Trump’s flip-flops on H-1B visas spook VCs about foreign tech workers

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As with virtually every policy, Donald Trump has been remarkably inconsistent. Despite his anti-illegals theme, believe it or not, critical elements of his platform on immigration have been no different. One of those blotches of flip-flopping was the dissemination of H-1B visas for professional workers, the same visa used in Silicon Valley.

“The influx of foreign workers holds down salaries, keeps unemployment high, and makes it difficult for poor and working class Americans — including immigrants themselves and their children — to earn a middle class wage,” read Trump’s thin policy prescription on his campaign website back in March (which has since been edited but retained by The Washington Post). “We need companies to hire from the domestic pool of unemployed. Petitions for workers should be mailed to the unemployment office not USCIS [U.S. Citizenship and Immigration Services].”

And yet, when directly challenged on the issue just over a year ago in one of the first Republican primary debates, he played coy.

“I’m in favor of people coming into this country legally. And you know what? They can have it any way you want. You can call it visas, you can call it work permits, you can call it anything you want.”

“As far as the visas are concerned, if we need people, it’s fine. They have to come into this country legally. We have a country of borders. We have a country of laws. We have to obey the laws. It’s fine if they come in, but they have to come in legally.”

He then flipped that stance again at another primary debate in March, saying he would absolutely end the program.

“I know the H-1B very well. And it’s something that I, frankly, use, and I shouldn’t be allowed to use it. We shouldn’t have it. Very, very bad for workers.”

“It’s very bad for business in terms of — and it’s very bad for our workers and it’s unfair for our workers. And we should end it.”

It is that Trump’s Uncertainty Principle that will likely drive further venture investor anxiety in the private markets, just as we have seen in a global selloff in the public markets.

Lou Kerner, an investor with The Social Internet Fund and The Israel Syndicate on AngelList and is also a registered Republican who spent the past year excoriating The Donald, thinks the major drawback for Silicon Valley will likely be foreign workers lack of interest to make the trip to a country that just elected a visceral anti-immigrant candidate.

He tells Geektime, “The disruption in the flow of foreign workers to the US will occur in two different ways. The first, and likely larger impact, will be felt immediately, as foreign workers will be reluctant to come to the U.S. to work in a country where the leader has vilified immigrants and where work permits are expected to be harder to get.”

Lou Kerner was Geektime's keynote speaker at Geektime's annual conference. Photo credit: Geektime / YouTube
Lou Kerner was Geektime’s keynote speaker at Geektime’s annual conference. Photo credit: Geektime / YouTube

He then notes, “The second is in the potential increased difficulty of foreign workers to get work permits or to have them shortened.”

That reflects trends in Europe, where a recently scrapped scheme to blacklist skilled visa holders rattled the UK, and Sweden where visa holders face more frequent renewal schedules. But that’s just the attitude says Kerner. Curbs on H1-B visas are a possibility from a policy standpoint.

Adam Fisher of Bessemer Venture Partners, however, does not agree.

“Will this disrupt trends to allow the free flow of foreign workers and ability of startups to scale? I don’t think so. Silicon Valley does not like Trump, but Trump didn’t run against Silicon Valley, but rather Washington,” Fisher argues, saying he doesn’t expect Trump’s anti-immigrant policies to hit skilled visa policy on tech startups.

“Silicon Valley doesn’t rely on foreign workers, but rather immigrants, many of whom are already US citizens or at least residents in the US,” he clarifies.

A centrist in wolf’s clothing?

Fisher expresses some cautious optimism though, saying, “Personality aside, he is likely to govern as a centrist as he learns how to speak to a broader audience and how that audience interprets him.”

That thought might be based on the indisputable fact that Donald Trump is a serial liar whose harsh policies might have been hyperbole to boost his poll numbers (not Fisher’s words, but my own analysis).

That wouldn’t dismiss fears about his competence though, and the perception among many that he was not studious enough to have deserved being nominated for president to begin with.

OurCrowd Founder and CEO Jonathan Medved downplays some of the concern, again saying it was too early to say for sure if Trump’s perceived lack of qualification is real enough to drastically impact the startup economy (or the economy in general), somewhat reflecting the words of billionaire Mark Cuban who asked people to give Trump a chance.

“I think it’s way, way premature. Give the guy a break. He’s going to be tasked with leading the world’s greatest power and economy,” Medved proclaims, appealing for calm in a storm of uncertainty. He says that when markets panic and move too soon, they lose money. That approach has never been helpful to investor confidence, and it won’t start to be now.

Jonathan "Jon" Medved, chief executive officer of OurCrowd Ltd., an Israel-based crowdfunding company, poses for a photograph following a Bloomberg Television interview in London, U.K., on Thursday, April 25, 2013. The shekel appreciated to the strongest level in more than two weeks on investor bets the government will implement reforms to boost economic growth. (Photographer: Simon Dawson/Bloomberg via Getty Images Israel
Jonathan “Jon” Medved, chief executive officer of OurCrowd Ltd., an Israel-based crowdfunding company, poses for a photograph following a Bloomberg Television interview in London, U.K., on Thursday, April 25, 2013. The shekel appreciated to the strongest level in more than two weeks on investor bets the government will implement reforms to boost economic growth. (Photographer: Simon Dawson/Bloomberg via Getty Images Israel

“This is not something where we can press rewind. As a VC and businessperson, you have to deal with reality,” he posits.

