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Why the H-1B Visa Freeze Puts the Tech Sector in Jeopardy

H-1B visa freeze

On June 22, President Trump signed an executive order temporarily suspending visas like H-1Bs. The ban seeks to ensure that there are open positions for American workers, citing COVID-related job losses. Without H-1B visa holders, though, the U.S. tech industry could face some considerable new challenges.

An H-1B is a work visa for workers in specialty fields like IT, science, and medicine. As a non-immigrant visa, it goes to people who aren’t U.S. residents but want to stay in the country temporarily. Before the ban, the U.S. would give out a limited number of H-1Bs a year, but now, they won’t issue until 2021.

Supporters of the ban point towards the unemployment rate, which neared 15% in April. Supposedly, suspending work visas would help keep jobs open for Americans who lost their jobs. That’s a reasonable cause, but this visa freeze may do more harm than good for the tech industry.

America’s Tech Talent Deficit

The U.S. has dealt with a tech talent shortage long before the pandemic hit. In the past few years, the technology industry has boomed, but the number of qualified workers hasn’t kept up. There’s too much demand for American workers to fill all of the open tech positions.

Mehul Patel, CEO of tech recruiter Hired, explains how every company is a tech company in today’s world. Even if a business doesn’t design or build technology, it needs IT workers to function. Technology has become inseparable from all kinds of businesses, leading to a massive demand for tech workers.

As of late 2019, there were roughly 918,000 unfilled IT positions among American employers. Fewer than 70,000 people graduate with a computer science degree each year, leaving a considerable gap even if every graduate got an IT job. Even if workers took every available H-1B visa a year, it wouldn’t be enough to fill this skills gap.

Before the ban, the U.S. only issued 85,000 H-1Bs a year. This visa program helps tech companies account for the talent deficit, but not entirely. Even with the H-1B program in full force, there would still be tech jobs available for American workers.

The Tech Industry’s Reliance on H-1B Visa Holders

Given the skills gap, banning H-1Bs won’t impact on the number of available tech jobs much. Not only would it be ineffective in improving job availability, but it could go so far as to damage the industry. Since the tech sector has such a considerable talent shortage, it’s come to rely on the H-1B program.

More H-1B visas go to workers in the tech industry than any other sector. In 2017, Amazon alone hired 2,500 H-1B holders, and the other top H-1B hirers were all tech companies. Losing these workers means that the nation’s tech businesses would lose a substantial part of their workforce.

At current levels, the U.S. isn’t producing enough qualified tech workers to sustain the industry’s astronomical growth. Tech companies have embraced H-1B workers because it helps them make up for this gap. Since the pandemic has contributed even more to tech’s growth, businesses need these workers more than ever.

Losing a Competitive Edge

Filling the skills gap isn’t the only reason why tech has turned to the H-1B program. Being able to pool talent from other countries has enabled U.S. tech companies to acquire the business’s best minds. This visa program is a major reason why the U.S. has dominated the global tech market.

Hiring foreign workers helps U.S. companies get the best talent that the world has to offer. It also brings that talent away from other nations, further solidifying America’s competitive edge. Without these workers, the U.S. could lose its status as a world leader in technology.

The consumer tech sector accounts for almost 12% of the GDP, generating $2.3 trillion annually. If the industry loses one of its most profitable advantages, it could impact the U.S. economy as a whole. As the sector loses some of its best talent, it could become less profitable, contributing less to the economy.

If the U.S. loses its spot a the top tech nation, it could draw American employees out. Tech graduates could leave the country to work in other nations with a better technology market.

Nearshoring as a Response to the Ban

If tech companies can’t use H-1Bs, they may turn to other options that could hurt American jobs. One potentially lucrative option is nearshoring, which involves hiring staff in other counties in similar timezones. Nearshoring gives businesses the advantages of offshoring while being able to collaborate more easily.

Nearshoring would enable U.S. tech companies to retain international talent and keep their competitive edge. While it may sustain the tech industry, this movement could impact American jobs more than the H-1B program would. As more companies nearshore to make up for the H-1B freeze, they could prefer it over hiring locally.

