COVID-19 and new immigration restrictions could spur an offshoring boom in tech

Like so many other international travelers, Mikko's plans to move to San Diego in March were derailed by the COVID-19 crisis. He was set to begin work as an engineer at an IT firm there, but as the pandemic spread, the U.S. shut down travel from most European countries, including Finland, where Mikko lives with his wife and two children. Mikko's employer agreed to let him push back his start date to August. By then, Mikko figured he and his family could at least fly to a country that wasn't banned, quarantine for two weeks, and continue on to the U.S. from there.

But in late June, President Donald Trump tossed another roadblock into Mikko's plans, signing an executive order with broad new restrictions on work visas. The order stated that foreign workers on certain types of visas who were outside the country and didn't already have a valid visa would not be allowed in until at least Dec. 31, at which point the ban could be extended. The same went for their family members.

Mikko, who asked that Protocol withhold his last name, already had a valid H-1B visa, the type reserved for highly skilled workers. And his wife and oldest daughter had also secured H-4 visas, which are designated for the family members of H-1B workers. But with consulates closed throughout the spring and early summer, their 6-month-old son was still waiting. Now, the ban might prevent Mikko's son from ever getting approved.

The Trump administration has argued this policy will help millions of out-of-work Americans land jobs that might have otherwise gone to foreign workers. But Mikko's story exposes a flaw in that logic that is being compounded by a new-found acceptance of remote working. Because when Mikko couldn't move to the U.S., his company didn't offer the job to someone else; they just moved the job to Finland.

"Now my salary [is coming] to Finland, and we, as a family, are not consuming it in the U.S.," Mikko told Protocol.

The pandemic necessitated a rushed and chaotic transition to remote work across corporate America. But months later, lots of companies, including Facebook and Twitter, have said they'll continue letting employees work-from-wherever well after it's safe to go back to the office. Now, immigration lawyers, academics and employers say that trend toward remote work, coupled with Trump's new restrictions on work visas, could lead to an offshoring spike, particularly for tech jobs that don't require people to be physically present.

"I don't think this accomplishes what the administration wants to accomplish, other than their goal of preventing immigration," Steven Brown, a Houston-based immigration attorney at the law firm Reddy & Neumann, said of the work visa restrictions. "If someone can do the job remotely, I think they're going to get the job done remotely, until they can get into the United States."

Asked for comment, USCIS directed Protocol to the State Department. The State Department directed Protocol to the White House. The White House didn't respond to Protocol's request.

In a working paper, Britta Glennon, assistant professor at The Wharton School of The University of Pennsylvania, studied how the inability to secure H-1B visas has affected hiring patterns at U.S. multinational firms. Analyzing data on foreign affiliate employment and H-1B visa applications, she found that when companies apply for H-1B visas and don't get them, they end up creating one job abroad for every three visas they miss out on. That figure, Glennon says, is likely on the low end for a number of reasons, including the fact that it doesn't include the number of international jobs created by foreign multinationals with U.S. offices. Meanwhile, U.S. hiring patterns at those same American firms remain flat.

Her research also found that when a new cap was placed on H-1B visas in 2004, overseas affiliates of multinationals that depend on H-1B visas grew by 3% to 8%. That, too, is likely an underestimate, according to Glennon.

Now that remote work is becoming more common and the Trump administration's restrictions on H-1B visas are even more extreme, Glennon says, "I think the trend is likely to accelerate."

A coalition of tech firms, including Twitter and Pinterest, echoed that prediction in a letter to President Trump last week, writing that the ban would "drive jobs out of the country as companies choose to shift operations to countries with better access to the labor force they desperately need."

Satish Sharma, director of corporate development for the Illinois-based IT firm Mygo Consulting, said it's been a "huge challenge" to find U.S. workers with sufficient experience and skills in SAP supply chain software, which his company specializes in. Right now, he has three people on H-1B visas who are out of the country and were set to begin work in October. Sharma says Mygo plans to let them work remotely in the fall and "see what happens if the ban gets lifted."

Of course, not every job translates easily overseas, particularly in the world of manufacturing. Sharma said another one of Mygo's employees is currently facing issues with his wife's H-4 visa that could require her to leave the country. Under the ban, she would likely be unable to come back. But Sharma said not only would it be difficult to replace that worker, it's critical that that employee stay in the U.S. and be physically present in the facility where he consults; the client is a major pharmaceutical company manufacturing a possible COVID-19 vaccine.

Tech giants including Microsoft, Amazon, Apple and Google are some of the top recipients of new H-1B visas, so it stands to reason that they might be the most affected by the ban. But Bismarck Lepe, CEO of the product development firm Wizeline, said it's other industries that may suffer most, because they already have a harder time competing for tech talent against Silicon Valley giants. "It's a straight supply and demand issue," Lepe said.

The struggle to compete with top-paying tech companies is one reason why Lepe says Wizeline's engineering team is based in Guadalajara, Mexico. He wouldn't be surprised if other companies followed suit.

As the Trump administration seeks to restrict the flow of foreign tech workers into the United States, it's also tried to limit the development of foreign tech talent in higher education. Earlier this month, ICE announced that foreign students would be prohibited from staying in the United States if all of their classes are online due to COVID-19. Top universities, including Harvard and MIT, have announced that this school year will take place virtually, putting international students at top universities at risk of deportation.

For Manan Mehta, founding partner of Unshackled Ventures, which invests in immigrant-founded startups, that policy would be potentially more devastating than the restrictions on work visas. "Our university system has attracted some of the brightest minds in the world. It's our generation's Ellis Island," Mehta said. "If you don't let people walk through that port of entry or have the ability to walk through, I think the long-term impacts are going to be significant, not just on the financial well-being of our universities, but also American competitiveness."

Harvard and MIT sued the Trump administration to stop the policy from going into effect. On Monday, a coalition of tech giants, including Facebook, Google, Microsoft and others, filed an amicus brief in the case, siding with Harvard and MIT. "Without international students, American educational institutions face a sudden loss of critical mass — jeopardizing their ability to maintain their standards of excellence; produce research that helps keep U.S. businesses on the cutting edge of innovation; and provide the training that makes American students a strong talent pool for their future employers," the letter reads.

By Tuesday afternoon, the administration agreed to rescind the rule.

The work visa ban may soon face legal challenges of its own. Jonathan Wasden, partner at the immigration law firm Wasden Banias, said he plans to file a suit on behalf of a group of H-1B and H-4 visa holders. The suit wouldn't seek to invalidate the entire ban, but it would argue that the rule is unlawful when applied to certain types of individuals. Wasden argues that most H-1B visa holders already have documentation from the Department of Homeland Security confirming that the employer in question was unable to find domestic workers for the job. Likewise, only a subset of H-4 visa holders are even authorized to work in the United States, making the administration's ban overly broad, Wasden argues.

"The executive order claims that it is necessary to keep H-1Bs and H-4 visa holders out of the country to protect U.S. workers' jobs," Wasden said. "Most H-4 children and spouses are not working in the U.S. and are not taking the jobs of U.S. workers."

That's especially true if the would-be H-4 visa holder is only 6 months old.

This article was updated to include the Trump administration's reversal of student visa restrictions Tuesday afternoon.