"Trump 2.0": How will the H-1B work visa in the United States change? This is Goldman Sachs' analysis

What changes will occur in the U.S. work visa under the Trump 2.0 era? What impact will it have on the global IT services industry?

On November 6, Goldman Sachs analyst James Schneider and his team released a report stating that the U.S. Citizenship and Immigration Services (USCIS) is expected to implement stricter rules for foreigners obtaining H-1B visas by the end of 2024, with the most significant change likely being a tightening of the definition of "specialized occupations," limiting the eligibility of candidates whose degrees are not directly related to their job positions.

Currently, under the strict visa regulations of the Biden administration, companies like Cognizant, Accenture, IBM, and Indian IT service firms have reduced their reliance on H-1B employees, and the demand for such employees has been adjusted to a stable level.

Goldman Sachs pointed out that if the Trump administration adds additional restrictions on H-1B applications, it could lead to delays in hiring by U.S. clients, which may temporarily increase customer service costs. Although major outsourcing companies have reduced their reliance on H-1B visas compared to before, they may still face profit pressures in the short term due to additional restrictions.

The H-1B visa is issued by the United States to individuals engaged in specialized technical work, and the sponsoring company must demonstrate that the candidate meets educational and skill requirements and ensure that the offered salary meets or exceeds market rates.

During Trump's administration from 2017 to 2020, H-1B policies became increasingly strict. After Biden took office, some of the stringent rules were revoked, but stricter regulations were implemented again after October 2023.

Total H-1B Approvals Decrease

Goldman Sachs stated that the landscape of H-1B sponsoring companies is changing, with IT outsourcing companies no longer leading in the approval of work visas.

From 2017 to 2018, IT outsourcing companies received far more H-1B approvals than large tech companies. However, over the past decade, as the number of employees in the U.S. has significantly increased, large tech companies have greatly increased their H-1B sponsorships. Currently, the number of H-1B approvals for large tech companies and IT outsourcing companies is nearly equal.

Due to increased restrictions, IT service companies have reduced their reliance on H-1B employees.

Goldman Sachs observed that under the stricter regulations of the Biden administration, the number of H-1B approvals for companies has stabilized—these regulations may be reshaping companies' long-term reliance on H-1B employees.

Since peaking in 2016-2017, the total number of H-1B approvals for Cognizant, Accenture, IBM, and Indian IT service companies has gradually declined under a series of increasingly strict H-1B regulations, with significant reductions in H-1B extensions and renewals, as new policies tend to impose stricter scrutiny on H-1B extensions.

However, despite the overall decline in approvals, the number of H-1B approvals for Cognizant, Accenture, IBM, and Indian IT service companies seems to have stabilized in recent years. Goldman Sachs believes this indicates that companies have adjusted their H-1B demand to a stable level in recent years.

H-1B Sponsoring Companies Face Stricter Regulations

Goldman Sachs believes that although IT service companies currently rely less on H-1B visas, stricter H-1B policies may still impact company operations and create short-term profit pressure.

In the coming years, the extent of profit pressure on companies may depend on the strictness of the new H-1B policies under the Trump administration. For example, during the Trump administration from 2017 to 2020, Cognizant experienced increased sales costs and declining gross margins due to stricter H-1B policies (higher wages and fewer extension approvals).

Currently, as H-1B sponsoring companies face stricter regulations, they have adjusted their recruitment strategies—significantly reducing the hiring ratio of entry-level positions and prioritizing candidates with higher skill levels and more work experience, as these candidates command higher salaries and find it easier to obtain work visas.

From 2017 to 2024, LCA data shows that companies like Cognizant, Accenture, and IBM have steadily increased the salaries of H-1B employees