, families, and employers.
Gold and Platinum Visas
The President also signed an Executive Order creating the Gold Card visa program on Friday. This program fast-tracks those applying for legal status if they make a significant contribution to the United States – $1 million individually or $2 million if paid by a corporation. The President identified such a contribution as “evidence of exceptional business ability” and requires Department of Homeland Security approval. The funds will be directed toward the U.S. Treasury.
Commerce Secretary Howard Lutnick claims the new visa program could raise an estimated $100 billion. In the Oval Office announcement of the Gold Card, Lutnick compared this program to the green card visa, which lets in 200,000 people per year, and who he claims only make an average of $66,000 per year. Lutnick is essentially making clear that this administration sees a hierarchy of who “deserves” access to live and work in the United States.
This enhanced visa will replace the EB-5 investor visa for those establishing job-creating ventures. Other countries, such as Portugal, Greece, Italy, and Spain, have variations of investor-based programs. Most other programs, however, require some proof of investment in a business or real estate and have long been critiqued for corruption. Now, no proof of investment is needed, just the one-time, non-refundable processing fee paid directly to the U.S. government. Legal challenges are likely to begin as some argue that the President does not have the authority to create new visa categories and such power lies within the Legislative Branch, although the President has shown time and time again that he is attempting to redefine and expand the role of the Executive.
For an even larger donation, $5 million, the President announced the Trump Platinum Card, which gives 270 days of residency in the U.S. with no tax on non-U.S. income. It is currently listed as “Coming Soon” on the trumpcard.gov website.
Without any requirements that prove intentions to invest or spur innovation within the U.S., these new visa designations are simply a way to buy one’s way into the United States. There are serious doubts about the impact on economic growth in the U.S.
Pay-to-Play as Order of the Day
The President put his signature touch on the country’s long-standing legal immigration pathway. Shifting them toward a “pay to play” and wealth-based system, America’s economic productivity is at risk, especially for small businesses and startups that cannot afford these exorbitant fees. These new directives will have negative downstream effects on numerous sectors of the economy.
The President is unilaterally transforming the immigration system into a revenue stream while sidelining innovation and equality. The previous H-1B and EB-1 visa categories were not perfect, but should be carefully reformed so as not to create unnecessary shocks to the American economy.