And what did we learn from all this?

So what should Silicon Valley learn from what just happened or do to prepare for the next four years? Fisher’s words aren’t exactly comforting.

“Only a reminder that good things always come to an end, and that startups must be agents of good, not just profit,” he believes.

Kerner thinks this will ultimately be a wake-up call for the new upper middle class and active components of Silicon Valley. The economic power of the region and growing influence of the sector haven’t yet translated into political influence. That will change.

He asserts that, “Silicon Valley will become more politicized, recognizing that they want their voice to have more of an impact than it did in this election.”

So is anyone in the venture world optimistic right now? Medved thinks in a world of extremely dejected venture capitalists and elites, at least someone is: “Peter Thiel is obviously very happy.””

4 COMMENTS

  1. The H-1B visa SHOULD bring in top talent to the US. Unfortunately, that’s not what it’s currently being used for. The GAO put out a report on the H-1B visa that discusses at some length the fact that the vast majority of H-1B workers are hired into entry-level positions. In fact, most are at “Level I”, which is officially defined by the Dept. of Labor as those who have a “basic understanding of duties and perform routine tasks requiring limited judgment”. Moreover, the GAO found that a mere 6% of H-1B workers are at “Level IV”, which is officially defined by the US Dept. of Labor as those who are “fully competent” (1). This belies the industry lobbyists’ claims that H-1B workers are hired because they are experts that can’t be found among the U.S. workforce.

    So this means one of two things: either companies are looking for entry-level workers (in which case, their rhetoric about needing PhDs and “the best and brightest” is meaningless), or they’re looking for more experienced workers but only paying them at the Level I, entry-level pay scale. In my opinion, companies are using the H-1B visa to engage in legalized age discrimination, as the vast majority of H-1B workers are under the age of 35 (2), especially those at the Level I and Level II categories.

    Any way you slice it, it amounts to H-1B visa abuse, all facilitated and with the blessings of the US government.

    The National Association of Colleges and Employers (NACE) has never shown a sharp upward trend of Computer Science graduate starting salaries, which would indicate a labor shortage (remember – the vast majority of H-1B visas are granted for computer-related positions). In fact, according to their current survey for Fall 2015, starting salaries for CS grads went down by 4% from the prior year. This is particularly interesting in that salaries overall rose 5.2% (3).

    References:

    (1) GAO-11-26: H-1B VISA PROGRAM – Reforms Are Needed to Minimize the Risks and Costs of Current Program

    (2) Characteristics of H-1B Specialty Occupation Workers Fiscal Year 2014 Annual Report to Congress October 1, 2013 – September 30, 2014

    (3) NACE Fall 2015 Salary Survey, NACE Salary Survey – September 2014 Executive Summary

  2. You know, if Offshore Outsourcing companies were barred from the H-1b U.S. Federal Government program, we would never have seen a year where ran out of H-1b visas.

    It is absolutely insane for the U.S. Federal Government to facilitate the business model of the Offshore Outsourcing companies.

    Silicon Valley CEOs do nothing but whine for an unlimited number of H-1b visas. But the truth is, U.S. Tech originating companies barely use 1/3 of the available H-1b visas. Most, more than half of the H-1b visas go to companies that do nothing but move jobs Offshore, after getting the displaced American to train their H-1b replacement.

    Silicon Valley leadership – Stop whining like a bunch of babies and start thinking about a sensible policy in regards to the H-1b visa.

  3. 2014 Census data provided more detail that there was NO U.S. shortage of STEM workers in US. Many people who graduate with STEM degrees don’t get jobs in the field as 74% of those who have a bachelor’s degree in science, technology, engineering and math are NOT employed in STEM occupations. An Economic Policy Institute study in 2014 found that the supply of STEM graduates exceeds by 2-to-1 the number of graduates who get hired! That means that even the current 65,000 a year number of H-1B visas is WAY TOO MANY, and it should be significantly reduced – not increased!

    According to U.S. Citizenship and Immigration Services, six out of the top 10 H-1B visa recipients in any given year are IT-focused companies headquartered in India that focus on selling contracts for temporary employment. Many of them specialize in outsourcing and several are based in India although many have offices in US as well (Cognizant, Tata, Infosys, Wipro, Accenture.) Cognizant is the worst having 12,883 visa renewals in 2014.

    H-1B program has been abused for many years to replace Americans with temporary workforce displacing good paying US jobs. There is no shortage of skilled IT workers in US, but there is a demand by greedy corporations for “cheap” skilled IT workers that do not need health benefits and 401K’s.

    H-1B visa program and others like L1 visa are sweat-shop type of operations that were products of dot-com boom that was followed by dot-com bust. These programs should be either eliminated completely or reworked from scratch to reflect current job market conditions!

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