There’s a limited number of available H-1Bs, but there’s no limit on how much nearshoring a company can do. The H-1B freeze could lead to a surge in nearshoring’s popularity, leading to fewer Americans’ available jobs. This strategy was always an option, but it may be a more enticing one without the H-1B program.

Opposition to the Visa Freeze

The tech sector is well aware of how the H-1B freeze could threaten it. In response, a group of tech giants filed an amicus brief against the ban in early August. The group, which includes companies like Amazon, Facebook, and Microsoft, argued that the ban would cause irreparable damage to the U.S. economy.

Technology companies aren’t the only organizations that announce opposition to the temporary ban either. In July, several business groups filed a lawsuit against Homeland Security and the State Department over the freeze. With plaintiffs like the Chamber of Commerce, this lawsuit has the potential to change something.

Google and Spotify also filed a request to support this lawsuit. The case goes beyond stating the ban’s potential economic impact, claiming that it exceeds the president’s authority. With all of this opposition, the H-1B freeze may not go into effect, but the lawsuit’s outcome remains uncertain.

What Will Happen to Tech When the Ban Lifts

If lawsuits don’t reverse it, the ban will last until the end of 2020, unless authorities think they need to extend it. Even if it does end in December, the tech industry may not revert to its previous state. Just a few months of restriction is enough to change an entire industry, especially one as fast-paced as technology.

The tech industry needs to move fast to meet ever-changing demands and to stay ahead of the competition. If the H-1B ban lasts long enough, tech companies will have to adjust, which could likely mean outsourcing or nearshoring. A few months of these practices could lead the industry as a whole to adopt them, too.

If tech businesses don’t resort to these strategies, the ban would still have lasting effects. A few months without access to the world’s top tech talent is more than enough for the industry to fall behind. By the time the ban lifts, potential H-1B applicants may want to stay in other countries with better tech industries.

As more tech talent emerges, the reinstated H-1B program could start to fuel the U.S. tech sector again. It would take a long time for it to get back to where it was before, though. The tech industry could reach its former glory again, but it won’t be immediate.

The Future of the U.S. Tech Industry Is Uncertain

At this point, all of these outcomes are just speculation. Whether or not the H-1B visa ban will last is up in the air, how U.S. tech companies will react. While none of these consequences are certain, most of them aren’t promising either.

The visa freeze has the potential to threaten the U.S. tech industry. The H-1B program is one of its greatest strengths, and without it, U.S. tech may not be able to keep its lead.

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Why Nearshoring is Vital to the U.S. Tech Sector Right Now


In June 2020, President Trump temporarily suspended work for H-1B visa holders in the United States. Demand for top-tier tech talent was already fierce in the U.S. before the decision. Still, the ban has placed significant additional pressure on companies that can no longer rely on sourcing international workers. Here is why nearshoring is vital to the U.S. tech sector right now.

The tech sector hires 85,000 foreign specialists every year and finds alternative ways such as nearshoring to sustain its workforce.

Before the Ban

An option prior to the ban, nearshoring, has been emerging as an attractive solution, particularly as remote work becomes even more commonplace in the tech sphere. Nearshoring is when companies hire teams overseas but in locations close by and share a time zone.

Not only is nearshoring ideal to harness foreign tech talent, but it can also save businesses up to 80 percent on costs. Considering many companies are struggling financially because of the COVID-19 pandemic, such savings are a much-needed lifeline.

Big data experts, programming consultants, and digital strategists from software engineers, the scope of potential nearshored roles, are vast. Here’s why nearshoring is vital to the U.S. tech sector right now:

The Value of Nearshoring

As many businesses have adjusted to remote practices due to the pandemic, most people are already familiar with operating effectively at a distance so that they can make a seamless switch to nearshoring.

Unlike offshoring, nearshoring focuses on locations within proximity to the U.S. As a result, there is greater time zone compatibility between businesses and nearshored workers, meaning teams can collaborate and communicate in real-time via video, in documents, or via digital channels.

