With the implementation of a $100,000 annual fee for H-1B visas, the president is once again showing that he is not afraid to shake things up when it comes to protecting domestic workers. But if we look beyond the surface-level details, we can plainly see that this is a policy that will alarm anyone who believes in free markets and fair competition. Rather than promote domestic employment, this new fee will only do more of the same: protect large, established, and politically connected firms at the expense of smaller, newer, and less-connected firms and increase the cost of presently done with H-1B visas. What’s more, with the recent developments exempting current holders from the annual fee, the whipsaw-like implementation followed by immediate revision surrounding this policy creates but more chaos and confusion in markets.
The H-1 visas were created in 1952 under section 101(15)(H)(1) of the Immigration and Nationality Act (which itself had been vetoed by President Truman but was overridden by Congress) and the Immigration Act of 1990, which split the H-1 designation into its constituent parts (A for nurses and B for workers in specialty occupations). These visas were created for “an alien having a residence in a foreign country which he has no intention of abandoning who is of distinguished merit and ability and who is coming temporarily to the United States to perform temporary services of an exceptional nature requiring such merit and ability.” In simpler terms, the H-1 visa was created to allow high-skilled workers from other countries to come here on a temporary basis and use their high skills in a professional setting.
To be clear, there have always been restrictions and requirements for those seeking an H-1B visa and for those seeking to hire people on an H-1B visa. In 1998, the U.S. began requiring a $500 payment to be used to retrain American workers and reduce the need for H-1B visas in the future. In 2000, this was increased to $1,000, and in 2004, to $1,500. This is also not the first time that President Trump has taken action on the H-1B visas. In April of 2017, President Trump signed the Buy American and Hire American Executive Order. And in 2020, he temporarily suspended the entry of people with non-immigrant visas, which included H-1B visas, because they posed “a risk of displacing and disadvantaging United States workers during the economic recovery following the COVID-19 outbreak.” (RELATED: Tech Companies Are Laying Off Americans to Replace Them With H-1B Workers, Vance Warns)
But in practice, this type of discretion invites lobbying efforts in a bid to secure crony capitalist benefits.
For tech giants like Amazon, Google, and Microsoft, who collectively employ thousands of workers on H-1B status, an additional $100,000 per worker is annoying but not devastating. With their quarterly profits in the hundreds of billions of dollars, a six-figure check to the government is like you and me buying a cup of coffee.
But what about a small tech startup in, say, Austin, trying to hire a new programmer from India to help them get off the ground, or a family-owned engineering company in Ohio that found a perfect candidate from Germany? For these smaller operations, which are the backbone of America’s workforce and the creators of our world-leading dynamism, an extra $100,000 annual fee is a crushing barrier that effectively prices them out of the global talent market. (RELATED: Elon Musk v. MAGA: H-1B Visas, Foreign Workers, Big Tech, and America First)
What is different about this one, though, is found in Section 1 (c), which states:
The restriction imposed pursuant to subsections (a) and (b) of this section shall not apply to any individual alien, all aliens working for a company, or all aliens working in an industry, if the Secretary of Homeland Security determines, in the Secretary’s discretion, that the hiring of such aliens to be employed as H-1B specialty occupation workers is in the national interest and does not pose a threat to the security or welfare of the United States.
In other words, if the Secretary of Homeland Security determines that an exemption to the $100,000 fee is warranted, then an exception is granted. In principle, anyone can apply and be approved for these exemptions. But in practice, this type of discretion invites lobbying efforts in a bid to secure crony capitalist benefits. When Amazon, Google, and Microsoft want an exemption, they send teams of lawyers and lobbyists to Washington, D.C., who use their contact list to secure meetings with top administration officials. They commission studies by prominent groups (typically staffed by former White House officials) showing how their specific hires will boost American innovation without impinging on national security.
But when a small manufacturer in Michigan or a biotech startup in North Carolina feels they warrant an exemption, what do they do? They fill out forms online that get sent to a veritable black hole or send physical paperwork in, in the hopes that a junior staffer happens to read it and pass it up the chain of command. With nothing but a hope and a prayer, no political clout, and no army of advocates working on their behalf in the halls of power, the likelihood of their exemption being approved is slim to none.
This is crony capitalism at its finest. First, create a high barrier and then give government officials discretionary power to lower it for the “right” people. It is exactly the same playbook we’ve seen time and again, from bank bailouts and green energy subsidies to defense contracts and healthcare carveouts. And it is exactly the same playbook that has led young people to believe (rightly) that “it’s not what you know, but who you know,” that the current economic system is rigged against them, and has caused them to turn away from capitalism and toward socialism at an alarming rate.
Let’s be real about who benefits from this policy. It’s not the American workers. If that were the goal, we’d be cutting regulations that make it harder for businesses to expand and hire domestically. It’s certainly not small businesses that will find themselves priced out of the international labor market. And it’s not innovation, which thrives on competition and diverse perspectives.
The real winners of this are the same ones who always win when the government picks winners and losers: large, established companies with deep pockets and political connections. In a truly free market, the size of your company should not determine your access to talent. But in the crony capitalist system that both parties seem determined to foster, it increasingly does.
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