Politics

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

This probably isn't what the Trump administration intended.

People standing and shaking hands on a pixelated drawing of a world map

Now that companies are more comfortable with remote work, new immigration restrictions could spur more overseas hiring.

Image: Klaus Vedfelt/Getty Images

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.

Crypto crackdowns and fintech super apps

Plus, the Coinbase/Robinhood competition heats up.

Photo: Dmitry Demidko /Unsplash

On this episode of the Source Code podcast: Ben Pimentel joins the show to discuss China's aggressive moves against the crypto industry, Robinhood and Coinbase's battle for crypto supremacy, and PayPal's new financial super app. Then Tomio Geron explains what's going on at Binance, and why the largest crypto exchange in the world is under so much regulatory scrutiny.

For more on the topics discussed in this episode:

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.


Keep Reading Show less
Nasdaq
A technology company reimagining global capital markets and economies.

Theranos 'valued PR' over patients, an ex-employee says

Adam Rosendorff said he felt pressured to vouch for tests he did not have confidence in. His testimony appeared to tie Holmes more closely to the lab's failures.

Elizabeth Holmes leaves the San Jose courthouse where her fraud trial is underway.

Photo: Jane Tyska/Digital First Media/The Mercury News via Getty Images

Former Theranos lab director Adam Rosendorff testified Friday that he repeatedly raised the alarm about bad blood tests to then-CEO Elizabeth Holmes, ultimately concluding that the company valued press and funding more than the patients.

"I was very enthusiastic working at Theranos in the beginning. Over time, I came to realize that the company really valued PR and fundraising above patient care, and I became very disillusioned," Rosendorff said on the witness stand inside the San Jose courtroom where Holmes' trial on fraud charges began this month.

Keep Reading Show less
Biz Carson

Biz Carson ( @bizcarson) is a San Francisco-based reporter at Protocol, covering Silicon Valley with a focus on startups and venture capital. Previously, she reported for Forbes and was co-editor of Forbes Next Billion-Dollar Startups list. Before that, she worked for Business Insider, Gigaom, and Wired and started her career as a newspaper designer for Gannett.

Protocol | China

Can NFTs happen in a crypto-less China? Amazingly, yes.

Using clever workarounds, Chinese NFT players are managing to weather a regulatory ban on cryptocurrency.

No matter what workarounds Chinese NFT marketplaces choose, the result is that most NFT transactions in China feel detached from cryptocurrency.

Image: Yu Chun Christopher Wong/S3studio/Getty Images

The NFT craze has come to China, but you can hardly see any trace of crypto in it.

In the past two months, Chinese social media and gaming giant Tencent has built an NFT purchase and collection app, ecommerce platform Alibaba sold 50 NFT mooncakes in a stunt to promote a metaverse product and half a dozen startups are competing to be the winner of the localized non-fungible token trading market in China.

Keep Reading Show less
Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.
Protocol | China

A Chinese ‘game companion’ platform’s phantom shutdown

Bixin said it would shutter its game companion business to keep regulators happy. It looks a lot like business as usual.

China's game companions are becoming even more vulnerable as a result of regulatory scrutiny.

Photo: Johannes Eisele/AFP via Getty Images

In a clear response to regulatory scrutiny, Bixin, China's leading online marketplace for game companions, or peiwan, announced on Sept. 10 that it would "permanently shutter" its controversial peiwan business. But its internal announcement shared with Protocol seems to contradict its public declarations.

This past summer, Chinese authorities issued a slew of regulations aimed at addressing what Beijing considers toxic subcultures and practices that harm the country's minors. Bixin, an app developed by Shanghai Yitan Network Technology Company with 6 million registered game companions, also received its own share of regulatory pressure. Yitan was founded in 2014 and is backed by IDG Capital.

Keep Reading Show less
Shen Lu

Shen Lu is a reporter with Protocol | China. Her writing has appeared in Foreign Policy, The New York Times and POLITICO, among other publications. She can be reached at shenlu@protocol.com.

Latest Stories