Likewise, nearshore services allow for heightened business agility because companies can request specific deliverables that may not be possible through their in-house teams. Companies can, therefore, develop and test products and services at a faster pace and iterate accordingly.

These agile processes create greater flexibility among teams, as well as shape a ready-to-scale workforce. By accelerating the time to market and having an on-the-ground presence in international markets, nearshoring helps identify places to expand into and poises companies for quicker growth.

Diversity also comes into play with nearshoring. With studies showing that diversity influences stronger, more creative teams, companies that opt to work with people from different backgrounds can benefit from a new perspective on solving problems.

Considering that many businesses prioritize their diversity and inclusion efforts in the new normal, nearshoring is a powerful way to boost diversity without asking people to leave their homes, families, and cultures.

Another noticeable draw is that nearshoring reduces expenses for U.S. startups. For early-stage ventures in Silicon Valley or other tech hubs, nearshoring is far more cost-effective, as salaries and living costs are lower than in the U.S. Not to mention, companies don’t have to cover visa sponsorship or relocation packages associated with the H-1B visa.

Nearshoring Hotspots for the U.S.

Latin America is a clear choice for U.S.-based companies facing obstacles related to the H-1B visa suspension.

The region has a maximum time difference of a few hours, and travel between many Latin American cities and the U.S. requires only a short flight.

English-language skills are also impressive there – Peru, Chile, Mexico, Ecuador, and Brazil have all surpassed China in English proficiency.

Meanwhile, countries like Panama and Colombia have ongoing national plans to reach bilingualism.

The top five Latin American spots for nearshoring include Argentina, Belize, Nicaragua, Puerto Rico, and Colombia. Argentina has an impressive track record of high education rates, along with the best English proficiency in Latin America, and the promise of 5G capabilities coming soon.

Belize is home to a workforce with experience in the tourism industry, so it is accustomed to North American culture. Nicaragua is experiencing elevated investment from the U.S. and has committed to having more technology in education, meaning younger generations are tech-savvy and show an interest in the field.

Puerto Rico already has tech companies like Microsoft and GE on the island and has plans for a new artificial intelligence technology center. Meanwhile, Colombia has a ministry dedicated to furthering science, tech, and innovation in the country, and is home to the unicorn on-demand delivery company, Rappi.

Colombia boasts an impressive number of highly-skilled developers, too; between 2001 and 2013, the country’s pool of IT professionals hit 340,000.

How to Choose a Nearshoring Partner

As opposed to freelance developers and tech workers, nearshoring offers companies a strategic partnership to source teams. Nearshoring partners serve as mediators to help companies find and vet people for projects ranging from small technical fixes, product testing, or full product launch.

They also bring to the table their previous business experience and technical acumen, full remote operation capabilities, formal structure, high compliance levels, and support for the team to thrive and deliver.

When looking for nearshoring partners, companies should first identify what skills they need for the given projects. They should then approach nearshoring partners that have a deep understanding of these skills and target markets.

It’s also worthwhile if the partners have experience working with developers and engineers with complementary skill sets.

Additionally, it’s useful to see testimonials from companies in similar industries that have worked with the nearshoring partner and recommend their services. In short, look for experience and social proof.

At the same time, companies are responsible for doing their own homework and researching the locations they want to nearshore in. Being informed about the political situation, legislation for nearshoring, tech infrastructure, data capabilities, education, and quality of life in the desired areas, is useful when deciding where to invest in teams.

Opportunities and Challenges

International workers are the backbone of tech in the United States, and abruptly preventing them from accessing the country is not a sustainable option for companies. Amid the visa ban and pandemic, developers’ demand remains high – no doubt, due to companies moving online to stay afloat during quarantine measures.

While Trump’s order certainly blocks access to international talent in the U.S., it actually opens the door for foreign developers with niche skills that aren’t always available locally.

As companies realize the perks associated with nearshoring, it’s likely to become a long-term model for leveraging overseas workers and markets. Nonetheless, companies need to move quickly to secure their nearshoring partner of choice and maintain business continuity for clients and stakeholders.

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