Trump’s Plan to Burst the H1-B Bubble: Which Tech Firms Will Feel It Most?

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By Kashif, Investment Analyst at PrivCo, a private company financial intelligence platform

President Trump’s controversial immigration reform plans include amending the H1-B visa program, which is widely used by tech companies to hire engineers from abroad that they claim they can’t find in the United States. While there is still is no official executive order or law passed by Congress as of yet, the general aim will be to prioritize hiring American workers by increasing the difficulty and expense of hiring internationally.

What do opponents of the current H1-B program think?

Opponents have criticized the H1-B program as a backdoor to import cheaper foreign labor for the benefit of companies who seek to cut compensation expenses and boost their bottom line at the expense of American jobs. Indeed, foreign tech workers come at a big discount to the cost of their American counterparts when it comes to salaries and benefits.

Why are tech companies the biggest advocates of the current H1-B program?

Tech industry leaders claim they can’t find the same quality talent in the United States due to a purported skilled worker shortage. Moreover, with almost 75% of the tech talent at Silicon Valley companies born abroad, opposing Trump’s H1-B reform is also a PR move to appease the same employees who keep America’s largest tech companies chugging along.

Regardless of which side is right, any H1-B reform will immediately result in two things:

  1. Tech labor will become more expensive, because Americans tend to be paid more and get better benefits; and
  2. Hiring tech workers will slow down in general, which may temper Silicon Valley’s astronomical growth expectations.

Which tech companies could take the biggest financial hit?

Not all companies will be affected equally if they are forced to hire more from the American tech talent pool, depending on their level of reliance on the H1-B program to fill their ranks. We looked through PrivCo’s private company database and employment figures to compare hiring trends with H1-B applications in order to determine who will be most and least impacted by the potential change. The results are reflected in the infographic in the title image above. Note that the certified H1-B applications we used in our calculations are not approvals, but a proxy for the amount of interest in and reliance on foreign workers of a given company.

Some companies, like IPO prospects/unicorns Slack and Airbnb, will hardly notice the change — the vast majority of their hiring is done right here.

Publicly-traded tech giants like Microsoft and Google are each notorious for making liberal use of H1-Bs to find engineers, with around 24% and 17% of 2016 hiring done through the program, respectively. Because they seek 3,000–5,000 certified tech-related H1-B applications each, being forced to hire Americans could make a significant dent on their bottom line.

Some tech companies will have to reconsider their hiring strategy entirely, especially if they are already pinching pennies. IPO prospects Uber and Dropbox, which are both scrambling to achieve profitability amid unrealistically high growth expectations due to massive valuations, each sought to fill 25% of their 2016 hires with foreign workers under the H1-B program. While they were only granted an undisclosed fraction of those workers, the potential effect of Trump’s reform is obvious: forcing these companies to hire domestically would drastically increase their labor costs and could push them to scale back on growth at a time when they must show high growth to potential public shareholders.

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Special to 24/7 Wall St. From PrivCo